Consider a diagram like Figure 22.3 where states are offered the opportunity to buy into Medicaid under the ACA for a 9:1 match.

(a) Mark an initial level of expenditures if the state is spending $20 on Medicaid expenditures and $80 on everything else, with an appropriate indifference curve.

(b) Suppose the state decides to collect a tax of $3, from the initial point, to put up for the match. How big will the match be? Draw the tax and the match on the graph.

(c) In this example is the state likely to be better off or worse off by collecting the tax to get the match? Why or why not?

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Other Goods 100 Ao Xre Upre 0 Ho Slope -1.0 Xpost Upost Essential Benefits ACA Match Slope --9.0 - Typical Medicaid Match-Slope -1.5 " 100 150 Health Care 800 Figure 22.3 The Impact of the Medicaid Expansion