One of the more off-the-chart reactions to the Supreme Court ruling on the health care law today comes from Michigan, where the former spokesman of the state Republican Party mused as to whether an armed rebellion was now justified. But only slightly more restrained is Sen. Jim DeMint’s call for continued resistance to the law:

“This government takeover of health care remains as destructive, unsustainable, and unconstitutional as it was the day it was passed, unread, by a since-fired congressional majority. Now as then, our first step toward real health care reform and economic renewal remains Obamacare’s full repeal, down to the last letter and punctuation mark.

“I urge every governor to stop implementing the health care exchanges that would help implement the harmful effects of this misguided law. Americans have loudly rejected this federal takeover of health care, and governors should join with the people and reject its implementation.”

This would only federalize the law even more, centralizing it under the control of the Health and Human Services Department. Because if governors stop implementing the exchanges, under the law they would revert to HSS to run.

However, in this primal scream you can see the seeds of how red-state governors will probably react to perhaps the most consequential – and most overlooked – part of today’s ruling. That would be the section about Medicaid, and whether the government can use their funds to coerce states into accepting the Medicaid expansion. Tom Harkin was wrong to call this “a resounding confirmation” of the health care law, and the Medicaid section of the ruling is the reason.

The way things go today is that states must comply with federal guidelines for Medicaid, a federal-state partnership, or lose all their Medicaid funding. It was assumed that the expansion, where the federal government covers the cost of raising Medicaid up to 133% of the federal poverty line, would work in the same way. However, the Court ruled differently:

The bottom line is that: (1) Congress acted constitutionally in offering states funds to expand coverage to millions of new individuals; (2) So states can agree to expand coverage in exchange for those new funds; (3) If the state accepts the expansion funds, it must obey by the new rules and expand coverage; (4) but a state can refuse to participate in the expansion without losing all of its Medicaid funds; instead the state will have the option of continue the its current, unexpanded plan as is.

So the options for states would be to accept the expansion, for which they only have to pay a sliver, or reject the expansion, and only lose the money for the expansion, keeping their current Medicaid system as-is.

This will set off the mother of all battles in conservative states. All federal-state partnerships of this type are technically voluntary, but we have not had this set of Tea Party governors before. I can guarantee you that at least some governors will reject this money for Medicaid expansion at the outset. They will claim that it puts their state on the hook for massive health care spending over time – that’s not really true, but it’s what they’ll say.

Then we will see a fight between conservative governors and the powerful hospital industries in those states. The industry really wants that Medicaid expansion, so that they have more people covered to whom they can provide care. Medicaid doesn’t offer great reimbursement rates, but it’s better than having more uninsured who will eat up uncompensated care in emergency rooms. This is the dynamic we saw way back in the 1960s with the original introduction of Medicaid. Eventually, every state came around, but it took Arizona until 1982, a 17-year gap, to comply. And we have a much more conservative set of lawmakers now.

This will have enormous political implications down the road. But it also will have enormous implications for poor Americans in those conservative states. For context, in the state of Texas, according to Kaiser, the Medicaid expansion would cover 1.38 million people, with a state cost of $2.6 billion and a federal cost of $52.5 billion. So what if Rick Perry says hell no to the expansion because of the $2.6 billion price tag? That’s a significant chunk of people remaining uninsured, and an imbalance between the states on their Medicaid coverage. Now, those people could end up buying coverage on the exchanges, but the majority of these people would be below the hardship line where they would not have the requirement under the mandate. So we could see more money doled out in subsidies, or not. It’s hard to say what would happen.

More than anything, this is the major post-SCOTUS fight on health care. And it all could be solved, actually, by federalizing Medicaid.