The Medicaid Ruling: Why is it Important? [Guest Post]

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The Medicaid Ruling: Why is it Important? [Guest Post]

Jul 05, 2012

Posted by Mike Beene - Almost lost in the frenzy is the surprising (to most) second part of the Supreme Court’s ruling on the health reform law that designates unconstitutional the portion of the ACA requiring states to accept new Medicaid obligations or else lose all funding. Thus, a state can say no to accepting new Medicaid participants (a projected 2 million people in California, 1.8 million in Texas, 950,000 in Florida…) and not lose the Federal funding they receive for their current Medicaid program.

Briefly, Medicaid is a state-federal partnership which was enacted in 1965 and had obtained full state participation by 1982.The federal government funds, depending on state poverty factors, between 50 and 83 percent of the programs. In exchange, the states must follow certain eligibility restrictions required by the feds to receive funding .The state’s portion is the largest budget expense for each state.

Why is this Supreme Court ruling on Medicaid important? The ACA is projected to add over 30 million people to the health insurance rolls. At least half of those are expected to get their new coverage through the Medicaid system. This is accomplished by requiring states to expand the eligibility requirements and make Medicaid available to nearly all people with incomes below 133% of the poverty level ($30,657 or below avg. household income for a family of four.) Currently, almost every state limits Medicaid to those below the poverty line who have dependent children.

The ACA would have required not only that the states expand their eligibility to add the 16 million or so new enrollees in exchange for new federal funding that would in a few years pay 90% of the program, but if a state refused the new offer and its 10% additional cost portion, the state would lose all of its current Medicaid funding. The court essentially separated the programs and said refusal of the new expansion does not impact current Medicaid operations.

So what? Several points to consider: The state portion of the ACA cost is to some degree forgotten. When the act is presented as deficit neutral, the cost to the states is ignored. States generally have a constitutional requirement to balance their budget. Will they willingly accept a 10% hit? Can they? However, will they want to send their tax money to the feds and get none of it back while funding the programs of other states? Will this become a hot political issue in the election? This portion of the ruling highlights the reason many consider this ruling the most important in our generation concerning the federal-state power struggle.  It will be interesting to see if this portion of the opinion becomes a bellweather to future state and federal fights or a footnote. I predict the former.

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