When passed, the Affordable Care Act (ACA), also known as ObamaCare, envisioned that every state would expand Medicaid guidelines to include those who made up to 138% of the federal poverty level. This would insure that lower-income Americans, especially those without children or those who would not qualify for financial assistance in the Marketplace, would be able to gain health insurance coverage.

Medicaid is jointly funded by the states and federal government, but to make this provision more palatable to budget-conscious states, the federal government offered to fund 100% of the expansion for three years with the federal contribution slowly lowering after that, but never dropping below 90%. However, this was not enough for many states. As the Kaiser Foundation points out, Medicaid enrollees are more likely to be in poor health and need a lot of medical treatment. This makes Medicaid very expensive when the federal funding reduces. In addition, conservatives around the country pointed out that the federal government would struggle to support their portion of the expansion, a fact underlined by several battles over the deficit in Congress.  Finally, states were frustrated that they were being forced to expand rather than making their own decisions.

The Supreme Court and Medicaid Expansion

To address these frustrations, 26 states, several individuals, and the National Federation of Independent Business filed a federal lawsuit challenging the constitutionality of the ACA. There were a couple points of contention addressed in the lawsuit:

  • The individual mandate, which required that all Americans obtain health insurance or face a penalty
  • The requirement of states to expand Medicaid or lose all federal Medicaid funding

The first court decision held that the individual mandate was unconstitutional, but the Medicaid expansion was a valid use of Congressional spending power. The case was appealed to the Supreme Court, which agreed to hear the case.

The Supreme Court’s final decision was that the individual mandate was only justifiable if it was an example of Congress’ taxing power – that is, taxing individuals who don’t maintain insurance. As a result, the tax penalty for not having insurance was upheld. However, the forced Medicaid expansion was ruled unconstitutional, and the penalty of removing all Medicaid funding was ruled too severe. As a result, the states were allowed to choose whether or not to expand, and only the expansion funding was withheld if they did not.

The Current State of Medicaid Expansion

In the end, many states have decided to expand their Medicaid eligibility in order to take advantage of the federal funding. States with more conservative leadership have tended to opt out or find a more creative solution. The current status of state Medicaid expansion decisions can be found on the Kaiser Foundation website.

In 2014, 27 states including Washington, D.C. moved forward with Medicaid eligibility expansion and 19 states did not. Five states continue to have open debate and many are looking for additional options. Montana’s legislature rejected the Medicaid expansion, so the governor and others are supporting a petition to allow voters to expand Medicaid through a ballot initiative. Arkansas decided to use the federal Medicaid expansion funds to purchase private insurance for lower-income residents, which helps keep the cost off the state budget. New Hampshire also used this option.

The controversy around Medicaid expansion continues to swirl, especially in conservative and budget-conscious states. Many Americans are nervous about the impact that federal support will have on the national deficit, and whether the states will be left to pay for the entire program themselves if a budget impasse arises in Congress. While most recognize the need to help lower-income citizens with health needs, how to do so remains an open question.