As the battle over Medicaid expansion rages in the states, supporters of expansion have dusted off an age-old favorite in making the case for taking federal dollars. They say: If our state doesn’t take the money, those dollars will go to some other state instead.
Happily, in this instance that is not true. When a state declines to expand Medicaid coverage to more people, no other state will receive its share of funds and federal spending declines. Based on figures from the Congressional Budget Office and analysis by the Kaiser Family Foundation, Washington was expected to spend roughly $950 billion expanding Medicaid between 2014 and 2022. Each state that declines to expand Medicaid relieves strain on the overall federal budget for this entitlement.
State governments generally don’t have much of an impact on the federal budget. But there was a gift for fiscally conservative state lawmakers tucked into last summer’s U.S. Supreme Court decision on the Affordable Care Act. In National Federation of Independent Business v. Sebelius, the court ruled that Congress cannot coerce states into expanding Medicaid by threatening to withhold federal dollars for a state’s existing program. This ruling effectively gave state policy makers the unique opportunity to veto hundreds of billions of dollars in new federal spending.
Supporters of Medicaid expansion also say that one state opting out won’t make a difference—that the amount of forgone money is a mere drop in the fiscal bucket. But states joining together to say no to Medicaid expansion will make a significant dent in the federal budget, and many already have.