Will Conservative Governors Reject the Deal of a Lifetime?

According to one of the latest counts, officials in 30 state governments have indicated that their state plans to opt out of the Medicaid expansion that was enacted as part of health care reform, or are at least leaning in that direction. The reason many conservative state officials, like Florida Governor Rick Scott, cite for opting out (putting aside general criticism of the evils of “Obamacare”) is that participating would “strain state budgets.”

In reality, the Medicaid expansion is the deal of a lifetime for state governments. The nonpartisan Congressional Budget Office (CBO) estimates that the federal government will take on nearly 93 percent of the costs of the Medicaid expansion over its first nine years. On average, that means that states will receive over 9 additional Medicaid dollars for every 1 they spend themselves.

While this may already sound like a great deal, many states may end up actually saving money by embracing the Medicaid expansion. An in-depth study by state officials in Arkansas found that it would actually cost the state $3.4 million more to not participate in the Medicaid expansion. Similarly, a study by the Urban Institute found that health care reform overall will save state budgets between $92-129 billion dollars from 2014-2019.

In some cases, the failure of the state government to accept the Medicaid expansion may also have the side effect of putting even more strain on local budgets. Last year in Texas, for example, the decision by the Republican Governor Rick Perry and state legislators to cut Medicaid forced the El Paso County Hospital District to raise property taxes to make up for the increasing costs from nearly uninsured patients. This dynamic explains why many local officials in Texas support the Medicaid expansion, even as Governor Perry is one of its most outspoken critics.  

While many conservative governors are claiming that the Medicaid expansion would cost too much, they are at the same time continuing budget-busting tax breaks for the wealthy. Iowa Republican Governor Terry Branstad for instance has said that the Medicaid expansion would be “unaffordable” and “unsustainable”, even though its estimated cost would be less than 4 percent of the revenue that could be raised by ending the Iowa’s bizarre and regressive deduction for federal income tax payments.

Considering the generous deal that governors are being offered, many commentators believe that most if not all the states will ultimately take the deal, despite the recent election year grandstanding. The CBO is not so sure. On Tuesday, CBO released its latest cost projections of health care reform, which predicts that many states will choose to opt out of the Medicaid expansion resulting in 3 million fewer people insured.

Photo of Gov. Terry Branstad via Iowa Politics Creative Commons Attribution License 2.0