Well, I think we’re about to find out pretty soon!
Though the bill will cover the cost of the benefits expansion, it will not cover the added administrative costs, which Heritage analyst Ed Haislmaier has highlighted. According to an article on Bloomberg.com, “States faced with unprecedented declines in tax collections are cutting benefits and payments to hospitals and doctors in Medicaid, the health program for the poor paid jointly by state and U.S. governments. The costs to hire staff and plan for the average 25 percent increase in Medicaid rolls may swamp budgets.”
Haislmaier projects the added administrative cost to the states would total $9.6 billion between 2014, when the provision is implemented, and 2019. This extra burden comes at a time when states are trying to tighten their budgets to account for decreasing revenues. Research by former Heritage analyst Dennis Smith and Ed Haislmaier shows that, as the fiscal burden of the Medicaid expansion grows, it would be in states’ interests to drop the program entirely: “The savings to state budgets are so enormous that failure to leave Medicaid might be viewed as irresponsible on the part of elected state officials. The federal government, however, would be left holding a trillion-dollar-plus tab.”
Clearly, this indicates that, whatever steps the federal government might take to "punish" a state (by withholding funds, for example), states do have the power to "leave Medicaid" and, therefore, leave the feds to pick up the tab.
If the feds cannot directly force the states to fund Medicaid, I'm interested to see on what basis the feds think they can force individuals to fund Medicaid through individual "purchases," not invoking the feds' power to tax.
Moreover, if states can opt out of Medicaid, maybe this gives them standing to opt out, essentially, on behalf of all citizens of the state.
President Barack Obama faces a fight over the health-care overhaul from states that sued today because the legislation’s expansion of Medicaid imposes a fiscal strain on their cash-strapped budgets.
Since most states must have balanced budgets, and no state can print money, there is a point at which the federal government's unfunded mandates to the states also become problematic.