Medicaid expansion: why some GOP governors are opting in, after all

As a federal deadline looms, Michigan is the third state to reverse course on Medicaid expansion. States that don’t expand their Medicaid programs will lose out on full federal funding.

When the Supreme Court made it optional for states to expand their Medicaid programs under the Affordable Care Act last year, most Republican governors jumped at the chance to reject an element of Obamacare.

Now, a trickle of Republican-led states are opting-in to the expansion, citing economic benefits to their state.

On Tuesday, Michigan became the third Republican-led state in the past six months to pass legislation expanding Medicaid, following Arizona in June and North Dakota in March. Republican legislatures in Virginia and Ohio are still debating whether they will expand their Medicaid programs in time to receive full matching grants from the federal government.

Under Michigan’s expansion, 470,000 additional uninsured residents will be eligible for Medicaid.

None of these states decided to participate in other elements of Obamacare, such as running their own insurance exchanges, and most of the governors still oppose Obamacare overall. So why are they on board with adopting the Medicaid expansion, a key original tenet of the act? 

For some Republican governors, the draw of extra federal funds for their state budgets trumped ideological views, says Lawrence Jacobs, a political scientist at the University of Minnesota in Minneapolis.

“The ideological battle over Obamacare in Washington has been reframed at the state level as a pragmatic fiscal challenge,” he says. “Republican governors are opposed to Obamacare, but are looking at their budgets and realizing it’s just too good a deal to pass up."

The deal for states is that, starting in 2014, and continuing for the next three years, the federal government will fund the entire cost for each state’s Medicaid expansion. After that, federal funding will phase down to 90 percent with states paying the remainder.

States that don’t expand their Medicaid programs now can do so later, but will lose out on the full federal funding.

“There’s a strong economic incentive to states to move forward with the expansion,” says Robin Rudowitz of the Kaiser Family Foundation, who also notes that the economic incentive and the support of the provider community, like local hospitals, are top reasons states have chosen expansion. 

States that expand Medicaid will cover those who make up to 138 percent of the federal poverty line, or $30,675 for a family of four in 2012 dollars.

Some Republican leaders point to studies that calculate that states will save money by expanding their programs, because the amount of federal funding will outweigh the projected cost of continuing to pay for uninsured who show up in emergency rooms. 

For instance, an October 2012 report by the University of Michigan and the Blue Cross Blue Shield of Michigan found that the state would save about $1 billion over 10 years if it expanded Medicaid.

In June, a report from the Rand Corp. calculated that the first 14 states to declare they would not expand their Medicaid programs stood to lose $8.4 billion a year in federal payments in 2016.

When Gov. Chris Christie (R) of New Jersey threw his support behind Medicaid expansion in February, he cited economic reasons, as did Arizona Gov. Jan Brewer (R) and Michigan Gov. Rick Snyder (R).

Governor Christie and Ohio Gov. John Kasich (R) have both insisted that they will support Medicaid expansion in the short-term, but want the ability to end expansion, if the federal funding falls short of promised levels. As a result, in June, Christie vetoed a bill that would have made New Jersey’s expansion permanent, and Governor Kasich insists that there be a “circuit breaker” in any legislation that would automatically roll back the expansion, if the federal government didn’t continue its funding.

Michigan Governor Snyder said that expanding Medicaid will “make our state healthier and stronger. It also will save money for the state’s taxpayers and job providers, help control medical costs, improve the state’s business climate, and boost our economy. All of these are crucial to continue Michigan’s comeback.” 

Most Republican governors continue to oppose expansion on the grounds that it heightens dependence on the federal government and costs too much money, and those governors in favor of Medicaid expansion do face push back from conservatives.

In Arizona, a tea party group is gathering signatures to try and force a referendum on the state’s expansion. In Ohio, the GOP-controlled General Assembly is taking up the issue as its top priority in September, as GOP lawmakers call for due diligence in fiscal analysis.

"We don’t want a situation that could bankrupt the state,” Republican Senate President Keith Faber told the Cleveland Plain Dealer.

The Medicaid expansion was originally planned as one of three main tools for expanding coverage under the ACA, in addition to state exchanges and the individual mandate. The Supreme Court in 2012 upheld the individual mandate, but issued countering rulings on Medicaid that in effect made it an optional decision for states.

In July, an Urban Institute study for the Kaiser Family Foundation calculated that the number of uninsured in America would be reduced by 10 million if all states implemented the Medicaid expansion.

Before Michigan’s expansion, 4.9 million uninsured lived in states that were not moving forward with expansion and 1.5 million were residents of states still debating the expansion. 

As of Tuesday, 25 states are expanding their Medicaid programs, 21 states are not, and five are still debating the issue. Of the 21 states opting out of expansion, 20 are led by Republican governors and one, Missouri, by a Democrat, Gov. Jay Nixon.

“The reality is that the Republican party is not of one mind about health-care reform,” says Professor Jacobs.