The Affordable Care Act was supposed to pad the safety net by forcing states to expand their Medicaid programs and cover all of the poorest Americans—not just children, pregnant women, and the disabled. But Thursday’s Supreme Court ruling authored by Chief Justice John Roberts holds that states don’t have to join in the expansion if they don’t want to. Congress is free to pay states that extend Medicaid access to everyone under 133 percent of the federal poverty limit, but it can’t coerce them to do so by threatening to yank the federal funds that cover their current, smaller Medicaid programs. That’s a problem for the law’s authors, who didn’t write a backup provision to help many of these low-income people buy insurance in some other way. Now they’re out of luck: The biggest losers in President Obama’s victory are the poor.
Twenty-six states—including some of the poorest, such as Mississippi, Louisiana, and Tennessee—joined the lawsuit challenging the Medicaid provision. Altogether, about 8.5 million residents in those states would have gotten Medicaid if the law went forward as written, according to a ProPublica analysis. It’s not clear that all 26 governors will opt out of the expansion now that they can, but some certainly will. A spokeswoman for Kansas’s Sam Brownback, for instance, tells National Journal that the governor “will not take any action to implement Obamacare.” South Carolina’s Health and Human Services director says that his state will “continue to fight” the law’s rules for Medicaid. Most residents in those states who were expected to get insurance thanks to the law would have gotten it through Medicaid.
The decision puts these poorest residents in a difficult position. They’ll be required to buy insurance but ineligible for Medicaid. As Roberts wrote in his opinion, Congress “enacted no other plan for providing coverage to many low-income individuals.” The upshot is that those Americans will probably not be penalized for violating the individual mandate, but they’ll still have trouble finding cheap insurance. “There is simply no other affordable form of coverage for those people, so you are effectively consigning them to health insurance hell,” says Daniel Hawkins, the vice president for federal, state, and public affairs at the National Association of Community Health Centers, a group of federally subsidized clinics.
The not-quite-poor will fare better. The health care law extends tax credits to Americans who earn between 100 percent ($11,170) and 400 percent ($44,680) of the federal poverty limit. Using those credits, they will be able to use regulated online marketplaces, called exchanges, to buy private insurance. Those credits will not be available to the poorest people, because lawmakers assumed that every state would be compelled to expand its Medicaid program, and Medicaid is much cheaper than the tax credits for private insurance. “You’ll have higher-income people having access to coverage but not low-income people,” says Heather Howard, director of the State Health Reform Assistance Network at Princeton University. There is one exception: Because legal immigrants are not allowed to get Medicaid, poor immigrants will get the credit that poor Americans can’t. “You’ll have real gaps in coverage,” Howard says.
States opposing the law said that Washington overstepped by requiring them to create big programs that they may not always be able to support. Because the fight was couched as a matter of states’ rights, and because so many Republican governors so strongly oppose the health reform law on principle, experts think that many states are likely to opt out of the expansion, at least at first. But over time, the political pressure on governors to participate will rise. “They are effectively denying the poorest residents of their state access to this vitally important coverage that they would have been eligible for,” says Hawkins. Governors will have a tough time explaining themselves, especially when the law says that the federal government will pick up 100 percent of the tab for expanded coverage during the first two years and more than 90 percent of the tab through 2022.
Local health care providers, particularly hospitals that serve a lot of low-income patients, will also lean on state governments to join the enlarged Medicaid program. The health care law cut subsidies that helped them treat poor and uninsured patients. The theory was that more people would acquire insurance once the law kicked in, making the subsidies unnecessary. But the Court’s ruling makes that less likely, meaning that local providers—many of which already operate on narrow margins—will be forced to treat patients without receiving the money to do so.
The National Association of Public Hospitals and Health Systems, the trade group that represents those providers, is already asking Congress for help. In a statement on Thursday, the organization “urges Congress to avoid a potentially disastrous outcome for vulnerable populations by immediately reevaluating safety-net funding in light of this decision.” In this budget climate, these providers may not get far with Congress. But their argument may make a bigger impression on the states, especially once the dust has settled on the Court’s decision.
This article appears in the June 30, 2012 edition of National Journal Magazine.