Congress Should Enact Obama’s Medicaid Proposal

Congress should quickly enact a proposal, which President Obama will include in his 2017 budget, to give all states three years of full federal funding when they expand Medicaid — whether they’ve already expanded or will in the future.

When policymakers enacted health reform in 2010, they assumed that all states would expand Medicaid in 2014.  The federal government would cover the full cost of expansion for three years, and the federal match would phase down to a permanent 90 percent rate starting in 2017.  But the Supreme Court’s 2012 decision making expansion a state option means that states that expanded after January 1, 2014 or that expand in the future get less than three years of full federal funding because the phase-down is still slated to begin in 2017.  States that wait until next year to expand won’t get the full 100 percent match to help them get their programs up and running.

If enacted, the President’s proposal should put to rest the claims of expansion opponents that the federal government won’t sustain an enhanced match.  Rather than shrink the match, it would increase it for states that expanded after 2014 or expand in the future, treating these states the same as those that expanded from the outset.  

So far, seven states have expanded since the start of 2014 and would benefit from the President’s proposal:  Michigan, New Hampshire, Pennsylvania, Indiana, Alaska, Montana, and Louisiana.  Louisiana’s expansion, announced this week, won’t take effect until July, so it will get only six months of a full match without Obama’s proposed change.

Meanwhile, expansion states are enjoying the benefits of expanded coverage for their poor adults as well as budget savings.  Poor adults in those states have more access to health care services and fewer problems paying their medical bills, and hospitals in those states are admitting fewer uninsured patients.  Expansion states also have saved money partly because they can use federal Medicaid funds to treat people with mental illness and substance use disorders.

Giving all expansion states the full federal match for three years is the right thing to do.