Is Your State Embracing Obamacare?

Medicaid expansion is coming -- but not the way Obamacare predicted.

The Affordable Care Act hoped to broaden Medicaid�to include any patients under the age of 65 with earnings that fall below 133% of the federal poverty level. Financing would come from the federal level for the first few years before shifting some of the burden to the states. That potential spending has a number of state leaders scrambling to find� ways to incorporate patients without explicitly signing on for the expansion.

What does this mean for the newly-eligible set to join Medicaid next year?

State standings
The Advisory Board Company provides the following breakdowns of where each state stands on Medicaid expansion:

Expanding Medicaid	Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, New Hampshire, New Mexico, North Dakota, Ohio, Oregon, Rhode Island, Vermont, Washington
Not Expanding Medicaid	Alabama, Georgia, Idaho, Iowa, Louisiana, Maine, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Wisconsin
Probably Won't Expand	Alaska, Nebraska, Wyoming
Probably Will Expand	Kentucky, New York
Undecided	Indiana, Kansas, Tennessee, Utah, Virginia, West Virginia

These groupings are based on comments from state leaders who have spoken publicly in support or rejection of expansion. But states continue to pursue deals with the feds. Maine falls into the "Not Expanding" category above, but Gov. LePage has asked the feds to pick up the state's full Medicaid tab for 10 years, rather than the three years covered by the ACA. If the Department of Health and Human Services, or HHS, agrees, Maine could switch into the "Expanding" row.

But the most significant negotiations could occur due to a waiver Arkansas received from HHS, allowing for the use of federal funds to buy private insurance for the Medicaid eligible. Ohio and Florida are among the states that might follow Arkansas' example. This path would allow politicians to be perceived as against the expansion without actually excluding the newly-eligible patients.

Expanding role for private insurers
Health insurance exchanges, or HIX, will commence next year to let people comparison shop for insurance plans. Some states will have their own HIX while others will participate in a federal exchange.

While Aetna (NYSE: AET  ) offers Medicaid coverage in several of the states leaning toward expansion, it's well-rounded behemoths like WellPoint (NYSE: WLP  ) and UnitedHealth (NYSE: UNH  ) that have the greatest earnings potential regardless of each state�s decision. Both companies offer Medicaid in more than 20 states and could potentially gain customers through the traditional Medicaid route and the private waivers.

But the expansion also carries risk for insurers. As fellow Fool Brenton Flynn noted, Medicaid beneficiaries were mostly children. The newly-eligible includes a higher percentage of older patients, and with that the number of health conditions that require treatment.

Insurers always have the option of opting out if the costs outweigh the rewards. A Centene (NYSE: CNC  ) subsidiary exited early from Kentucky�s Medicaid program last year due to lost profits. Cigna (NYSE: CI  ) decided not to participate in Connecticut's HIX for vague reasons that probably related to finances.

Road ahead
Any article about the ACA changes at this point will have a heavy dose of conjecture. States don't have a deadline for deciding on Medicaid expansion, but dawdling will cost them some of the federal money set aside for funding. It will take years before any definitive analysis of the expansion can take place.

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