With no states jumping on the offer of added federal money to expand their Medicaid programs, Democrats are mulling changing the federal-state partnership to cover millions of people left ineligible for government-funded insurance.

Congressional Democrats in the 12 states that haven’t expanded their Medicaid programs under the Affordable Care Act say their state legislatures remain hostile to growing their public health insurance programs, and have left too many Americans uninsured.

Some in the holdout states are proposing a new tier of the ACA marketplace plan, or government-run insurance available to people who make too much to qualify for Medicaid—but too little to qualify for subsidies for private insurance. Others are suggesting allowing counties or cities to expand access within their boundaries, a move that could help major population centers.

These policies would represent a major change to Medicaid’s federal-state partnership, where states take the lead on insuring people with disabilities, or whose income falls below the federal poverty line.

“When you get to a point where you’ve gone out of your way to hurt your own citizens, then that calls for drastic action or creative action,” Rep. Kathy Castor (D-Fla.) said in an interview. “What we’re talking about is making sure folks have access to the doctor’s office.”

New Incentives

The $1.9 trillion Covid-19 relief package (Public Law 117-2) enacted earlier this year increased the federal government’s share of Medicaid costs in states that newly expand their public health insurance. Under the ACA, states can expand eligibility to adults earning up to 138% of the poverty level, with the government paying 90% or more of the costs.

The ACA was originally designed to make this Medicaid expansion mandatory, so it doesn’t include insurance subsidies for people below the poverty line, or about $17,000 per year for a single adult. But the median income limit for families to enroll in Medicaid n the 12 holdout states is 41% of the poverty line—or an annual income of $8,905 for a family of three in 2020, according to an analysis by the Kaiser Family Foundation. That leaves many families, and individuals, stuck in the coverage gap.

More than 2.2 million people lack insurance in non-expansion states, Census data show. The new law offers a two-year increase in the federal government’s portion for traditional Medicaid, the larger section of the program.

The response so far has been mixed. A Medicaid expansion bill made it through one chamber of the Wyoming legislature, and Alabama’s governor signaled being open to expansion. State leaders in Florida and Texas have said they still oppose it.

‘Broken’ Partnership

Castor said that at least in Florida, the federal-state partnership for Medicaid is “broken” because the decision not to expand has largely been a political move. She favors a public health insurance option, a government-run insurance plan, or lowering the age of eligibility for Medicare.

Castor, like other Democrats, said she’s hopeful congressional leaders can attach legislation aimed at bolstering coverage in non-expansion states in the jobs and infrastructure package currently under debate.

It may be an uphill battle. Democrats aren’t united on a solution for extending coverage, and the non-expansion states are represented mainly by Republicans who don’t support a major expansion of government insurance programs. Georgia is the only non-expansion state with two Democratic senators, both of whom were elected this year.

In addition to Florida, Texas, Georgia, Wyoming and Alabama, the following states have balked at expanding Medicaid: Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, and Wisconsin.

Rep. Lizzie Fletcher (D-Texas) said she’s still hopeful her state will expand its Medicaid program but has discussed with other Texas Democrats alternatives such as allowing counties or cities to expand their Medicaid access.

“There’s a lot of interest in Congress on these kinds of projects,” Fletcher said in an interview.

‘Outrageous’ During Pandemic

President Joe Biden has vowed to take on this issue, and outside groups that advise Democrats say now is the time to act, while the party controls both chambers of Congress.

“It’s outrageous that these Republican legislatures have outright refused to provide health coverage for people during this pandemic,” said Leslie Dach, chair of the pro-ACA Protect Our Care. “The country can’t wait any longer and we should look at solutions.”

Republican state leaders say rejecting Medicaid expansion will benefit their states in the long run by minimizing costs. Conservative health policy advisers say a blanket expansion of Medicaid has only caused health costs to grow.

“States would be wise to take targeted approaches to increase health care access for certain groups like postpartum mothers and kids, rather than the failed Medicaid expansion approach,” Brian Blase, an adviser to the White House in the Trump administration, said in an email.

The solutions being debated are complicated and likely expensive, costing billions of dollars, researchers say.

‘Why Not Us?’

Lawmakers could build on the ACA’s marketplace and offer a Medicaid-like insurance plan in non-expansion states—but they’d need a way to ensure states that have already expanded don’t reverse the decision to take advantage of this new federal Medicaid option, said Joan Alker, who studies Medicaid policy as executive director of the Center for Children and Families at Georgetown University.

“You’re rewarding states that haven’t done the right thing,” Alker said. “The states that have expanded are going to ask: why not us?”

This Medicaid plan would need to be much more generous than an ACA marketplace plan or Medicare, which have premiums and deductibles, she said. Medicaid is aimed at people with low incomes who can’t afford health care services with cost-sharing, she said.

Medicaid is run primarily by states for good reason, said Judith Solomon, a senior fellow at the Center on Budget and Policy Priorities, where she focuses on Medicaid and other health programs.

“A state-run Medicaid program for adults with low incomes is better than a federal program,” Solomon said. “They’ve done really creative things to help the homeless or people with substance use disorder that a federal program might not.”