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The incomplete promise of Medicaid expansion

4 million poor Americans are counting on Democrats to fix the Medicaid expansion gap.

A dozen states still refuse to expand Medicaid a decade after the Affordable Care Act passed, leaving an estimated 4 million people uninsured.
Spencer Platt/Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

In November, Missourians voted to expand Medicaid under the Affordable Care Act, granting access to health insurance to roughly 230,000 people living in poverty. Now the state’s Republican legislators are defying the will of their voters by refusing to implement the expansion.

In late April, the Missouri Senate blocked funding for Medicaid expansion. Last week, Gov. Mike Parsons cited the lack of funding to justify withdrawing the expansion plan entirely.

Lawsuits will likely be filed over Parsons’s decision. But this is not the first time Republican leaders in a conservative state have fought to block their voters’ wishes on Medicaid expansion. Utah legislators had sought to scale back the expansion plan approved by their voters in 2018, though they eventually acquiesced once the Trump administration said the legislature’s alternate proposal was not permissible.

The pattern demonstrates that, nearly a decade after the Supreme Court ruled that states could choose whether to expand their Medicaid programs, the fight over whether to do so is far from over. So far, 38 states and Washington, DC, have expanded Medicaid, covering nearly 15 million people. In the dozen states that have not, 4 million people are uninsured who would receive Medicaid coverage if their state expanded eligibility under the ACA. More than 95 percent live in the South, they are disproportionately Black, and many are not eligible for subsidies to buy private coverage on the ACA markets.

As I’ve reported on Medicaid expansion, I’ve often heard advocates express optimism that, eventually, some day, the holdout states will just come around. Arizona took until 1982 to implement its Medicaid program, 17 years after Medicaid was approved as part of LBJ’s Great Society agenda. At some point, the thinking goes, the allure of providing needed benefits to your constituents — and reaping billions of federal dollars — is too good to pass up. And advocates have made progress in deep-red states. Voters in Idaho, Nebraska, and Oklahoma recently voted to approve Medicaid expansion. It’s also popular with voters in holdout states like Kansas and North Carolina.

But the Missouri controversy casts doubt on those hopes; Medicaid expansion may be hitting a wall. The Affordable Care Act was signed into law more than 10 years ago and has become fairly popular nationally. Medicaid expansion won decisively with voters in Missouri. The state has a $1 billion budget surplus, as NPR noted, yet the legislature and governor are citing budget concerns to block the expansion.

Meanwhile, Texas and Florida, which have more than 1 million uninsured people in poverty between them, are still the two biggest holdouts. Florida voters will decide in 2021 on a ballot referendum that would expand Medicaid, but the state legislature has already shown its propensity for undermining initiatives approved by popular vote. Texas, like some other states, can’t expand via ballot initiative.

Biden and Democrats in Congress are trying to nudge the holdout states along, offering new incentives for states to expand. But if those incentives don’t work, the disparities in American health care will continue to grow even worse.

Medicaid expansion saves states money and saves lives

Initially, expanding Medicaid — which had historically covered a narrow slice of people living in poverty — was supposed to be mandatory for all 50 states. But Medicaid expansion was also designed to be an attractive deal for states: The federal government would initially cover 100 percent of the costs and then phase down to 90 percent, picking up that share of the tab in perpetuity.

The Supreme Court’s decision in 2012 allowed states to opt out and turned expansion into a state-by-state fight. Republicans usually raise two objections to Medicaid expansion: It’s too expensive, and Medicaid isn’t such a great program to begin with, inferior to private insurance.

To address the financial concerns, Democrats in DC have tried to sweeten the offer even more to entice the holdout states. As part of the American Rescue Plan, Congress approved an additional 5-percent match for the traditional Medicaid population (mothers, the disabled, the elderly, and people in extreme poverty) for holdout states that expand Medicaid now.

That enhanced match would last for two years. Missouri, to give one relevant example, would bring in an additional $1.7 billion in federal revenue over that period, according to estimates from the Center for Budget Policy and Priorities. Texas would receive nearly $6 billion; Florida, more than $3.5 billion. It is as close to a (legal) bribe as you’re likely to find in public policy.

Arguably, the extra money shouldn’t even be necessary. As health economists Jonathan Gruber and Benjamin Sommers wrote in the New England Journal of Medicine last year, states have been able to implement expansion without a negative impact on their finances. Expanding Medicaid has enabled them to cut back on other spending — for uncompensated care, care for people who are in the judicial system, and so on — while expansion is fully subsidized by the feds.

“Medicaid expansion appears to be a win–win from the states’ perspective,” they wrote, “giving health insurance to millions of low-income adults and offering financial support to safety-net hospitals, without any adverse effects on state budgets.”

And while it is true that Medicaid beneficiaries sometimes have fewer provider options because fewer providers take Medicaid because of its less generous payment rates, the evidence is clear that Medicaid expansion still benefits patients and saves lives. The body of research convincingly shows that people have more access to care and better self-reported health after Medicaid expansion. Cancer diagnoses come earlier, and patients are given the prescriptions for medications they need more often.

A National Bureau of Economic Research working paper from 2019 concluded that states’ refusal to expand Medicaid had led to more than 15,000 deaths in one year that otherwise would not have occurred.

One idea: Take Medicaid out of states’ hands

As a presidential candidate, Joe Biden had a plan to fix the Medicaid expansion gap: Create a new public insurance option and automatically enroll people who are in the gap. But whether because of the Senate’s “budget reconciliation” rules, internal party disagreement, or fear of a backlash from the health care industry, a public option does not appear to be on the table in the next two years despite full Democratic control of Congress and the White House.

Democrats tried to offer the holdouts a new carrot, in the form of the enhanced funding included in the American Rescue Plan. There has been some preliminary interest from a handful of states (Wyoming and Alabama in particular) but the new funding does not seem like it will fix the gap on its own.

I know the Biden White House wants to find a solution to the Medicaid expansion gap because I’ve spoken with aides about it. But it’s a trickier issue to navigate than it might seem: If they go overboard in handing out these perks to holdout states, they might be challenged in court by states that have already expanded Medicaid, asking why they can’t get the same deal.

The case of Missouri should be enough to disabuse the Democrats of the notion that Republican states will simply willingly enter the fold, with time. Some left-leaning experts have long thought the federal government should simply assume full responsibility for Medicaid and take these decisions (and fiscal responsibility) out of states’ hands; Jon Walker made that case in the American Prospect at the beginning of Biden’s term. Democrats are reportedly considering such a plan for their next legislative package, as Politico’s Susannah Luthi reported; the details are still to be determined.

Health care for millions of Americans in poverty depends on it. Otherwise, the legacy of the Biden presidency might be new health coverage, via the American Rescue Plan, for millions of middle-class Americans — while the poor and uninsured are still left waiting for a solution.

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