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Medicaid expansion: why some GOP governors are opting in, after all

As a federal deadline looms, Michigan is the third state to reverse course on Medicaid expansion. States that don’t expand their Medicaid programs will lose out on full federal funding.

By Chelsea B. SheasleyCorrespondent / August 28, 2013

Senate majority leader Randy Richardville (l.) and Sen. Judy Emmons listen as the Michigan Senate considers Medicaid legislation Tuesday in Lansing. After initially falling one vote short, a Medicaid expansion bill passed the Senate, with eight Republicans joining 12 Democrats to provide the 20 votes needed for passage.

Dale G. Young/Detroit News/AP

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When the Supreme Court made it optional for states to expand their Medicaid programs under the Affordable Care Act last year, most Republican governors jumped at the chance to reject an element of Obamacare.

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Now, a trickle of Republican-led states are opting-in to the expansion, citing economic benefits to their state.

On Tuesday, Michigan became the third Republican-led state in the past six months to pass legislation expanding Medicaid, following Arizona in June and North Dakota in March. Republican legislatures in Virginia and Ohio are still debating whether they will expand their Medicaid programs in time to receive full matching grants from the federal government.

Under Michigan’s expansion, 470,000 additional uninsured residents will be eligible for Medicaid.

None of these states decided to participate in other elements of Obamacare, such as running their own insurance exchanges, and most of the governors still oppose Obamacare overall. So why are they on board with adopting the Medicaid expansion, a key original tenet of the act? 

For some Republican governors, the draw of extra federal funds for their state budgets trumped ideological views, says Lawrence Jacobs, a political scientist at the University of Minnesota in Minneapolis.

“The ideological battle over Obamacare in Washington has been reframed at the state level as a pragmatic fiscal challenge,” he says. “Republican governors are opposed to Obamacare, but are looking at their budgets and realizing it’s just too good a deal to pass up."

The deal for states is that, starting in 2014, and continuing for the next three years, the federal government will fund the entire cost for each state’s Medicaid expansion. After that, federal funding will phase down to 90 percent with states paying the remainder.

States that don’t expand their Medicaid programs now can do so later, but will lose out on the full federal funding.

“There’s a strong economic incentive to states to move forward with the expansion,” says Robin Rudowitz of the Kaiser Family Foundation, who also notes that the economic incentive and the support of the provider community, like local hospitals, are top reasons states have chosen expansion. 

States that expand Medicaid will cover those who make up to 138 percent of the federal poverty line, or $30,675 for a family of four in 2012 dollars.

Some Republican leaders point to studies that calculate that states will save money by expanding their programs, because the amount of federal funding will outweigh the projected cost of continuing to pay for uninsured who show up in emergency rooms. 

For instance, an October 2012 report by the University of Michigan and the Blue Cross Blue Shield of Michigan found that the state would save about $1 billion over 10 years if it expanded Medicaid.

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