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Keith Hennessey: Why not expand Medicaid? July 16, 2012

Last week former Michigan Governor Jennifer Granholm (D) argued that any Governor who rejected the Affordable Care Act’s new Medicaid expansion was either stupid or evil.  This is a common refrain from the law’s defenders, that only an irrational or uncaring Governor would reject the ACA’s new Medicaid subsidies to provide health insurance to poor adults without kids.

This question is now relevant thanks to the Supreme Court’s recent ruling.  The Roberts Court ruled that the federal government may not deny the federal share of funds for a state’sexisting Medicaid program if that state refuses to avail itself of the new subsidies offered for expanding program eligibility.  In the wake of this ruling several Governors have said they will not, or may not, expand their Medicaid programs, notwithstanding the ACA’s offer of generous matching federal funds.

How generous?  Under the ACA the Feds will pay all benefit costs for this new population for two years, and then from 80-95 percent of benefit costs beyond that.  That compares to an average federal share of 57 cents of each dollar spent on Medicaid benefits for existing populations.  The exact federal share varies by state and ranges from 50 cents federal to 78 cents federal for basic Medicaid benefits.

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