State fiscal considerations and research opportunities emerging from the Affordable Care Act's Medicaid expansion.

I. INTRODUCTIONAs enacted, the Affordable Care Act (ACA) directed states to provide Medicaid coverage to most nonelderly adults with incomes up to 138% of the Federal Poverty Level (the "Medicaid expansion group") beginning in 2014. * 1 The Medicaid expansion provision of the ACA is an integral component of fulfilling the ACA's primary objective to achieve near-universal health insurance coverage rates across the United States.Title XIX of the Social Security Act (Title XIX) is Medicaid's enabling statute. Medicaid is a medical assistance program for certain low-income individuals, jointly funded and administered by federal and state governments. Certain features of the Medicaid program provide a framework within which the ACA and subsequent Supreme Court decision National Federation of Independent Business (NFIB) v. Sebelius can be understood.A. Eligibility CategoriesPrior to the ACA, the Federal Medicaid statute provided funding to state Medicaid programs for benefits provided to some, but not all, categories of low- income or so-called "financially needy" individuals. These categories of eligible low-income populations corresponded to eligibility criteria applicable to the federal programs of cash assistance-one for families and dependent children (known as "TANF-related"), and another for persons aged 65 and older or with "permanent and total" disability or blindness (known as "SSI-related"). Thus, the eligible low- income groups, defined as "categorically-eligible" groups, were: (1) children; (2) parents with dependent children; (3) adults aged 65 and over; and (4) adults with a disability or blindness.2The ACA greatly expanded the categories under which a low-income individual could be eligible for Medicaid, discussed in Part IL A. 1 infra. After the ACA's passage, states that implement the new expansion provision in their Medicaid programs are entitled to federal funding for all of their newly incurred healthcare service costs for "newly eligible" individuals until 2017, when still the vast majority of those costs are federally funded.3 Before the United States Supreme Court reviewed the expansion provision, the ACA was interpreted to allow CMS to withhold some or all of a state's Federal Medicaid funds for its preexisting Medicaid programs if it did not comply with the Medicaid expansion requirements to cover the "newly eligible" individuals.4B. Federal Financing and Matching RatesThe Centers for Medicare and Medicaid Services (CMS) is in charge of administering funding to State Medicaid programs, among its other duties. Federal Medicaid provisions establish the level of federal financial participation for each state, which is known as the state's "Federal Medicaid Assistance Percentage" ("FMAP" or "matching") rate. The FMAP rate varies for each participating state and is driven mainly by a state's per-capita income.5 Although the federal statute sets a minimum FMAP rate of fifty percent for all medical service costs for Medicaid beneficiaries (and for almost all of the administrative costs), these state-specific matching rates can be as high as eighty-three percent of all medical services costs in the "poorest" states (as measured by per capita income).6 In addition to these standard federal matching rates, certain provisions of Title XIX establish "enhanced" matching rates for certain services, certain covered populations, and for investments in major improvements in the administration of Medicaid. Congress has also enacted temporary enhanced matching rates for all Medicaid program costs during periods of economic downturn.7 Most significantly, states that decide to expand Medicaid under the ACA expansion option are eligible for substantially enhanced matching funds, with the federal government reimbursing 100% of the medical costs incurred by states for the newly eligible expansion group until 2017, and gradually reducing this enhanced reimbursement rate to 90% by 2020. …