Court allows Medicaid expansion

Published in POLITICO

The Supreme Court upheld the health reform law’s Medicaid expansion to 16 million new people in its ruling Thursday — but it also gave states greater freedom to opt out.

The health reform law took Medicaid, historically a health program primarily for poor children and the low-income disabled and opened it to anyone under 133 percent of poverty.

The court said Congress is free to broaden the program, which the federal government will largely pay for. But it also ruled that states can opt out — and the federal government cannot punish them by taking away Medicaid dollars they were promised by laws in place before the passage of the Affordable Care Act.

In other words, states can keep Medicaid basically as it is today — or it can go ahead with the broader version created by the health law. And it’s not immediately clear which path the more conservative states will follow.

The legal question facing the court was how far Congress can go in attaching conditions to federal funds.

The Medicaid program is technically optional for states, and has been since its creation in 1965. But for years, all states have participated and taken the federal dollars — which means they have to comply with federal requirements.

The courts have never objected to this arrangement, even when Congress expanded Medicaid in the past — although those expansions were far more modest than this one.

But this time, the court said there’s a limit to how much Congress can change the rules in the middle of the game. It can tell states they won’t get new Medicaid funds included in the Affordable Care Act if they don’t take on the new people the law makes eligible. But it can’t take away all their Medicaid dollars.

“Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use,” wrote Chief Justice John Roberts in opinion joined by the court’s four liberal justices. “What Congress is not free to do is to penalize states that choose not to participate in that new program by taking away their existing Medicaid funding.”

Whether large numbers of states will refuse to expand their Medicaid program is an open question. Some red states might take that route as a way of continuing to resist “Obamacare.” But that would mean leaving a lot of federal money on the table and saddling local hospitals with the cost of treating poor people who have no health insurance.

And covering the newly eligible population comes with a very small cost to states. The federal government will cover all of the costs of the newly eligible beneficiaries for the first three years, scaling back to 90 percent of the costs by 2020.

But some health reform law supporters worry that state opt-out could mean some low-income people don’t get the benefits of the law.

The ruling, said the National Association of Public Hospitals and Health Systems in a statement, “could strand millions of our most disadvantaged people without access to basic health care coverage.”

Thursday’s ruling is a bit of a curveball for legal experts, especially since the court upheld the individual mandate, which was considered far more vulnerable than the Medicaid expansion.

The Medicaid provisions seemed safe because, since the New Deal, Congress has used the same spending power to regulate states in areas ranging from civil rights to education to public safety.

The court appears to have attempted to keep the Medicaid ruling narrow, perhaps to avoid opening the door to legal challenges to scores of existing regulations in these other areas.

The issue, the challengers had argued, was not just that Congress was adding conditions to Medicaid dollars but that it was fundamentally changing the program into something that the states hadn’t signed up for.

“The Medicaid expansion … accomplishes a shift in kind, not merely degree,” Roberts wrote.

When the states signed up for Medicaid, he argued, it was narrowly targeted to covering specific low-income populations. But under the Affordable Care Act, “it is no longer a program to care for the neediest among us, but rather an element of a comprehensive national plan to provide universal health insurance coverage.”

Whether this has broader implications for Congress’s ability to use federal funds as a de facto form of regulation may take years — and many more lawsuits — to sort out. But on Thursday, the court made clear that the Obama administration can proceed with adding to the Medicaid rolls, even if some states decide not to go along.

“As a practical matter, [this ruling] means states may now choose to reject the expansion; that is the whole point,” Roberts wrote. “But that does not mean all or even any will.”

Jennifer Haberkorn contributed to this report.


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