5 Years Later, States That Rejected the Medicaid Expansion May Get Their Reward

When the Supreme Court made the Affordable Care Act’s Medicaid expansion optional in 2012, who could have guessed it would be the key to a money scramble in 2017? Photo: Aaron P. Bernstein/Getty Images

You’d like to think something as important as the repeal and replacement of the Affordable Care Act would, if nothing else, revolve around matters of principle and policy. But as the Senate barrels toward a possible vote on the Graham-Cassidy “block grant” legislation, the debate, such as it is, resembles an old-fashioned federal funding “formula fight” between the several states. And the key differentiator is very simple: States that accepted the ACA’s Medicaid expansion are going to lose to one extent or another, and states that Just Said No will be (relatively speaking) rewarded.

We would not be in this particular situation, of course, had not the U.S. Supreme Court surprised just about everyone five years ago with a ruling that made the Medicaid expansion optional.

This aspect of the NFIB v. Sebelius decision was overshadowed by the Court’s simultaneous ruling that the rest of Obamacare passed constitutional muster. But another reason for the light attention it received at the time was that the consensus of wonks and pundits (present company excluded) that the Medicaid expansion was such a sweet deal for the states that they’d all take the deal, if not immediately then after health-care providers and other interested parties weighed in.

It is true that the number of states accepting the expansion gradually increased over time, to the present 31 (plus the District of Columbia), in part because the Obama administration chose to let Republican-controlled states use expansion money to implement various conservative policy tweaks to Medicaid. Indeed, the current vice-president of the United States was one of the governors who cut an expansion deal in a plan designed by the Trump administration’s current director of Medicaid and Medicare Services. But now, as congressional Republicans make what could be the final push to shut down Obamacare once and for all, the patience — or more likely, the ideological stubbornness — of the leaders who turned down all that federal money because enslaving more citizens in a government program would be immoral — are finally receiving their reward. Depending on whose numbers you believe, some or most of the non-expansion states will receive a windfall, at least initially, from the redistribution of Medicaid expansion dollars which is part of the transition to the new block grant.

It’s unlikely that the Justices who made the Medicaid expansion optional had any idea they were setting off a money scramble that would still be under way five years later, or that they were putting into motion a process that would vindicate the views of then–Texas governor (and now Trump Energy secretary) Rick Perry:

“If anyone was in doubt, we in Texas have no intention to implement so-called state exchanges or to expand Medicaid under Obamacare,” Gov. Perry said. “I will not be party to socializing healthcare and bankrupting my state in direct contradiction to our Constitution and our founding principles of limited government.”

According to an analysis from the health-care-consulting firm Avalere, Perry’s state would do better than any other under Graham-Cassidy, increasing its federal health-care funds by 13 percent (or $10 billion) by 2026, when it and every other state would get soaked by the new block grant’s termination.

All that, and Texas got to keep its founding principles of limited government. Who could have predicted that in 2012?

States That Rejected Medicaid Expansion May Get Their Reward