Obamacare dares states not to expand Medicaid

Local lawmakers have the right to refuse -- but businesses, poor residents and political careers may suffer as a result.

By Jason Notte 6 hours ago

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States and their lawmakers have the absolute right to reject the new health care law's expansion of Medicaid benefits and sniff at it derisively as "Obamacare." 

However, they should also be aware that it will burden state businesses with Internal Revenue Service penalties and deny coverage to low-income citizens while legal immigrants get aid for their own coverage.

So far, 20 states, plus the District of Columbia, have accepted the expansion. Thirteen GOP-led states have declined, citing current Medicaid expenses and distrust of Washington. An additional 17 states are still weighing options and considering how more aid to low-income adults with no children at home will affect them.

In Arkansas, the Republican-controlle​d legislature and Democratic Gov. Mike Beebe just struck a compromise in which the state will accept additional Medicaid money under the federal law but will use it to buy private insurance for eligible residents. The Obama administration hasn't weighed in on the move yet, but it's been deemed necessary if the state wants to avoid tax penalties for businesses and other politically uncomfortable scenarios.

Roughly half the nearly 30 million uninsured people who will get coverage as a part of President Obama's health care overhaul will do so through Medicaid, which has an income cutoff of roughly $15,860 per person. Middle-class Americans who don't have coverage at their jobs will be able to purchase private insurance in new state markets, helped by new federal tax credits.

However, states that don't expand Medicaid are putting their employers with 50 or more workers in a tough position. Those businesses face penalties if any of their employees have to get subsidized insurance through those new state markets, but not if those same workers are on Medicaid. Without the expanded Medicaid option, tax firm Jackson Hewitt says employers could be on the hook for more than $1 billion a year in penalties.

There's also the not-so-slight detail that U.S. citizens with incomes below the poverty level -- $11,490 for an individual, $23,550 for a family of four -- can get coverage only through the Medicaid expansion. Legal immigrants who are also below the poverty level, however, are eligible for subsidized private insurance.

That's a potential mess in waiting for lawmakers in immigrant-rich states like Texas and Florida, where declining Medicaid expansion could be construed as favoring immigrants over lifelong residents. That possibility has prompted outspoken Obama administration critic and Republican Arizona Gov. Jan Brewer to propose that her state expand its Medicaid offerings.