The Affordable Care Act, or Obamacare, became law in 2010. The expansion of the Medicaid entitlement to any able-bodied adult who earns less than 138 percent of the federal poverty level has been a large part of the ACA. This expansion began in 2014. The language in the original law forced all states to expand Medicaid. The enticement was that instead of states paying 50 percent of the costs of the Medicaid expansion, as in traditional Medicaid, the federal government would pay 100 percent of the expansion costs gradually decreasing that figure to 90 percent beginning in 2020.

In 2012, the U.S. Supreme Court ruled that the ACA was constitutional. In a separate part of the decision, the Court ruled that the federal government could not force states to expand Medicaid.

The majority of states have expanded the entitlement either through state laws or through voter ballot initiatives. The argument has been that expansion money is “free” federal money. Of course state taxpayers are also federal taxpayers, so in reality, these state taxpayers are forced to fund the entire expansion.

Unlike the federal government, states cannot run a budget deficit. Medicaid expansion states are now realizing that even the 5 to 10 percent of these new costs can be a budget buster. A recent report from Oregon, one of the first states to expand Medicaid, shows a 2019-2021 budget deficit of $632 million. (here) This red ink is in spite of a 5 percent increase in revenue in Oregon compared to the current budget.

Traditional Medicaid is one of the top three budget items for every state, crowding out other important responsibilities of state governments like education and transportation. Even though 10 percent of expansion costs seems small, that money adds considerably to the existing costs of Medicaid and adds to the burden of state taxpayers.