The Medicaid discussions in Washington have prompted angst at the state level. | Getty GOP may boost Medicaid spending in order to slash the program

Republicans determined to cut Medicaid may first have to pour more money into it to keep the peace between Republican governors who expanded health care for low-income people under Obamacare and those who resisted.

It’s all part of the GOP’s long-term plan to dramatically revamp the health care entitlement for the poor in order to cap what they see as runaway federal spending.


But growing the program, even as an act of political expediency, would mark a major break from GOP campaign slogans and conservative orthodoxy on spending.

“Is it possible to avoid a food fight?” said Tom Scully, who ran the Centers for Medicare & Medicaid Services in the George W. Bush administration. “No. The way to make it equal and fair is to spend more money.”

Medicaid is the nation’s biggest insurance program, covering 69 million people, or more than 1 in 5 Americans.

But it remains a patchwork quilt after the Supreme Court upheld the constitutionality of Obamacare’s individual mandate but made its Medicaid expansion optional. Thirty-one states expanded their Medicaid programs to help realize the law's coverage expansion while 19 largely Republican-led ones held out, willing to sacrifice billions in extra federal cash to expand their covered populations.

States of those hold-out governors could wind up the biggest losers if GOP lawmakers make good on their longstanding vow to cap federal spending by giving states lump sums tied to the number of Medicaid enrollees. So congressional Republicans are girding to spend significantly more money — at least in the short term — to effectively reward the non-expansion states for their resistance.

The goal, at the very least, is to ensure funding parity between expansion states that would stand to get more money under a capped program and conservative holdouts like Texas, Georgia and Tennessee.

“States that chose not to [expand] based on conservative principles and opposition to the takeover of health care should not be punished," said Sen. John Cornyn of Texas, the chamber's No. 2 Republican. "We’re not going to allow that to happen."

The Medicaid discussions in Washington have nonetheless prompted angst at the state level, with Ohio, West Virginia, Arizona and other red expansion states trying to protect themselves from having to care for a large number of newly enrolled people with less federal money. More than 11 million people gained coverage under Medicaid as a result of the Obamacare expansion. The federal government paid the full cost for the first three years and will pick up at least 90 percent in the future.

One idea under discussion is to scale back the amount of money that expansion states get over time. Indeed, one conservative bloc in Congress wants to cut expansion altogether as part of Obamacare repeal. But governors of those states are warning Congress that millions of people could be dropped from the rolls if the feds cut their funding. Because Republicans, including President Donald Trump, have promised that no one will lose their insurance under an Obamacare repeal, the GOP has few options beyond spending more.

By capping Medicaid and reducing the federal rules for states, “you could end up with 19 more states involved in Medicaid expansion,” said Sen. Bob Corker (R-Tenn.). “So the tab could actually be much higher than it is right now.”

“Here’s why they have to look out for the governors who [didn't expand]: If they’re not rapidly taking money away from the states that got it, you’re creating intraparty rivalry and tensions,” added Tom Miller, a health policy expert at the conservative American Enterprise Institute.

Republicans want to end Medicaid as an entitlement where there's no limit on what the federal government spends. They would cap how much to reimburse states per enrollee in an Obamacare repeal-replace plan. Important details have yet to be worked out, including how much to pare back federal spending.

Yet any plan to financially reward conservative states that shunned a major piece of Obamacare for years could run into steep resistance from hardline conservatives angling to sharply curtail entitlement spending.

The House Freedom Caucus on Monday endorsed an Obamacare repeal bill Congress cleared and former President Barack Obama vetoed in 2015 — which eliminated the Medicaid expansion in two years — and indicated they'd worry about a replacement later. That puts conservative lawmakers from non-expansion states in something of a bind when it comes to their home states.

“I don’t think that you can, as a fiscal conservative coming from a state that didn’t expand, punish that state for being what we would say is fiscally prudent with our state legislature and at the same time reward those states that took advantage of it,” said Rep. Mark Meadows (R-N.C.), chairman of the Freedom Caucus. “That’s not just unique to North Carolina. I’ve heard the same comments from Texas, Tennessee, Florida.”

He pushed back on the idea that Republicans may end up expanding an entitlement program to avoid state infighting about money.

“It’s going to be Republicans modifying a huge expansion of an entitlement program — there’s a difference,” Meadows said.

Other Republicans from non-expansion states understand they may have to place parochial concerns over ideology.

Giving more money to non-expansion states "would be probably the right view from the South Carolina-only perspective. But it wouldn’t be about what I’ve tried to work on for a long time, which is trying to watch out for the taxpayer," said Rep. Mark Sanford (R-S.C.), a Freedom Caucus member.

Republican Sens. Rob Portman of Ohio and Shelley Moore Capito of West Virginia, both from expansion states, recently held a meeting with other GOP senators in a similar bind. The subject has been a priority for governors who have weighed in and met with lawmakers.

“A number of the senators who are from Medicaid expansion states are getting together — working with the governors” on next steps, said Sen. Dan Sullivan (R-Alaska), whose state also expanded Medicaid. “There’s a lot of work going into that.”

Sen. Lamar Alexander (R-Tenn.) suggested another option — that Republican governors may get a combination of less money and more relief from federal Medicaid rules.

“The governors, and I used to be one, strongly believe that the federal government mandates on Medicaid are a big source of the cost of Medicaid,” Alexander said. “And there are many governors that will tell you if you give us a lot more flexibility we can cover more people with the same amount of money or with less money.”

Arizona GOP Sen. Jeff Flake, whose state also expanded Medicaid, said some states can’t afford further cuts to their programs.

“Some of the expansion states are worried that if it were block granted, those that had already wrung some of the inefficiencies out would be penalized,” he said.