From NCPA

The Patient Protection and Affordable Care Act (PPACA), also known as "ObamaCare," has been the subject of a rigorous national discourse. This debate has transcended mere discussion and made its way up the judicial totem pole: the Supreme Court will hear arguments in the spring of 2012. And while much of the focus of the trial will undoubtedly be on the individual mandate, which was ruled unconstitutional by two lower courts, this should not sidestep the crucial issues involving Medicaid, says Jeffrey Singer in Reason Magazine.

As it stands now, Medicaid is a "voluntary" program that states can opt into. It provides federal subsidies for state-run health care programs that meet federal standards. These federal contributions amount to such a sizeable portion of the total expenses of the program that many states can ill-afford to provide a similar level of service without federal assistance. Yet it is this final point of financial dependence that has trapped states into a Medicaid system that tramples state sovereignty.

• Federal Medicaid funds typically amount to anywhere between 40 percent and 60 percent of the state's Medicaid budget.
• These federal funds are so attractive to state lawmakers that every single state has enrolled in Medicaid, with Arizona being the last to submit in 1982.
• States are technically free to opt out of Medicaid just as they opted in, but this would mean the forfeiture of the federal funds that the state currently receives to subsidize its programs.

This adequately paints the picture of the federal-state relationship in Medicaid: federal funds are so generous that no state can possibly think to opt out. This essentially amounts to coercion in which the states have no real choice but to enroll.

This forced enrollment becomes abusive because of the burdensome regulations that states must abide by in order to qualify for federal funding. Statutes such as the Emergency Treatment and Labor Act, which makes it illegal to transfer patients between hospitals for financial reasons, undercut the states' sovereignty in running their own health care systems. This completes the ploy set by the federal government, as states are trapped between excessive regulation on one side and financial bankruptcy on the other.

Source: Jeffrey A. Singer, "Why Medicaid Is No Longer a Voluntary Program," Reason Magazine, December 30, 2011.