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ABSTRACT The US Supreme Court's ruling on the Affordable Care Act in 2012 allowed states to opt out of the health reform law's Medicaid expansion. Since that ruling, fourteen governors have announced that their states will not expand their Medicaid programs. We used the RAND COMPARE microsimulation to analyze how opting out of Medicaid expansion would affect coverage and spending, and whether alternative policy options-such as partial expansion of Medicaid-could cover as many people at lower costs to states. With fourteen states opting out, we estimate that 3.6 million fewer people would be insured, federal transfer payments to those states could fall by $8.4 billion, and state spending on uncompensated care could increase by $1 billion in 2016, compared to what would be expected if all states participated in the expansion. These effects were only partially mitigated by alternative options we considered. We conclude that in terms of coverage, cost, and federal payments, states would do best to expand Medicaid.
The Affordable Care Act expands health insurance primarily through three provisions: the expansion of Medicaid to cover the poorest segment of the population (those with annual incomes below 138 percent of the federal poverty level), health insurance subsidies on the new exchanges for low- and medium-income people (those with annual incomes of 100- 400 percent of poverty) who lack access to employer coverage or Medicaid, and a mandate for the uninsured to buy coverage.
After the act was signed into law on March 23, 2010, Florida and twenty-five other states sued the federal government to prevent its implementation, claiming that the Medicaid expansion provision was unconstitutionally coercive. The US Supreme Court's June 28, 2012, decision1 affirmed the constitutionality of the individual mandate, but it made states' participation in the Medicaid expansion voluntary.
As of April 25, 2013, the governors of fourteen states-Alabama, Georgia, Idaho, Iowa, Louisiana, Maine, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, and Wisconsin-have publicly said that their states will not participate in the expansion of Medicaid, and several other governors have expressed serious reservations about participating.2 In this article we explore the implications of states' decisions about expanding Medicaid for coverage expansion through Medicaid or other sources of insurance and for the state and federal costs associated with...