The Supreme Court ruled that the Affordable Care Act was legal with one exception: the federal government could not require states to increase Medicaid eligibility. Although States were not required to make Medicaid eligibility more generous, the did have an incentive to do so. The federal government will pay 90% of the cost of enrolling this additional individuals in Medicaid. Thus, most states still had an incentive to expand Medicaid roles to increase funds flowing from the federal government.
A number of states, however, did not expand their Medicaid coverage. One unique example is Wisconsin. WonkBlog reports:
Under Wisconsin’s new Medicaid design, about 82,000 childless adults living under the federal poverty level are newly eligible. About 75,000 adults earning between the federal poverty level and 200 percent FPL were removed from the Medicaid program, known as BadgerCare in Wisconsin. They’ll be eligible for federal subsidies to purchase exchange coverage…
Wisconsin’s Medicaid plan is pretty unique. Walker rejected Obamacare’s far more generous federal match for the Medicaid expansion while managing to cover more of the state’s poorest residents. And there’s no eligibility gap like there is in other states that rejected the ACA’s Medicaid expansion, since anyone above the poverty level can get coverage on the exchange. But will they find the exchange coverage affordable, even with the federal subsidies?
The Wisconsin plan is almost analogous to a voucher program. Governor Scott Walker is saying, ‘if you are poor, we will give you a subsidy to buy whatever insurance you want. You are not required to buy low-quality government insurance’. However, it is unclear whether the size of the exchange subsidies are the same as the expected benefit one would receive from Medicaid coverage. Thus, in their Walker’s proposal is pro-market and potentially welfare improve for the poor, in practice it may not be if the subsidies are not sufficient to offset the benefits poor individuals would have received from Medicaid.