The Supreme Court Approves the 2014 Medicaid Expansion: What Now?


July 18, 2012

by Ron Manderscheid


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Will the states recognize the financial benefits of the 2014 Medicaid Expansion?

Like a most welcome cool breeze on a very hot summer day, the recent Supreme Court decision on the Affordable Care Act (ACA) has reinvigorated our energy and enthusiasm. This should provide wind at our backs to move forward quickly with implementation efforts at the state level. Advocacy is needed urgently to attest to the moral and fiscal soundness of electing the 2014 Medicaid Expansion (ME), now that it has become a state option. Similarly, work is needed immediately on the Essential Health Benefit so that key mental health and substance use benefits are included at full parity, as states prepare their submissions to HHS in September. Finally, discussions must be undertaken around state health exchanges and the role that your state will play in implementation. Here, I want to focus only on our future work around the ME.

The Supreme Court decision on the 2014 ME left the Expansion intact, but removed the federal penalty for failure of a state to undertake it. In effect, this decision makes the ME a state option. This decision also has engendered new and difficult questions, such as: What is the Medicaid entitlement of a person below 138 percent of the Federal Poverty Level and not currently eligible to be enrolled in Medicaid in a state that does not elect the ME? Will the Medicaid Disproportionate Share Payments (DSH) for charity care in a state that does not elect the ME be decreased according to the schedule outlined in the ACA? More on these questions below.

In thinking about the 2014 ME, it seems clear that the 24 states and DC that did not oppose the ACA likely will adopt this option immediately. Among the remaining 26 states (AL, AK, AR, CO, FL, GA, ID. IN, IO, KS, LA, ME, MI, MS, NE, NV, ND, OH, PA, SC, SD, TX, UT, WA, WI, WY), targeted within-state advocacy will be necessary. As a result of this advocacy work, probably half will adopt the ME later this year. For the remainder, half are likely to adopt the ME after the fall 2012 elections. This probably will leave only the few states recently characterized as having “rogue governors”. This latter group will require intensive, very well organized advocacy that crosses traditional boundaries.

Without any doubt, the ME will be of tremendous financial benefit to states. For new enrollees, 100 percent of the cost will be paid by the federal government for the first three years, after which this amount will become and remain 90 percent. In effect, federal funds will be substituted for state and county funds previously spent on this population. As one example, Texas is expected to receive $52.5 billion, in return for a $2.6 billion investment, not considering the state funds that will be supplanted by these federal funds for the ME population in Texas. (See the Kaiser analysis of this issue at: Thus, in purely economic terms, the ME is really a “must do” for states.

Further, an estimated 40 percent of the new Medicaid enrollees are expected to enter coverage with pre-existing behavioral health conditions. The ME will lead to reduced use of expensive care in emergency rooms and inappropriate incarcerations in local and county jails by these persons. Thus, considerable secondary financial service-offset gains also will accrue to a state that elects the ME.

The ME also is a “must do” to promote social justice in our society. If we value all people equally, then equity demands that we make health care available to those who are poor and disabled. A decision to do this also makes very good economic sense, since good health is a prerequisite for fostering a competitive workforce in a global economy.

I expect that we will find kindred traditional allies in the broader disability community to support our advocacy efforts for ME. However, less likely but equally important allies also are likely to emerge. These include the hospital industry and the insurance industry. Hospitals’ charity care costs can be expected to skyrocket in the absence of the ME and the DSH payments. Similarly, health insurance companies will not be able to share in all the anticipated new business to be generated through the ME. Similar comments could be made about the potential of collaborating with other allied health industries. Efforts to organize these advocacy efforts need to be initiated immediately.

The Coalition for Whole Health (CWH) will continue to work with state advocates who are committed to ensuring that their state adopts the ME. If your state does not have a CWH, please consider developing one in the short term. This group can serve as the nucleus for organizing your state advocacy efforts.

No work is more important during this very hot summer than encouraging your state to adopt the ME. I wish you strong cool breezes at your back for these important endeavors!

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