A New Report on Medicaid Expansion

by Reihan Salam

Charles Blahous has a new report on the issues state governments will need to consider before accepting the Affordable Care Act’s Medicaid expansion, which he has summarized for Economics 21. His essential point — an important one to keep in mind as conservatives assess governors who are deciding whether or not expanding Medicaid is the right decision — is that the decision isn’t a “no-brainer,” particularly if state governments are in a position to secure greater flexibility from the federal government as to how the Medicaid program is administered:

The bottom line is that Medicaid expansion brings additional federally-financed health benefits to the states while exposing state budgets to higher costs. It is reasonable for state governors to reach different conclusions as to which is the overriding factor. Perhaps the only common incentive clearly facing all states is to shift their childless adults above the FPL from Medicaid to the ACA’s new health exchanges and to let the federal government absorb the full cost of their subsidies. Beyond that, much decision-making will depend on whether the states believe they can negotiate satisfactory terms to justify shouldering the costs of expansion, and on how states believe the troubled federal fiscal picture will ultimately be resolved.

Manny Fernandez reports that in Texas, at least some Republican legislators are suggesting that a Medicaid expansion might be acceptable if the state is given wide leeway to pursue more market-oriented approaches:

Some leaders, including State Senator Tommy Williams, a Republican and chairman of the Senate Finance Committee, have insisted that the state needs flexibility to administer a “Texas solution,” like requiring co-pays and deductibles for Medicaid recipients and enrollment in private or employer plans if available.

Governor Perry has made it clear that he opposes the ACA’s Medicaid expansion. One reason is presumably that, as Blahous observes, Texas has a relatively high number of current uninsured with incomes below the federal poverty level, and so the state government might have to devote more of its resources to covering this population as a condition of accepting the more generous federal match for newly eligible individuals. Yet there is a great deal of uncertainty as to how this will work in practice. 

Recent developments in Arkansas might have a big effect on how state governments approach Medicaid expansion. If states like Ohio and New Jersey can secure Arkansas-like deals, Medicaid expansion will suddenly look far more attractive to state governments. Sarah Kliff and Avik Roy have more on Arkansas.