When the Patient Protection and Affordable Care Act—a.k.a. ObamaCare—was first drafted, state leaders complained that the law's expansion of Medicaid would impose an impossible fiscal burden on them. In response, backers of the law argued that the federal government would pick up 90 percent of the new costs. Several states came back with a reply of their own: a threat to drop out of Medicaid entirely.
ObamaCare is projected to expand insurance coverage to an additional 32 million Americans by the end of the decade. Fully half of that expansion is expected to occur within Medicaid, a joint federal-state health insurance program for the poor.
Medicaid spending has grown rapidly in recent years and is now the single largest budget item for states. But states have been loath to make changes, in part because they receive matching federal dollars based on their own spending.
In November, bucking the tradition of put up and shut up, Texas Gov. Rick Perry signaled that he might consider pulling his state out of the program. "Without greater flexibility and the elimination of federal strings, Medicaid will strangle state budgets," Perry told The Dallas Morning News. Kaiser Health News reports that as many as a dozen other states were publicly or privately considering following the Texas Republican's lead.