Obamacare originally required every state to expand eligibility for Medicaid to 138 percent of the poverty line, or roughly $32,500 per year for a family of four. Not surprisingly, many states balked, and last summer the Supreme Court ruled 7–2 that the federal government could not force states to expand their programs. In fact, Florida was a party to that lawsuit.
So to incentivize states to go along, the federal government is dangling “free” money in front of them. For the first three years, the federal government promises to pay 100 percent of the cost of expansion. This will gradually decline to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in 2020. Given that the federal government provides only 58 percent of the funding for Florida’s current Medicaid program, this sounded like too good a deal for Gov. Scott to resist.
He was wrong.
First, there is no such thing as free money. Even with the federal government picking up 90 percent of the cost, Florida taxpayers are not off the hook. Ten percent of a very big number is still a very big number. In fact, it is estimated that once full federal funding expires and Florida is required to pick up part of the cost, the Medicaid expansion will cost the state’s taxpayers $5.36 billion.
However, those estimates significantly underestimate the cost to Florida because they ignore a second category of recipients likely to be added to the Medicaid rolls: what the Robert Wood Johnson Foundation has dubbed “the woodwork effect.”