The Affordable Care Act (ACA), particularly the expansion of Medicaid, has created considerable controversy, with 20 states opting not to expand the program, leaving over 3 million Americans uninsured who might otherwise be covered by Medicaid. With the recent election in Kentucky threatening Medicaid expansion there, and ongoing debate about the future of the Medicaid expansion program in other states, the topic is likely to remain high on the policy agenda.
Often the opposition to Medicaid expansion is couched in economic terms, with statements about the inability of states to afford the cost of coverage. Specifically, while the Federal government pays 100 percent of the cost of Medicaid expansion for 2014 through 2016, that share falls to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and levels off at 90 percent for 2020 and beyond.
The concern is that the state’s 10 percent share of Medicaid expansion spending could represent a significant expenditure that the state could not afford. If taxes were raised to cover the expense, those taxes would dampen economic activity and, to some extent, harm the very people the ACA is intended to help. While the magnitude of these effects is subject to debate, the notion that states must fund a portion of the costs of Medicaid expansion is correct.
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