Did the Supreme Court Cripple ObamaCare’s Main Event?

The underreported story of the Affordable Care Act (ACA) decision is what is likely to result from the Court’s disallowing mandatory Medicaid expansion in the 50 states.

The law had prescribed that states must make Medicaid available to all who earn less than 33% above the federal government's poverty levels. Those that failed to do so would lose all their federal Medicaid funding (The U.S. matches however much each state spends on Medicaid). The Court struck down that mandate and penalty as overly coercive to the states’ sovereign power.

The media has not paid much attention to what could be a devastating blow to the part of the Affordable Care Act that affects the most people. It could turn out that more lose coverage from this Court action than if the Court had struck down the mandate to buy insurance that had the media’s full attention.

The Act’s Medicaid program was stunningly generous. The federal government would pay 100% of the costs of each state’s expansion for four years starting in 2014, a bit less in each subsequent year, but never less than 90% starting in 2020 and thereafter. The Court’s ruling still leaves states free to partake of the government’s largesse, but with the ACA’s forcing them to do so struck down, each state’s legislature would have to pass a bill that accepts the government program, and that bill would then need the signature of each state’s governor.

Sounds simple, doesn’t it? What state could refuse all that free money?

A lot. Remember that 26 states joined in the suit to block so-called ObamaCare. What alarmed them was the Medicaid portion; that’s the part that impacts the states. True, they do not need to pay at all for four years and pick up only 10% of the tab after eight, but for many states it would be 10% of a much larger pool of recipients that the 33%-over-poverty rule would add to their Medicaid rolls compared to who is eligible in their states now.

So the question is, after taking their case all the way to the Supreme Court, why would the 26 states now have a change of heart and accept the government’s offer?

Freed to do nothing by the ruling they sought, if all 26 decided to pass up the federal program, that would deny Medicaid coverage to some 8.2 million people. It would cut in half the number of people that the Affordable Care Act was projected to cover under Medicaid.

And there is nothing certain about the other 24 states, except perhaps the 13 states that have both Democratic governors and legislatures. In the rest, there will be legislatures that will not take up the issue, and others that vote yes to the government deal, only to be rebuffed by a governor's veto. It becomes apparent why the Affordable Care Act made its Medicaid program mandatory; the bill’s drafters didn’t think enough states would opt for it were it voluntary.

For now, Republican governors such as Rick Scott of Florida, Bobby Jindal of Louisiana and Nikki Haley of South Carolina are competing for who can most adamantly reject ObamaCare. A spokesman of Haley’s said, “We’re not going to shove more South Carolinians into a broken system that further ties our hands when we know the best way to find South Carolina solutions for South Carolina health problems is through the flexibility that block grants provide”.

But consider South Carolina. For its size, it would get one of the biggest cash infusions into its weak economy. Under Medicaid at present, states can make their own rules for who qualifies for Medicaid. South Carolina cuts off Medicaid eligibility at a low level of income, leading to a high percentage of its citizens left uninsured — 19%. So if the state adopted the federal program, which would send in enough money to pay for raising the Medicaid eligibility to anyone making as much as 133% of the poverty level, South Carolina would get $11 billion and see its 19% uninsured slashed by 56.4%. That’s what Nikki Haley is turning up her nose at.

As you may have inferred, states who set the eligibility cutoff the lowest would get the most amount of money to bring them up to the federal target. Massachusetts, for example, would get the least, thanks to Mitt Romney’s own affordable care act that led to its highly insured population.

Texas is another matter. In Texas you have to earn less than $2,905 a year to qualify for Medicaid. That’s 74% below the federal poverty level of $11,170 for an individual. So if Texas signed on to the government’s offer, it would see an avalanche of money — $52 billion to bring it up to federal par.

Money like that in the offing leads to an opposing view that says that, once the Republican governors’ posturing dies down, there will be too much pressure for them and their legislatures to refuse the money. They will feel it from the hospitals, which will be left treating the uninsured — by law — without recompense. They will hear from voters, Republicans and Democrats alike, who will anger at governor-ego and think foregoing the money is simply stupid. And they will have to answer to the insured, who will continue to pay higher premiums because hospitals will continue to inflate charges to insurers to cover the cost of the uninsured who will continue to show up at emergency rooms with empty pockets.

That theory says that, one by one, states will cave in and sign up. In an interview, Howard Dean, a physician himself, and former candidate for president and Democratic National Committee Chairman, said about Texas, “I don’t care who the governor is, they’re going to take this money...they have a really sophisticated network of hospitals, probably the 3rd or 4th most sophisticated in the whole country. They’re one of the real meccas of American medicine. If you think that the governor, whoever it is, Republican or Democrat, is going to turn down $52 billion and not be eaten alive by places like Baylor and Houston Medical Center, you’ve got another think coming”.