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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
JAMA Forum

The Other Important Issue Before the Supreme Court—Medicaid Expansion

So much attention has been paid to the individual mandate that relatively few have bothered to focus on the other questions that will be debated tomorrow in front of the Supreme Court. One involves the expansion of Medicaid, and it is absolutely worth some time.

Aaron Carroll, MD, MS

As Medicaid currently stands, it covers children in poverty, pregnant women in poverty, and parents who qualify under some pretty restrictive regulations. Adults without children, however, are often out of luck. In the majority of states, it does not matter how poor childless adults are; they cannot qualify for Medicaid.

As part of the Affordable Care Act (ACA), Medicaid regulations change. Starting in 2014, all adults, regardless of whether they have children, will be eligible for Medicaid if they earn up to 133% of the federal poverty line. These changes are an enormous expansion of Medicaid, so much so that about half of the newly insured under the ACA will be getting their coverage through the program.

Of course, such a large expansion cannot be cheap. In fact, the Congressional Budget Office estimates that it will cost almost $800 billion over the next decade. To make this more palatable to states, the federal government will cover 100% of the expansion when it begins in 2014. That will slowly phase out, so that by 2020, the federal government will cover 90% of the expansion. While this will leave states paying for some of those who will newly be eligible for Medicaid, their share of the expansion will still be far less than the 25% to 50% that they must cover for Medicaid today.

The way the ACA is written, unless states comply with these expansions, they stand to lose all Medicaid funding. Not just the new stuff, but the entire program. This is concerning to many states, because Medicaid is already straining their budgets. They can barely keep afloat now, so they don’t like being on the hook for new people. Moreover, many states are recognizing that this Medicaid expansion is bringing people out of the woodwork who were already eligible for Medicaid but didn’t sign up for it. Those people will not be paid for out of new funds, so states are seeing this as a big penalty.

Florida, along with 26 other states, is bringing a case to court based on the Constitution’s Spending Clause. Basically, the federal government has the right to make states accept certain conditions for which they will be given federal funds. If they don’t accept the conditions, then they don’t get the money. This is how Medicaid began, as an optional program states could agree to join. All of them did, obviously.

But now the law has changed, and those against the ACA’s new policy argue that this is an unfair expansion of a program that in practical terms is no longer optional. Medicaid is so fundamental to states’ operations now, they assert, that it can’t be considered funding that states can refuse if they choose not to agree to the new regulations. Because they will lose not only the new funding but all Medicaid funding if they don’t expand the programs, they say the actions of the federal government are coercive.

The federal government, of course, feels differently from Florida. It has argued that Congress has included new populations in Medicaid many times, and has at each time made Medicaid funding conditional on the acceptance of new regulations. They hold that the program is still voluntary. They argue that this use of the Spending Clause is constitutional and necessary for a functioning government. Moreover, they assert that should the Supreme Court intervene, it, not the elected representatives of Congress, will be responsible for determining how policy and revenues are set between the federal and state governments.

The 11th Circuit Court of Appeals has previously found in favor of the federal government on this case. They found that Congress has always had the right to amend Medicaid regulations and requirements, and that failure to comply can result in defunding. In fact, Texas recently made the news for losing funding for their women’s health program because they violated Medicaid regulations about disqualifying some providers for services. The court also found that since the federal government is bearing pretty much all the costs for the expansion and giving states 4 years to get ready for it, they have plenty of time to decide if they will continue to participate in Medicaid.

While most who follow these cases think it very likely that the Supreme Court will rule with the federal government on this issue, many of those same people thought the court would side with the Circuit Court of Appeals and not hear this case. Personally, I still think it’s likely the Court will rule against Florida and uphold the Medicaid expansion. The importance of the case should not be underestimated, though. If the mandate gets struck down, that will have implications for the ACA. If the Medicaid expansion is struck down, it will have much broader implications for how Congress can use federal funding to set national policy in all sorts of areas.

About the author: Aaron E. Carroll, MD, MS, is a health services researcher and the Vice Chair for Health Policy and Outcomes Research in the Department of Pediatrics at Indiana University School of Medicine. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll.