Supreme Court takes on the legality of Medicaid expansion while states grapple over funding

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As state officials negotiate their fiscal 2013 budgets, more than half are grappling with billions in shortfalls that put Medicaid funds at risk, according to a new report.

Regardless of the Supreme Court's decision on whether the Affordable Care Act's Medicaid expansion in 2014 is constitutional, states are seeing high demand for healthcare safety net services, according to a report from the Kaiser Commission on Medicaid and the Uninsured.

In order to contain costs next year, governors have proposed measures such as significant eligibility cuts, increased reliance on managed care, and technology that would streamline the enrollment processes, the report notes.  But there is some good news: A handful of states, such as California and Tennessee, have proposed provider payment increases that would include nursing homes.

In Washington, the U.S. Supreme Court wrapped up three days of oral arguments challenging the ACA on Wednesday, with the final session debating whether the law's expansion of Medicaid is illegally coercive.

Under the healthcare law, states must expand Medicaid eligibility to cover individuals under 65, who have incomes of up to 133% of the poverty level. States that fail to comply with this requirement would see their federal funding cut; Medicaid is a joint state-federal program.

Attorney Paul Clement, representing the 26 states that oppose the expansion, argued that the threatened loss of federal funds for refusing to comply constitutes “coercion.” While Justice Elena Kagan told Clement that the law does not sound coercive to her, the more conservative justices disagreed, according to the testimony.

Legal experts say that the states' case against the law's Medicaid expansion is the weakest part of their challenge.

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