Affordable Care Act Medicaid Expansion: Why States Should Opt Out

Although the Supreme Court recently found the individual mandate in President Obama's health care bill to be constitutional, the court's ruling that states can opt out of the Medicaid expansion affects a majority of the expansion of health coverage and plagues the potential reforms in the bill.

Specifically, this expansion includes the federal government paying 100% for those who enroll in Medicaid up to $31,809 for a family of four, or 133% of the federal poverty line, for the first three years and gradually decrease the percentage paid to states thereafter. Estimates indicate that by 2019 this expansion will likely increase the number of Americans on Medicaid by 17 million.

While there may appear to be upfront benefits from this expansion, there are at least 10 states contemplating opting out, and 26 states that previously challenged the expansion in court. Some argue that potential downsides to this action by these states could be large, but keep in mind that these states will continue to get their current federal contributions. However, these states are justified to opt out of this overreach by the federal government and choose what they believe is best for them instead of bureaucrats in Washington, D.C. that do not know the specific characteristics of each state. This knowledge problem outlined by Friedrich Hayek is tantamount to the current debate and I pose questions to address whether a state should opt out of the Medicaid expansion.