The backlash begins: States start opting out of Medicaid expansion

July 2, 2012

If Florida opts out of the Medicaid expansion, 950,000 fewer people there would gain Medicaid coverage (DonkeyHotey | Flickr)

The Supreme Court decided last week that the federal government could not penalize states for not participating in the Medicaid expansion, set to begin in 2014.  Florida and South Carolina have decided since then that they will opt out of the program. Republican legislators elsewhere are also mulling the idea.

"Florida will opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program," Florida Gov. Rick Scott's office said in a Sunday evening statement.

The consequences of that decision would be pretty huge for the health law's insurance expansion. Take Florida: Right now, it has a relatively bare bones Medicaid program. It does not cover childless adults. If you're a parent, you can only get on the program if you earn less than $6,478.

The Affordable Care Act would have extended Medicaid to cover everyone who earns less than $14,500, regardless of whether they have children or not. That expansion, to cover higher earners, would have covered 951,622 Floridians, according to a Kaiser Family Foundation report.

In South Carolina, the expansion was expected to cover 330,932 people. Taken together, that's 1.2 million people—about 7.5 percent of the 17 million people expected to gain Medicaid coverage—who would no longer have access to the program.

What exactly happens to these people isn't exactly clear. The Affordable Care Act allows those who are above the poverty line—earning more than $11,170 —to use subsidies to buy coverage on the health insurance exchange.

Poorer Americans—those who live below the poverty line— could be caught in a sort of "no man's land." They're not eligible for subsides under health overhaul because the law worked with the assumption that they would fall under the Medicaid plan.

We still have to wait and see whether the states actually follow through with the commitment. The Medicaid expansion is still 18 months away and opting out would mean leaving tens of billions of dollars of federal funding on the table. There's also the possibility that if states come under new leadership - after an election - they might change their minds, and opt back into the program.

If they don't, however, we could see the Supreme Court decision having a significant effect on the health law's insurance expansion— significantly reducing the potential numbers of those who ultimately gain coverage because of Obamacare.

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Ezra Klein | July 2, 2012