Why Red State Govs May Embrace Medicaid Expansion

Keckley says the second dynamic surrounds states' negotiations with commercial plans to manage these expanded populations.  "I don't think the line in the sand with the feds and the states is 'go' or 'no go,'" he says.  "The line is 'we will go some of the way, you've got to come some of the way.' Once they reach some kind of deal you look to the commercial plans and say 'this is the deal we have cut and now we want you to bid on managing that.'"

PwC's Connolly says the Supreme Court's ruling that effectively makes the Medicaid expansion optional should help with the negotiations between the federal government and states. In addition, she says innovative states already have the ability to request waivers for their Medicaid programs.

"If there was a particular state that wanted to try something at a slightly different level they would probably start with attempting a waiver request first," she says.

On a related topic, the nation's safety net hospitals have complained that a failure to expand the Medicaid population could saddle them with $53.3 billion in uncompensated care costs over the next seven years. That's because the lower disproportionate share payments that the safety nets agreed to as part of PPACA were supposed to be offset by expanded Medicaid coverage. 

With lawmakers now focused on the so-called "fiscal cliff," Connolly says safety net hospitals should brace themselves for renewed scrutiny of the disproportionate share payments. "We are about to get into a season where people are going to be scouring for every nickel and dime they can find," she says. "The safety net hospitals have a reason to be concerned."