State Budgets

Medicaid Expansion Is the Price to Shift the Balance of Federalism


  • The federal government is willing to pay states to shift the balance of federalism in favor of the federal government–states must recognize this.
  • State and local government is weakened with every joint state/federal program, and Medicaid expansion is no exception.
  • Oklahoma has shown that it can both a) innovate health care, and b) uphold the principles of federalism by developing its own health care programs for low income residents.
  • Accepting Medicaid expansion, as written in the Affordable Care Act, will be a devastating blow to the balance of federalism between Oklahoma and the federal government.

The debate over Medicaid expansion is as much about federalism and the issue of state control as it is about money-because these are ultimately one in the same.

The Affordable Care Act (ACA) includes Medicaid expansion, which widens the range of eligible individuals who can receive government insurance. The federal government has promised to provide 100 percent of the funding for the new enrollees, consisting of the childless adults whose income is 138 percent of the federal poverty line, for the first three years. Over time, the states will gradually pick up 10 percent of the total costs. Several states have jumped at the opportunity to get “free money” to provide more government services.

This funding split was not originally meant to be an enticement for states to accept expansion. It was just the way the law was written. Under the ACA, all states, as part of their Medicaid program, had to accept Medicaid expansion or risk losing all Medicaid funding. Several states took issue with this, accusing the federal government of coercion. In the landmark June 2012 decision, NFIB v. Sebelius, the United States Supreme Court agreed. Although it was expressed in several opinions, seven of the nine justices agreed that the national government could not impose such a harsh sentence on states for not accepting what the Court considered an unpredictable change to the joint state/federal program.

States had a choice on accepting Medicaid expansion. Seen through a federalism lens, Medicaid expansion is the price that the federal government is willing to pay in order to impose its preferred policies on the states.

Federalism is about a balance of powers between the states and federal government. Programs such as Medicaid, billed as “federal/state partnerships” blur those lines a bit. In several states, the federal government and the state split costs down the middle, making it appear to be a true joint effort. But even the most well-balanced partnership is still an encroachment into the powers left to states in the Constitution. By accepting federal support for these programs, states are allowing the federal government to overtake state powers.

Federalism is not about wheeling and dealing and trying to pull down as much federal money as possible, as seems to be the goal and rhetoric of many politicians. One popular claim is that tax dollars collected by the feds in a particular state will just wind up being sent to other states, which simply isn’t true (1).

Each state should work to reduce its overall spending and also do what it can to discourage the federal government from spending more, especially given the massive federal deficit. Oklahoma has been doing its part through the Insure Oklahoma program, innovating the way health care is delivered. The program actually includes Medicaid funding and, because of that, the state must annually ask the federal government for permission to extend its waiver–demonstrating yet another peril of ceding ground to the federal government in this area.

Time and again, states are far too willing to accept this encroachment if they believe they’ll get funding out of it. It’s not as though the federal government will simply allow a state to back out of the expansion once the deal has been made. Some politicians claim that by accepting Medicaid expansion the state can always drop expansion if the federal government breaks its funding promises (2). The Supreme Court only recognized that states are entitled to have a choice in the matter, not that they are entitled to a “get out of Medicaid free” card. The Court stated that changes in funding ratios are predictable. That means that the federal government could pull all Medicaid funding from a state if that state opted out of Medicaid expansion after already accepting it.

Medicaid expansion, and the money promised to the states considering it, is the price that the federal government is willing to pay a state in order to entangle it in the federal government’s policy goals. Elected leaders in Oklahoma must decide if the offer of federal dollars is a fair trade for the powers it will surrender.

(1) Jonathan Small, Propaganda: It’s our money. Fact: No it’s not. Oklahoma Council of Public Affairs. (Aug. 20, 2013),

(2) Emmett Hanger, Op-Ed, Virginia can control its destiny with Medicaid expansion, Roanoke Times, (June 30, 2013),

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