Red States Are the Big Winners from Obamacare's New Rules

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Republican States will benefit from Obamacare Most
Now that the Patient Protection and Affordable Care Act -- aka "Obamacare" -- has passed muster before the Supreme Court, the next question is how it will be implemented. Some parts of the law, like the one that will stop insurers from denying you care for preexisting conditions, will simply go into effect at their appointed times. To bring other provisions online, however, the federal government will have to work with individual states, some which have governors intensely opposed to the program. Oddly enough, many of the states whose leaders like Obamacare the least are the ones that will benefit from it the most.

Texas is a good example. On Monday, Gov. Rick Perry joined the governors of Wisconsin, Florida, Louisiana, Mississippi, and South Carolina in refusing to take part in the program's Medicaid expansion, which would extend Medicaid coverage to people making up to 133% of the poverty line. In context, this means that, under the PPACA, single people who make less than $14,857 would qualify for Medicaid, as would a family of four that brings home less than $30,657.

Obamacare

The trouble is, individual states provide 43% of the funding for Medicaid and administer the program. As such, they can determine who qualifies for it. As The Washington Post's Ezra Klein notes, Texas' cutoff is 26% of the poverty line, which means that a single person earning $2,905 per year is too wealthy to receive Medicaid in the Lone Star state. Not surprisingly, 26.5% of Texans under age 65 don't have insurance -- the highest uninsured rate in the country.

There's a big distance between $2,905 and $14,856, and if Texas accepted the Medicaid expansion, everyone who falls into that chasm would get free medical insurance. That might sound like a bad deal for Texas, which would be stuck with a big increase in Medicaid costs. However, until 2020, the ACA will completely cover the difference for each state -- in other words, Texas wouldn't have to spend a penny to insure millions more of its citizens. After 2020, the PPACA will still fund 90% of the difference.

The same drama is the playing out red states across the country. States where conservatives are in charge tend to have stingier Medicaid requirements that give coverage to only the most, compared to liberal states, which generally make it easier for poor people to get subsidized health care. In fact, nine of the 10 states that would benefit the most from the PPACA's Medicaid expansion voted for McCain in the 2008 presidential election, while eight of the 10 states that will benefit least voted for Obama.

Perry's intransigence isn't surprising: Pretty much every time the federal government has offered new health care funds, a few states have fought against taking the money. Eventually, though, the lure of federal largesse is always too much to resist. Despite delays, every state adopted Medicare and CHIP -- although some, like Texas, maintained exceedingly draconian requirements. Most experts agree that Perry and the other holdouts will eventually accept the Medicare expansion. The alternative would be accepting the tough task of explaining to voters why they refuse to insure millions of their citizens at a minimal cost to state taxpayers.


Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at@bruce1971.


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