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White House to states: On Medicaid expansion, it’s all or nothing

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If states were to cover citizens below 133 percent of the federal poverty line -- $14,893 for an individual -- they would have to volunteer to do so.

That got some state officials thinking: Could they volunteer just to cover some of those people? The federal government, after all, is offering a pretty sweet deal: They'll pay 100 percent of the cost for the newly eligible enrollees.

If a state decided to cover, say, everyone up to the federal poverty line, they would be working with a smaller, more manageable population. Those living above the poverty line, meanwhile, wouldn't be left in the lurch. The Affordable Care Act allows them to receive very generous subsidies in the private insurance market.

Monday, Health and Human Services came back with its answer: The health-care law will not fund partial Medicaid expansions. "Consistent with the law, there is not an option for enhanced match for a partial or phased in Medicaid expansion," acting Center for Medicare and Medicaid Services administrator Marilyn Tavenner told reporters on a call Monday.

The administration's reasoning goes like this: The federal government was giving states a really, really good deal on the Medicaid expansion. It was footing the entire bill for the newly eligible enrollees for three years. To put that in context, the feds usually chip in about half or two-thirds of a state's Medicaid costs.

Congress, White House officials say, gave states that really high funding in the service of a very specific goal: Ensuring all Americans have access to insurance options.

"The law contemplated that every American would have a way to get health insurance coverage," says Medicaid administrator Cindy Mann. "The Medicaid expansion to 133 percent was a method identified in the law to do that."

States that don't expand all the way up to that level, Mann contends, wouldn't be complying with the spirit of the law. They wouldn't offer all their residents a way to purchase affordable coverage. And if they're not going to do that, White House says they don't deserve the extra funding.

"The statute contemplates, with the enhanced match, that states will fully comply with the provisions of the law," Mann says.

In one sense, this ends a game of chicken that the states and federal government have been playing ever since the Supreme Court decision. States have stayed mum on whether they will participate in the expansion, seeing first if they could get a better deal -- the partial expansion. The federal government took awhile to show its cards: It wanted to see if states would sign up for the full expansion, without giving them a scaled back option.

That could mean the administration thinks states will decide the 100 percent match is too good to pass up and that the federal money will pull everyone in (just lower funding eventually lured all states into the initial Medicaid program).

Or, it could indicate the Obama administration is okay with not all states participating with the Medicaid expansion on day one. Again, this wouldn't be unprecedented: Only six states initially signed up for Medicaid when it launched in 1965.

Either way, the administration ended the game of Medicaid chicken Monday. It told states they have exactly one option. Now, it's up to the states to make their move.