Democrats push states to expand Medicaid under Obamacare

President Biden’s COVID-19 relief law is dangling $16.4 billion in front of the 12 states that haven’t expanded Medicaid under Obamacare to get them to join up, saying the pandemic is a bad time for their residents to be going without health coverage.

But underscoring the ongoing partisan divide over the Affordable Care Act, the Republican governors of at least two of those states already turned their backs on the money.

The problem, as they see it, is that providing coverage for more people in the short term could leave their states on the hook for continuing to insure them and overwhelm their coffers if the federal aid dries up in as soon as two years.

“Gov. McMaster isn’t for sale, regardless of whatever ill-conceived ‘incentives’ congressional Democrats may come up with,” said Brian Symmes, spokesman for South Carolina Gov. Henry McMaster. “What the federal spending plan does is attempt to offer a short-term solution for a long-term problem. At the end of the day, South Carolina’s taxpayers will be on the hook for the massive budgetary consequences of expanding Medicaid, and Gov. McMaster won’t let that happen.”

Florida Gov. Ron DeSantis also is a hard no.

“The governor remains opposed to the expansion of Medicaid in Florida,” DeSantis spokesman Cody McCloud said.

In Wyoming, where Republicans hold a supermajority in each chamber of the state Legislature, lawmakers are considering the promise of receiving about $70 million in federal funding over the next two years to expand Medicaid to about 25,000 people who do not qualify for the low-income program. Bills to take up Congress’ offer passed key legislative committees last week.

Under the “bribe,” as Mr. McMaster called it, the federal government would pay a greater share than it does now of the cost of covering those on Medicaid if holdout states expand.

At the center of the debate is a provision of the Affordable Care Act, President Obama’s signature health care law, which aimed to reduce the number of uninsured Americans but is criticized for giving the federal government too large of a role in health care. The law pushed states to make Medicaid available to more people.

Eligibility for Medicaid varies from state to state. Under Obamacare, the federal government agreed to initially pay the entire cost of expanding the program to people who make up to 138% of the poverty level, or $30,305 for a family of three, in 2021.

In Texas, which didn’t opt in to the program in 2010, an expansion would mean covering adults without children. Childless adults with low income currently do not quality for Medicaid.

Most states joined the expansion. The 12 holdouts are Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin and Wyoming.

Obamacare called for the federal share of covering more people to gradually shrink, and the federal government now pays 90% of the cost of the expanded program.

That does not change under a provision Democrats included in the $1.9 trillion coronavirus relief package. But to entice more states to expand, the American Rescue Plan upped the federal government’s share of funding for those already on traditional Medicaid by 5 percentage points for two years.

How much of Medicaid a state covers varies, but the federal government covers on average about half of the cost of people on traditional Medicaid. The states pay the other half.

More people are on traditional Medicaid than would be added through expansion. If the federal government picks up a greater share of the cost of covering those already on Medicaid, it would outstrip the cost to states of adding people, said Rachel Garfield, vice president of the Henry J. Kaiser Family Foundation.

According to a Kaiser Family Foundation analysis, the 12 holdout states would have to spend $6.8 billion over the next two years to expand Medicaid, but they would receive $16.4 billion in additional federal funding, creating a net gain of about $9.6 billion.

In Texas, the state would have to spend $3 billion to expand the program over the next two years and receive an extra $5 billion in federal funds. The state would end up ahead by about $2 billion, according to the analysis.

“Our goal in crafting this was to create an offer that was too good to refuse,” said Rep. Frank Pallone Jr., New Jersey Democrat and chairman of the House Energy and Commerce Committee, which handles health care policy. “I’m hopeful that this new incentive will be the tipping point that encourages the remaining states to finally do the right thing and expand their Medicaid programs, which would result in 4 million more Americans gaining health insurance.”

In Wyoming, expanding Medicaid would cost about $40 million over two years, but the state would receive $70 million in additional federal dollars, according to the Kaiser estimate.

The prospect of receiving $30 million in federal funds helped find bipartisan support for expansion in the Legislature, said Wyoming Senate Minority Leader Chris Rothfuss, a Democrat and the sponsor of an expansion bill under consideration in Cheyenne.

The dangling of the federal dollars “comes at a time when Wyoming will be forced to cut essential health programs due to declining state revenue,” he said. “The added [federal] revenue, coupled with our state’s repeated failure to provide any meaningful policy alternatives to expansion, have persuaded some Wyoming legislators that have previously opposed expansion.”

Wyoming Gov. Mark Gordon, a Republican, is waiting to see what the Legislature decides, spokesman Michael Pearlman said.

Alabama Gov. Kay Ivey, a Republican, also is open to the offer.

“Ensuring every Alabamian has access to quality health care is important to the governor and always has been a priority of hers,” said the governor’s spokeswoman, Gina Maiola. “However, as she has made clear, the problem has always been how to pay for it. She is open to the discussion, but right now we simply do not have all the facts.”

Even without the promise of more federal funding, the idea of expanding Medicaid has proved popular among residents of some red states that initially rejected the program. Republican leaders, though, continue to oppose the idea.

Since 2017, voters approved ballot initiatives expanding Medicaid in Maine, Utah, Nebraska and Idaho. They did it last year in Oklahoma and Missouri.

“For voters, Medicaid expansion isn’t a partisan issue. It’s about getting hardworking people health care and bringing their tax dollars home to help their communities — and that’s popular in red and blue states alike. What our work has shown is that Americans are in greater agreement and much more generous than our politics might suggest,” said Jonathan Schleifer, executive director of The Fairness Project, a liberal Washington group that pushed the ballot initiatives.

A bill proposed by Rep. Marc Veasey, Texas Democrat, scheduled to be heard by the House Energy and Commerce Committee on Tuesday, also would try to entice the holdout states. The federal government would pick up the entire cost of expanding Medicaid for the 12 states for the first three years and pay at least 93% of the cost of the expansion for the subsequent three years.

The proposal is among 17 that Democrats are pushing to try to expand the Affordable Care Act. It includes spending $200 million a year to market Obamacare and impose new requirements on plans sold through the system’s exchanges.

One problem is that states that allow more residents to sign up for Medicaid could be on the hook to keep insuring them when the two-year federal aid ends.

“It would be up to the states to have to backfill whatever federal dollars they were relying on,” said Nina Owcharenko Schaefer, a former senior adviser on health care policy in the Trump administration and now a researcher at The Heritage Foundation, a conservative Washington think tank.

What’s more, she said, congressional Democrats do not recognize that some states that kept their economies open more than others during the pandemic might not need the federal dollars as much as states that shut down.

If Democrats want more states to expand Medicaid, then the Biden administration has made it more unappealing, Ms. Owcharenko Schaefer said.

She noted that Republican lawmakers in Utah added a requirement that those eligible for Medicaid under the expansion have to look for work. Other Republican states may have been willing to expand if they were able to add similar requirements.

Mr. Biden has said he will not allow extra requirements.

In February, the Centers for Medicare & Medicaid Services wrote that states with Medicaid work requirements must drop them. In March, the agency notified Arkansas and New Hampshire officials that they were no longer authorized to have the requirement.

States taking the Obamacare dollars could be seen as supporting the law, and many are concerned that it expands the federal government’s role in health care.

“The administration is beginning to claw back a lot of the flexibility the Trump administration gave states,” Ms. Owcharenko Schaefer said. “It’s [now] all about spending more federal dollars while giving states less flexibility.”