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Obama to Propose Greater Federal Support for States Slow to Expand Medicaid

By Rebecca Adams, CQ Roll Call

January 14, 2016 -- President Barack Obama will ask Congress to give states more time to benefit from full federal financing of Medicaid expansion in the budget proposal he will release Feb. 9.

Under the Affordable Care Act, states were allowed to broaden Medicaid eligibility to people with income up to 138 percent of the federal poverty level. The overhaul required the federal government to pay all the costs for covering the people who became eligible through an expansion in 2014, 2015, and 2016. The federal funding phases down starting in 2017, when states must pick up 5 percent of the costs. In 2020 and beyond, states must bear 10 percent of the expenses for the expansion population.

However, Obama is arguing that all states that expand should get the same arrangement that states that expanded in 2014 did, including three years initially of complete federal financing. The proposal would "provide any state that takes up the Medicaid option the same three years of full Federal support and gradual phase down that those states that expanded in 2014 received, no matter when the state takes up the option," said an administration blog post issued early Thursday.

"This common-sense proposal makes the expansion as good a deal for states that expand now as it is for the states that have already done so," wrote Office of Management and Budget Director Shaun Donovan and Domestic Policy Council Director Cecilia Muñoz. "It is further evidence of the Administration’s willingness to work with states to build on recent progress in improving health coverage and making Medicaid affordable to states and taxpayers alike."

The flexibility would benefit states that have not expanded, many of them in the South and Midwest, if officials change their minds. 

If Congress approves, the proposal could provide additional money not just to states that expand in the future but also those that expanded after Jan. 1, 2014, and lost the opportunity to get full federal financing from the start. Those states include Alaska, Indiana, Michigan, Montana, New Hampshire, and Pennsylvania. Louisiana is slated to expand on July 1.

However, Republicans in Congress just cleared legislation (HR 3762) that would have repealed the Medicaid expansion, which Obama vetoed. GOP lawmakers running for re-election are unlikely to embrace additional federal funding for an expansion of Medicaid.

"I like the idea but I don't think it will pass Congress this year," said Georgetown University Center for Children and Families Executive Director Joan Alker. "The opposition continues to be ideologically based, but eventually some of the air will deflate from that balloon. Clearly the 2016 presidential election is very consequential here."

The president's proposal could put pressure on officials in holdout states. After Louisiana expands Medicaid as Democratic Gov. John Bel Edwards has promised to do this summer, only 19 states will not have broadened the program as the health law allows. Already, governors in South Dakota, Virginia and Wyoming are calling for expansion as part of their budgets. Advocates also are watching to see whether there could be action in Nebraska or in Southern states. Republican governors Gary Herbert of Utah and Bill Haslam of Tennessee also tried to convince GOP lawmakers in their states to accept expansion. 

The Medicaid issue has survived legal battles, with the Supreme Court ruling in 2012 that states could reject an expansion without losing all of their Medicaid money for their entire program, and numerous political fights. Obama is determined to cement as much of his legacy as possible this year by persuading states that have resisted broadening the program. However, conservative candidates also view opposition to the expansion as a winning political strategy in this election year.

The states that have not expanded are Alabama, Florida, Georgia, Idaho, Kansas, Maine, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.

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