Demystifying State Expansions of Medicaid

On Sunday, Virginia’s political world was rocked with the news that Sen. Phillip Puckett, D-Tazewell, would be resigning his seat in the Senate, allegedly in exchange for a GOP promise of high-profile jobs for both him and his daughter, who is awaiting confirmation to the state judiciary. Senator Puckett’s resignation and its potential implications roiled state Democrats, including the Governor who had pledged to expand Medicaid as a major part of his campaign platform .The resignation effectively handed the GOP full control of both legislative chambers, allowing them to pass a budget without an expansion of Medicaid. McAuliffe’s chances of expanding Medicaid now look slim – his only option now appears to be unilateral action, bypassing the state legislature, the legality of which is murky and would undoubtedly be questioned in court.

Virginia is not the only state that has gone through dramatic political theatre over the question of Medicaid expansion, and it likely will not be the last. The debate boils down to the question of what does the expansion of Medicaid mean for states and why are some so adamantly and steadfastly opposed to it? It starts and ends with money – Medicaid is a hugely expensive program that already takes up a massive proportion of state budgets. According to NASBO, the National Association of State Budget Officers, it accounted for 24.4 percent of all state budgets in FY 2013, ranging from a high of 35.8 in Missouri to a low of 7 percent in Wyoming.

Participation in Medicaid has historically been limited to specific low-income groups, including pregnant women, children, the elderly and the disabled. The program is partially funded by state governments, and partially by the Federal government. The Affordable Care Act, or Obamacare, sought to expand participation in Medicaid to all citizens who make less than 138 percent of the federal poverty level – a massive expansion that would inflate the number of those covered by the program by an estimated 17 million Americans. The cost to do this would be huge and, under the ACA this expansion was mandatory for all states.

The Supreme Court’s ruling in National Federation of Independent Business v. Sebelius found the section of the law requiring states to expand Medicaid to be unconstitutionally coercive of states, which in practicality left the expansion optional for the states. While the federal government has pledged to fully fund the cost of this expansion through 2020, following which it would fund 90 percent of the expansion, many states are skeptical and have pushed back, claiming that there is simply no room in their budgets to do so, with others doubting the federal government’s commitment to fund the program. To date, 26 states have opted for expansion, 20 have declined and four are currently considering proposals. The District of Columbia has also chosen to expand the program.

Predictably, the question of expansion has largely fallen under party lines – many of the states that have chosen not to do so tend to have conservative state legislatures and governors. This has left many of the so-called purple states, with divided governments such as Virginia and Maine, caught in the middle of bitter partisan battles. With the political landscape likely to shift following November’s elections, expect this debate to rage on through the 2015 legislative sessions.