Research & Commentary: States Should Avoid Medicaid Expansion

Published July 3, 2012

The U.S. Supreme Court has ruled on the constitutionality of the Patient Protection and Affordable Care Act (PPACA). While the individual mandate was upheld as a “tax,” the law’s Medicaid expansion has been partly rejected.

Before the Court’s ruling, PPACA required states to expand Medicaid eligibility to all individuals whose income is less than 133 percent of the federal poverty level. States that failed to meet this requirement would no longer receive federal Medicaid grants.

Because the federal government cannot legally force states to regulate, the rule was 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, state officials argued they did not have a realistic choice.

The Supreme Court agreed, ruling the expansion would place a significant financial burden on the states and the federal government cannot penalize states that decide against expansion. The federal government can, however, disallow states from limiting their Medicaid populations.

Therefore, states are not required to expand their Medicaid programs, and opponents to the expansion argue they shouldn’t. According to a Heritage Foundation report, 33 states would increase their Medicaid population by 30 percent and 10 states would increase by 50 percent if they went through with expansion. Additionally, a study from Americans for Prosperity revealed expansion would cost states approximately $21 billion just from 2014 to 2019.

Florida, Iowa, and South Carolina have publicly rejected the expansion, citing budgetary ramifications. Florida Gov. Rick Scott told the Washington Post: “Florida will opt out of spending approximately $1.9 billion more taxpayer dollars required to implement a massive entitlement expansion of the Medicaid program.”

States should think twice about giving up more control of their Medicaid programs only to further expand a system that is already fiscally unsustainable.

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

Medicaid: To Expand or Not To Expand

Nicole Kaeding of Americans For Prosperity argues states should avoid expanding their Medicaid programs because doing so would support the federal health care law, place heavy financial burdens upon the state, and extend an already-broken system.

The End of Federalism: How Obamacare Will Impact States

A fact sheet from The Heritage Foundation outlines the consequences of expanding Medicaid programs to match federal requirements.


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 on 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–commentary-state-medicaid-expansion-and-the-oregon-medicaid-study

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 Kendall Antekeier, The Heartland Institute’s manager of external relations, at [email protected] or 312/377-4000.