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Will California once again lead the nation as Medicaid is expanded?

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One of the critical elements of the just-released Supreme Court decision on the Affordable Care Act, or "Obamacare," is the piece that gives states the option of saying no to money from the government that would have expanded Medicare coverage. This is from Josh Barro at Bloomberg:

Today’s Supreme Court ruling upheld the individual mandate in the Affordable Care Act. But it did strike down one part of the law—the provision that withdraws all Medicaid funding from states that do not expand eligibility to all people under age 65 living below 133 percent of the poverty line. States that do not expand eligibility will have to forgo only those federal funds that would have financed the expanded coverage, not all Medicaid funds.

I'm no legal scholar, but the debate over this piece of the law is a fairly straight-up case of federalism versus states' rights, that oldest of American Con Law dustups. Here's how it goes: The law as written would have effectively taken away all Medicaid money that didn't participate in the ACA expansion. That would represent a federal penalty imposed on the states for saying "No thanks" to the extra money. 

The Supreme didn't like this because it decided that the states should have the right to decline additional federal money without losing the federal money they're already receiving. As with constitutional issues, this aspect of the decision brought out some of the better SCOTUS language, so I've excerpted it (from the summary of the decision, not from Chief Justice Roberts' majority opinion):

The threatened loss of over 10 percent of a State’s overall budget is economic dragooning [my emphasis] that leaves the States with no real option but to acquiesce in the Medicaid expansion.  The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the “right to alter, amend, orrepeal any provision” of Medicaid...But the expansion accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for particular categories of vulnerable individuals. Under the Affordable Care Act, Medicaid is transformed into a program to meet the  health care needs of the entire nonelderly population with income below 133 percent of the poverty level. A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically.  The Medicaid expansion thus violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion. 

So what does this mean for California? Well, the Golden State was happy to be economically dragooned — so much so that it had already moved forward of this piece of the Affordable Care Act, scheduled to take effect in 2014. We essentially made a bet that the ACA would would not be completely struck down and that Medicaid expansion would survive, even if states were given a choice about whether to take the new funding.

In California the program is called "Bridge to Reform" and basically brings close to 2 million new residents into Medicaid. Los Angeles has by far the most new participants, nearly 140,000. The Mecury News has a nice summary:

California's bridge program is implemented by county health agencies, which enroll patients under the same qualifying rules that would be in place under health reform. For every budgetary dollar counties invest in the program, they receive a 50-cent match from the federal government, which has reserved $8 billion for the effort.

Participants have income levels beyond the traditional ceilings for Medicaid, which is called Medi-Cal in California.

They reach as high as $46,100 for a family of four in some counties and are never lower than $30,667 for a family of four in others. In another major change, adults without children now qualify.

Undocumented immigrants do not qualify.

Not all California counties are embracing the program. Fresno and San Luis Obispo counties have withdrawn from participation, not because of the Supreme Court uncertainty, but because they feared their health systems could not accommodate the new patient load.

California is a huge state and according to the Census Bureau, has almost 20 percent of residents living without health insurance. Making matters worse in the high cost of getting by the state. California Watch reported last year that to cover basic needs, a family of four in California needs and income of 63,000 a year — "nearly triple the federal poverty level." So you can see why we would have embraced an expansion of Medi-Cal.

The question is whether states that share our poverty and un-insured issues will stick with the old Medicaid funding levels or go ahead and participate in the expansion. Under the law, the federal government will initially cover 100 percent of the tab and wind that down to — wait for it — 90 percent. This has been called free money because that's what a program than costs states 10 cents on a dollar is usually called.

The decision isn't really economic, then. It's political. As Josh Barro points out, all 50 states participate in Medicaid, even thought they don't have to. Even the holdouts — such as Arizona, which didn't sign on until 17 years after Medicare was established — are now in. A relatively conservative state like Texas, with nearly a quarter of the population uninsured, may choose to politely decline Justice Roberts' invitation to say no to more federal dollars. Or it may see the advantages and take the additional funds.

That said, Republicans in Congress are still pledging to repeal Obamacare. So even though some states may decide to follow California's lead in embracing an expansion of Medicaid, they may not leap into the fray and establish their own bridge programs before 2014.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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