Introduction: The Medicaid Choice

In June 2012, the U.S. Supreme Court ruled unconstitutional key provisions of the federal Affordable Care Act of 2010.[1] These portions of the ACA would have denied federal matching Medicaid funds to states that chose not to extend Medicaid eligibility to people with incomes of up to 133 percent — practically speaking, 138 percent — of the federal poverty level.[*] Prior to passage of the ACA, most state Medicaid programs limited eligibility primarily to children and their parents, and only a few states enrolled childless adults earning above 100 percent of the federal poverty level.[2] As a result of the court’s decision, Michigan and other states now have the opportunity to compare the costs and benefits of expanding Medicaid eligibility without the threat of losing substantial federal monies.

Graphic 1: 2013 Federal Poverty Levels

Graphic 1: 2013 Federal Poverty Levels - click to enlarge

Source: U.S. Department of Health and Human Services.

The ACA was initially expected to provide coverage for 32 million uninsured individuals and families when fully implemented.[†] About half of the newly covered were expected to obtain private coverage, while the other half would enroll in an expanded Medicaid program.[3] The ACA contains financial incentives designed to strongly encourage states to expand Medicaid eligibility.[4] The Obama administration and advocates of the plan have touted the benefits of expanding Medicaid. In addition to providing health coverage and improved access to care for low-income uninsured individuals, the federal government promises to pay most of the cost.[5]

Michigan has an important choice to make. A thorough discussion of the Medicaid expansion must involve costs, obstacles and potential pitfalls.

[*] Although eligibility for the proposed Medicaid expansion is technically cut off at 133 percent of the federal poverty level, applicants can ignore up to 5 percent of their income. “Compilation of Patient Protection and Affordable Care Act [As Amended Through May 1, 2010] including Patient Protection and Affordable Care Act Health-Related Portions of the Health Care and Education Reconciliation Act of 2010,” (Office of the Legislative Counsel, 2010), Section 2002, p. 189-190, (accessed June 12, 2013).

[†] The ACA was estimated to cover 32 million uninsured by 2016 and 34 million by 2021. See Douglas W. Elmendorf, “CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010,” (Congressional Budget Office, 2011), Table 3, p. 18, 87zua (accessed May 15, 2013). This estimate has been revised to 26 million by 2016. See Jessica Banthin, Holly Harvey, and Jean Hearne, “Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” (Congressional Budget Office, 2012), Table 3, Page 20, (accessed May 28, 2013).