Fate of Medicaid Expansion and Filling the Coverage Gap May Once Again Depend on the Outcome of State Elections

The Inflation Reduction Act (IRA) of 2022 includes a number of climate, tax, and health care provisions.  Major health care provisions include prescription drug reforms that primarily affect Medicare as well as a three year extension of enhanced subsidies to purchase Marketplace coverage that were included in the American Rescue Plan Act (ARPA).  However, a temporary federal policy to close the coverage gap – which was included in the House-passed reconciliation bill — was not included in the IRA and an amendment offered by Senator Warnock to add it back in did not garner enough votes.  The coverage gap includes roughly 2.2 million individuals living in 12 states that have not adopted the Affordable Care Act’s (ACA) Medicaid expansion. These individuals do not qualify for Medicaid and have incomes below poverty, making them ineligible for premium subsidies in the ACA Marketplace. Without a federal option to close the coverage gap, attention once again turns back to the states for now, where Medicaid expansion could be a key issue in some upcoming elections.  Public polling consistently shows that the majority of people living in non-expansion states want to see their state expand Medicaid.

Expansion is likely to be a major issue in several upcoming state elections.  In the 12 states that have not adopted the Medicaid expansion, all but two (NC and MS) have upcoming gubernatorial elections in November 2022. States where Medicaid expansion could be an issue in the election — and where the gubernatorial election is considered a toss-up — include Georgia, Kansas, and Wisconsin.

• In Georgia, Stacey Abrams has campaigned on health care and Medicaid expansion as she runs again against incumbent Republican Governor Brian Kemp, who opposes it. In addition, recent reporting suggests some Republicans may be shifting in opposition to expansion given hospital closures, the pandemic, new fiscal incentives and popular support for expansion.
• In Kansas and Wisconsin, incumbent Democratic governors with several failed attempts to expand Medicaid within Republican legislatures are running for re-election (Laura Kelly and Tony Evers). Derek Schmidt who is running against Laura Kelly has stated that he does not support Medicaid expansion in its current form.
• Voters in South Dakota are expected to re-elect Republican Governor Kristi Noem – who has opposed expansion – but they will also vote on the ballot measure to enact Medicaid expansion through a constitutional amendment. If passed, the amendment would direct the state to expand Medicaid by July 1, 2023 with no additional eligibility restrictions. Noem has stated that if the initiative passes, she will make sure it is implemented fairly. While Medicaid expansion may not be a deciding issue for many voters, the outcome of these elections will have consequences for the chances of expansion moving ahead in these states.

While there is no federal provision to address the coverage gap, states that newly implement Medicaid expansion will receive a temporary fiscal incentive under the American Rescue Plan Act (ARPA). Under the ACA, the federal government pays 90% of the costs for the expansion group. However, under ARPA, enacted in March 2021, new expansion states would be eligible for an additional 5 percentage point increase in the state’s traditional match rate for two years if they implement the expansion at any time. The traditional FMAP applies to most services for non-expansion groups. Since this group is much larger than a state’s expansion population, states would see a net fiscal benefit for two years from additional funds for a large share of their Medicaid program. For example, earlier analysis shows that the net fiscal benefit over a two-year period would be $710 million for Georgia, $250 million for Kansas, $60 million for South Dakota, and $1.1 billion for Wisconsin.  In Wisconsin, estimates do not account for new state costs for expansion because the state currently provides Medicaid eligibility to childless adults earning up to the poverty level under a state waiver, at the regular FMAP; thus, even with additional costs due to covering currently marketplace-eligible people between 100-138% FPL, the state would likely see fiscal gain under expansion by moving waiver enrollees from the regular state match to the 90% expansion match.

The ARPA fiscal incentive reignited discussion in a few states in 2021 and again in 2022.  In 2021, Medicaid expansion narrowly failed in Wyoming, and proposals were introduced in Kansas, North Carolina, and Wisconsin by Democratic governors but failed in Republican dominated legislatures. In 2022, Kansas’ Democratic governor, Laura Kelly, reintroduced Medicaid expansion, however it once again failed within the Republican-controlled legislature. Also in 2022, Democratic Governor Roy Cooper again introduced a proposal to expand Medicaid.  In June 2022, both the House and Senate – which have Republican majorities — passed different Medicaid expansion proposals; however, the legislative session adjourned without any action. Debate about expansion is ongoing in North Carolina.

To track updated state-by-state activity on Medicaid expansion, please visit our Medicaid Expansion State Tracker.