States May Opt Out of Medicaid Expansion, Court Rules

Margaret Dick Tocknell, for HealthLeaders Media , June 29, 2012

The U.S. Supreme Court ruled Thursday that states can opt out of the expansion of the Medicaid program without facing the loss of their existing funding. The ruling provides cash-strapped states with an easy way to avoid adding additional members to their Medicaid rolls and could have a chilling effect on the interest among health plans in the Medicaid market.

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In a victory for the 26 states that filed suit against Patient Protection and Affordable Care Act, the high court called unduly coercive the provision to allow the Secretary of Health and Human Services to cut all Medicaid funding for states that choose not to participate in the Medicaid expansion under the PPACA.

"The threatened loss of over 10% of a state's overall budget is economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion," Justice John Roberts wrote.

"The government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the 'right to alter, amend, or repeal any provision' of Medicaid. But the expansion accomplishes a shift in kind, not merely degree."

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