There are reports out of Texas that as many as a dozen states are thinking of opting out of Medicaid. They have their reasons. The program is expensive for the states and seems to do a lousy job of delivering care.
But I don't think the answer is for states to opt out of Medicaid. I think the answer is for Republican governors (and the newly elected Republican state legislators) to offer policy fixes for Medicaid in their own states, apply for waivers from the federal government and let the Obama administration say no if they dare. There is obviously a policy component to this. The governors would have to put together Medicaid reform plans that would either save money or plausibly offer better care to Medicaid recipients or both. There are several models to choose from including Mitch Daniels's Healthy Indiana Plan, and Bobby Jindal's plan to introduce insurance competition into Medicaid. Let a dozen reform plans bloom. Then the governors (hopefully a lot of them) could put public pressure on the Obama administration (and make intense use of media) to allow the states to experiment with plans that would save the their states money and offer better care to their states' residents. This could also be a good way to open a two front war against Obamacare as it would let congressional Republicans introduce bills to give the states flexibility. All of this would tend to increase public awareness of more free market approaches to health care reform and we might actually get some good policy out of it to boot.
Obamacare includes a huge expansion of the already problematic Medicaid program. It is also contains an opportunity for conservative politicians to gain ground on the health care issue and restructure Medicaid in a direction that nudges the country toward a more consumer-driven health care system.
h/t to Peter Suderman.