Research & Commentary: PPACA and Medicaid Expansion

Published March 26, 2012

The Patient Protection and Affordable Care Act (PPACA) requires states to expand Medicaid eligibility to all individuals whose income is less than 133 percent of the federal poverty level. States that fail to meet this requirement will no longer receive federal Medicaid grants.

Because the federal government cannot legally force states to regulate, the rule is designed to give states a theoretical option: accept the provision and maintain federal funding, or choose against expansion and find the money elsewhere. With Medicaid constituting one of the largest parts of every state budget, states do not have a realistic choice.

The Supreme Court will hear oral arguments on March 28 regarding whether the Medicaid provision is constitutional. The 26-state legal case against the federal health care law argues it is coercive and infringes on state sovereignty and is therefore unconstitutional.

The Obama administration argues this condition is well within its authority to determine how to disburse funds to states, and it notes Medicaid has been similarly expanded in the past. It also argues states will not bear any large burden from the expansion because the federal government will pay the cost for all newly eligible enrollees added to the program.

However, full federal coverage of new enrollees will end in 2020, leaving states to finance the difference when at least 15.9 million Americans will have been added to Medicaid, according to Congressional Budget Office estimates. In addition, because all individuals will be required to purchase health insurance, those who are currently eligible for Medicaid but not enrolled will be forced to join to receive coverage. The cost for these individuals will not be covered by the federal government and will have to be covered by the states.

All of this means states will experience significant cost increases for a Medicaid system that has already proven financially unsustainable.

The following documents offer additional information on state Medicaid costs and the potential impact of forced expansion.

Mario Loyola: Challenging the Constitutionality of Obamacare’s Medicaid Expansion
In a podcast for Coffee & Markets, Mario Loyola describes why he and many other analysts consider the federal health care law’s Medicaid expansion to be unconstitutional.

Medicaid Coverage and Spending in Health Reform: National and State-by-State Results for Adults at or Below 133% FPL
The Kaiser Commission on Medicaid and the Uninsured explains the effect the expansion of the system will have on states, specifically the additional financial strain of a system that is already overwhelming state budgets.

Medicaid Expansion Would Strain State Budgets
Writing in Health Care News, Sarah McIntosh of Missouri News Horizon explains the burden the federal Medicaid expansion will place on states.

State Budget Crises Under Further Pressure From Obamacare
Writing in The Heartlander digital magazine, Loren Heal of the University of Illinois delves into the burdensome costs states will experience due to Medicaid expansion and the implementation of health insurance exchanges.

Oregon’s Medicaid Expansion Health Outcomes Examined
Marc Kilmer of the Maryland Public Policy Foundation describes a New England Journal of Medicine report that revealed “Medicaid recipients consume 25 percent more health care resources than the uninsured” and compares the Oregon expansion to the federal Medicaid expansion.

Consumer Power Report #308: Who Pays for Medicaid Expansion?
Benjamin Domenech, a Heartland Institute research fellow and managing editor of Health Care News, discusses a Medicaid Health Plans of America (MHPA) report that examines how costs are shifted to states under the federal health law’s Medicaid expansion.

Oregon’s Medicaid Expansion Proves Costly
Health Care News reports, “Expanding Medicaid coverage to low-income individuals results in better reported health and greater financial well-being, but also higher costs and greater utilization of care.”

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or the Heartland website, contact Heartland Institute Legislative Specialist Kendall Antekeier at [email protected] or 312/377-4000.