Whether for political reasons or failing to see financial benefits at little or no cost, states that have opted out of Medicaid expansion have excluded themselves from federal funding that is paid for by all states.
Minimal Cost to States with Medicaid Expansion
In 2012, the Supreme Court ruled to allow states to choose whether to participate in the expansion. Many states declined to participate feeling that it would negatively impact their budgets, although research has shown that the costs to states of expanding Medicaid average is less than 1 percent of state budgets.
Federal Government to Pay 90-100% Through 2020
A key provision of the Affordable Care Act is the expansion of the Medicaid program to residents with incomes at or below 138 percent of the federal poverty level ($15,856 for an individual and $32,499 for a family of four). The federal government will initially cover 100% of Medicaid costs for newly eligible enrollees. It will continue to cover those costs through 2016, and will then phase down its support. However, by 2020, the federal government will still pay 90% of the costs.
Benefits of Medicaid Expansion
If adopted by all states, the Medicaid expansion is expected to provide health insurance to as many as 21.3 million Americans by 2022, improving their access to care and financial protection. In addition to providing valuable health insurance benefits to low-income state residents, and steady sources of financing to state health care providers, the Medicaid expansion will be an important source of new federal funds for states.
Funding from Federal Taxes
Like a substantial share of highway funds and all funding for defense procurement contracts, federal funds that pay for state Medicaid programs are raised through federal general revenue collection. These revenues are raised from taxes paid by residents in all the states, whether or not they benefit from a specific federal spending program.
Federal funding provides direct benefits and helps local economies. Even states that do not value the health benefits of expanding Medicaid may value the expansion as a source of funds that benefits the state economy.