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Medicaid Expansion Under the Affordable Care Act

Medicaid Expansion Under the Affordable Care Act

What happens when states refuse to enlarge this coverage to its residents?

Print, television and online media outlets have extensively covered the June 28, 2012 U.S. Supreme Court case of Florida et al. v. Department of Health and Human Services, et al.,1 which challenged the constitutionality of the Patient Protection and Affordable Care Act of 2010 (the ACA). Along with upholding most provisions of the ACA, the Supreme Court upheld the ACA’s individual mandate: that is, individuals will now be required to purchase health insurance regardless of their situation; those who fail to purchase health insurance will risk paying a financial penalty. While many are excited about the new requirements expanding healthcare to approximately 30 million uninsured,2 others are wary that under new conditions, individual states can opt out of the state-operated, federally funded Medicaid program, which provides health coverage for lower income individuals, families and children, the elderly and people with disabilities.3

The Supreme Court decision gives individual states the option of expanding Medicaid by changing enrollment requirements. Under the expansion, anyone 133 percent above the federal poverty line will qualify for increasing coverage to low-income individuals, meaning that 17 million currently uninsured would gain Medicaid coverage. The new law will simplify eligibility for enrollment by eliminating the pre-existing categories that one must currently fall under to qualify for Medicaid. Moreover, before the ACA, the federal government shared Medicaid costs with the states, with the federal government paying roughly 57 percent of the total amount. If individual states accept this provision to expand Medicaid, the federal government will cover the total cost for Medicaid expansion for three years. States that consent to the Medicaid expansion will receive funds to pay their residents’ health care bills, which could also reduce the number of hospitals and physicians left with uninsured patient bills. The 100 percent match rate from the federal government will decrease after the first three years: in 2017, the federal government will pay 95 percent of the cost, and in 2020, the federal government will cover only 90 percent of the bill.4

After three years, the individual states participating in the Medicaid expansion may sustain costs from this extension. The federal government will not pay all bills for Medicaid enrollees who qualify for the program, but who haven’t registered. If individual states choose not to expand Medicaid coverage to their residents, this decision could lead to fewer people with access to care and more state residents subject to the ACA’s mandate requiring individuals to purchase health insurance or pay a tax, as opposed to being eligible for Medicaid under the new federal requirements.

Those states that refuse to comply with the Medicaid expansion would be in jeopardy of losing supplementary federal funding to cover the newly eligible Medicaid enrollees.5 It’s unknown how many states will participate in this Medicaid expansion, but 26 states have already challenged the expansion in court. These states fear that with so much attention around the ACA, Medicaid enrollment rates will increase drastically and bankrupt their budgets. If a state chooses not to expand Medicaid, residents of that particular state, with incomes from 133 percent to 400 percent of the poverty level, can attain federally funded private insurance through insurance exchanges. However, those individuals with incomes below that level wouldn’t qualify for assistance.



1.   National Federation of Independent Business v. Sebelius, No. 11–393 (June 28, 2012); Department of Health and Human Services et al. v. Florida et al., No. 11-398 (June 28, 2012);Florida et al. v. Department of Health and Human Services, et al.,No. 11-400 (June 28, 2012).

2.   “Health Care Reform and the Supreme Court (Affordable Care Act),” The New York Times (June 29, 2012) at p. 3.

3.      “Medicaid—Get Help Using Insurance,”

4.     Robert Pear, “Uncertainty Over States and Medicaid Expansion,” The New York Times (June 29, 2012) at p. 1.

5.     Provisions of the Affordable Care Act,





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