Easy Chair — From the May 2014 issue

Fill In the Gap

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When the U.S. Supreme Court upheld the bulk of the Affordable Care Act in June of 2012, the decision was widely viewed as a victory for President Obama and a validation of his signature domestic-policy achievement. The Court’s declaration that the federal government couldn’t force states to participate in the law’s Medicaid expansion was treated almost as an afterthought. But now, as Obamacare begins to take effect, the ramifications of the Medicaid ruling are at last becoming clear.

Under the Affordable Care Act, Americans making between 100 and 400 percent of the federal poverty level are eligible to receive subsidized health insurance purchased from private insurers on government-run exchanges. The law also expanded Medicaid to cover everyone making less than that. Before the ACA, states received matching funds from the federal government to provide Medicaid benefits to certain vulnerable populations, notably low-income families and pregnant women. Although states could opt to extend coverage to other populations with additional federal aid, few did. For instance, only nine offered Medicaid benefits to adults living in poverty without dependent children. In tandem with the subsidized exchanges, Obamacare’s new Medicaid standards — which required that states cover their entire nonelderly low-income population in order to be eligible for funding — were intended to guarantee some form of coverage to all those below the 400 percent line. But the Supreme Court ruled that this change caused “a shift in kind, not merely degree” in how Medicaid was administered and represented an unconstitutional federal mandate. The Court found that while the federal government could offer states the funds to expand Medicaid, it could not force them to accept changes to the program. In the wake of the ruling, nineteen Republican-led states chose to refuse their share of the funds, creating what is now being called the coverage gap: an estimated 5 million American adults earn too little to qualify for federal exchange subsidies but too much to qualify for Medicaid.

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