Policy Documents

Medicaid Expansion Will Become More Costly to States

August 30, 2012

In this issue brief by Heritage, the unsigned author(s) state that under the Supreme Court’s ruling on the Affordable Care Act (ACA), states may choose to expand their Medicaid populations to include individuals below 138 percent of the federal poverty level, with the federal government picking up 100 percent of payments for the first three years and then rolling back federal payments. This structure is designed to be attractive to the states, since it appears to increase health coverage at little or no state-level cost. However, the expansion would be very expensive to states as early as 2019. In his fiscal year (FY) 2013 budget, President Obama has already proposed reducing the federal match rate on the expansion.1 Many states are already struggling with Medicaid spending. The blended rate proposed in the Administration’s budget would make matters worse, costing states up to $3.4 billion a year.2