Obama Administration: States Will Not Receive Full Federal Funding For Partial Medicaid Expansions

Health and Human Services (HHS) Secretary Kathleen Sebelius announced on Monday that, for now, states will not be able to receive full federal funding if they choose to implement partial Medicaid expansions. States will need to fully expand the program to be eligible for the matching funds under Obamacare that will offset the cost of the program.

Although the Supreme Court upheld the bulk of the landmark health reform law last summer, Obamacare’s proposed Medicaid expansion was scaled back when the court ruled that states should be able to decide whether or not to expand their programs. Since then, GOP governors have been digging in their heels against reform, refusing to expand their states’ Medicaid pools to extend affordable insurance to millions of low-income Americans. That’s led lawmakers in several GOP-run states, such as Texas and Louisiana, to toy with the idea of partially expanding Medicaid in individual counties as a way of overcoming their governors’ continued obstruction.

But Sebelius has confirmed that pursuing that option will make states ineligible for the matching funds that the federal government will offer to the states that choose to fully expand Medicaid:

[W]e explain how Exchanges and Medicaid administrative costs will be funded and how we will continue exploring opportunities to provide States additional support for the administrative costs of eligibility changes. We clarify in our new guidance that states have the flexibility in Medicaid and the Children’s Health Insurance Program to provide premium assistance for Exchange plans as well as to adopt “bridge plans” that offer coverage through both Medicaid and Exchanges — keeping individuals and families together when they cross the line between Exchanges and Medicaid. And, while the law does not create an option for enhanced match for a partial or phased-in Medicaid expansion to 133 percent of poverty, we will consider waivers at the regular matching rate now and, in 2017 when the 100 percent federal funding for the expansion group is slightly reduced, broad-based State Innovation Waivers.


We hope states will take advantage of the substantial resources available to help them insure more of their residents. As an independent report highlighted, “Accounting for factors that reduce costs, states as a whole are likely to see net savings from the Medicaid expansion.”

In fact, several independent reports have highlighted the cost-cutting potential of Obamacare’s Medicaid expansion.

Without full federal matching funds for partial expansions, the stakes have been raised for recalcitrant GOP governors and legislatures, who control the state governments of seven out of the ten least-insured cities in America.