Is Obama Winning or Losing on Medicaid Expansion Under the Affordable Care Act?

By: Katie Booth

The Obama administration announced in February that it would allow Arkansas to use the federal money intended for Medicaid expansion to buy private health insurance plans for individuals with incomes up to 133% of the federal poverty level. This week, Florida’s senate rejected the Medicaid expansion but left open the possibility that it would try to negotiate a similar deal with the Obama administration. Indiana and Ohio may follow suit.

At first glance, this seems like a political loss for Obama. Several states with Republican governors may now expand healthcare for the poor using a private payer model—the type of model Mitt Romney supported during the 2012 presidential race. Yet Obama’s compromise in Arkansas may ultimately be a win for the president. All of the 14 states that are not participating (as of now) in the Medicaid expansion have republican governors. The private insurer model would allow these governors to save face while ultimately expanding access to healthcare for the poor.

Declining to participate in the Medicaid expansion will be very expensive for state taxpayers, healthcare providers, and employers. A chunk of state taxpayers’ federal income taxes will help provide healthcare for residents of the states that have adopted the Medicaid expansion.

Healthcare providers will lose out on the Medicaid money that was intended to help compensate for a reduction in Medicare and Medicaid reimbursement rates. In Florida, hospitals estimate that the ACA cuts reimbursements by $11.7 billion, and that the Medicaid expansion would help make up the difference.

Employers will also suffer, since they will have to either insure employees that would have been eligible for the Medicaid expansion or pay fines under the ACA. Texas employers may face $448 million in fines, while Florida employers may face $219 million in fines. This may be one reason why Florida Governor Rick Scott abruptly changed course and decided it was in Florida’s best interests to expand Medicaid, although he was unable to rally support in the Florida legislature.

Given the price tag of refusing the Medicaid expansion, more Republican governors may opt to accept the money but use it to buy private insurance plans for the poor. At the end of the day, Obama wins because more people gain health insurance—which may be very hard for states to take away even if federal funding runs dry.



Katie Booth Wellington was a Student Fellow during the 2012-2013 academic year. At the conclusion of her fellowship, she was a third-year law student at Harvard Law School with a focus on health care law. She attended Yale University, where she majored in English. Prior to law school, Katie worked for two years as a management consultant for pharmaceutical, biotech, and agribusiness companies. Katie was the joint Editor-in-Chief of the Harvard Journal of Law and Technology, which focuses on intellectual property law, health law, and technology law issues. During law school, Katie interned in the Health Care Fraud Unit of the United States Attorney’s Office in Boston and in the Health Care Group at Ropes & Gray. During her fellowship, Katie researched the problem of cyberattacks on wireless medical devices, focusing on the current U.S. legal and regulatory structure.

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