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Will States Resist Fresh Billions for Medicaid Expansion?

The stimulus increases the federal matching rate and offers other incentives to encourage holdout states to expand Medicaid. Most of the holdouts will still take a pass.

Protesters with signs calling for Medicaid expansion in Texas.
A March 4 rally at the Texas state Capitol calling for Medicaid expansion. Texas remains one of a number of holdout states opposed to expanding health care for the poor. (Stephen Spillman/The Austin American-Statesman/TNS)
When is an offer too good to refuse? In several states, the answer is never, at least when it comes to expanding Medicaid.

As part of the most recent federal stimulus, states that haven't expanded Medicaid under the Affordable Care Act can receive additional matching funds. Rather than paying 10 percent of the cost for new recipients, they’d only have to pay 5 percent over the next two years. Additional subsidies mean they would actually cost themselves money by refusing to expand. Florida, for instance, would come out ahead by $1.25 billion, even after paying its share of expanded coverage. Still, Gov. Ron DeSantis and legislative leaders remain opposed.

“It just comes down to digging in your heels and refusing to budge,” says Maura Calsyn, managing director for health policy at the Center for American Progress, a progressive think tank. “From a health perspective and a fiscal perspective, it’s always been a no-brainer, and this makes it even more so.”

The Affordable Care Act called on states to expand Medicaid or risk losing their traditional Medicaid funding. In 2012, the Supreme Court found that requirement unconstitutionally coercive, making Medicaid expansion optional for states. 

A dozen states have never expanded Medicaid. In two of the states where expansion has been approved through ballot initiatives, Missouri and Oklahoma, the program has yet to be implemented.

On Tuesday, the Missouri House voted to block $128 million from Gov. Mike Parson's budget that would pay for implementation, directing those funds to other programs. Missouri would gain $1.2 billion in federal dollars over two years if it were to expand Medicaid.

“By standing up to liberal special interest groups, House Republicans have saved Missourians over $100 million in the upcoming fiscal year alone, and billions more in years to come,” Cody Smith, the House budget chair, said in a statement.

For years, one of the Republican arguments against allowing expansion has been that even 10 percent of the cost could become unaffordable. Now, with the feds offering to pay still more, some legislators argue that it’s a bait-and-switch tactic. “I’m not surprised this would be the same old song, the same old dance,” said Greg Albritton, who chairs the Alabama Senate Budget Committee. “Buying a new car now. Nothing down, but the payment is due in two years.”

It’s true that the 95 percent match rate will only last for two years. But plenty of states have put in place triggers that would end their expansion programs if the federal share ever dipped below 90 percent, notes Trish Riley, executive director of the National Academy for State Health Policy.

There’s an effort underway to put Medicaid expansion on the South Dakota ballot next year, although its implementation, if passed, would come too late to cash in on the enhanced funds.

The one holdout state that looks likeliest to take the stimulus deal is Wyoming. Last week, the Wyoming House voted, 32 to 28, to pass a Medicaid expansion bill. House Speaker Eric Barlow said he’d voted against Medicaid expansion “multiple times” in the past but sees no alternative at this point.

“The governor is still considering the long-term implications of HB 161,” says Michael Pearlman, communications director for Wyoming Gov. Matt Mead. “However, he understands the opportunities before the state, including the new federal incentives. He remains concerned about the ability of low-income Wyoming residents to obtain medical care, but is also concerned about what the state’s future financial obligations could be under expansion.”

Although it doesn’t look as if there will be any kind of a stampede to expand Medicaid, Riley says it’s possible federal waivers could still make the program more attractive. She cites as a possible model the so-called private option in Arkansas, which uses Medicaid funding to pay for private health plans. 

The private option did manage to thread a political needle, but it’s been in place for several years now and has yet to be replicated. Perhaps the additional dollars now on the table will make some difference. 

The latest stimulus also provides additional Medicaid dollars that will help all states with their bills and provide citizens with additional coverage. For instance, states can now offer Medicaid coverage to new mothers for a full year after delivery, rather than the previous 60-day limit.

The new law lifts the inflation cap on federal rebates to states for prescription drugs and provides an 85 percent match for mobile mental health crisis prevention programs. In addition, there’s a 10 percent bump in the federal matching rate for home and community-based services. “We’ve seen during the pandemic the importance of keeping people in their homes and communities,” Calsyn says.

Alan Greenblatt is the editor of Governing. He can be found on Twitter at @AlanGreenblatt.
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