One of the major tenets of the Affordable Care Act was state-by-state expansion of the Medicaid program to cover the poorest residents on a state-by-state basis. The law was originally written to withhold Federal reimbursement for Medicaid payments if states did not comply with the expansion of coverage. The Supreme Court ruled that the Federal government could NOT withhold funding for Medicaid as a penalty for not complying with that portion of the law.

This ruling by the Supreme Court has created an ominous burden on the economic impact of the Affordable Care Act.  Each state that decides NOT to expand their Medicaid program will continue to receive Federal funding for their current Medicaid recipients, but will not expand coverage for many of those that would be eligible under proposed guidelines.

Despite the lack of coverage through the states’ local Medicaid program, the uninsured would still have the option of coverage through the state insurance exchange that would be covered through the Federal program. The problem is that these individuals would not be covered through their own state’s plan, but would be a part of the Federally mandated exchange.  This would mean that individuals not covered by the states own Medicaid program would be partially subsidized by the rest of the population outside their own state.

The carrot provided for states by the Feds is picking up the tab in the early years and letting the states begin to pick up their portion of the bill after the first few years.  It is going to be an interesting dynamic to watch as the states who have opted NOT to expand Medicaid see their poorest become insured through an exchange that would largely be supported by others.  This makes for difficult math, not to mention significant disparities in cost on a state-by-state basis. Stay tuned as this interesting dynamic unfolds prior to 2014!