Since it was enacted into law in the 1960s, Medicaid has provided health insurance coverage for low-income adults with children, disabled adults, and low income children. The Affordable Care Act (“ACA”) expanded Medicaid by providing additional funding and other mechanisms to encourage states to cover more people through their programs.
This article provides a basic and non-exhaustive look at Medicaid before and after the ACA. You can read detailed analysis and explanation of how the ACA affected Medicaid on the Kaiser Family Foundation’s website.
II. Before the ACA
Prior to the ACA, many low income and uninsured individuals were ineligible for Medicaid coverage. The federal government only required that states provide Medicaid to children, pregnant women, parents of dependent children, individuals with disabilities, and qualifying people over age 65. States were not required to cover childless, low-income, non-disabled adults. In addition, states were only required to cover the very poorest individuals. According to Kaiser Family Foundation, in 2013, “the median state Medicaid income eligibility cutoff for working parents was 61% of [Federal Poverty Level (“FPL”).]” This meant a family of four had to earn less than $15,000 per year to qualify for Medicaid in 2013. States were required, however, to offer coverage for children up to at least 100% of FPL and many states had more generous coverage than federally required.
The lack of available Medicaid coverage for childless non-disabled adults, as well as the strict and very low limits on income, meant that many individuals remained ineligible for Medicaid. Thus, prior to the ACA, an estimated 47 million uninsured Americans could not afford private health insurance and were ineligible for Medicaid.
One of the primary mechanisms through which the ACA sought to reduce the number of uninsured Americans was through expansion of Medicaid. When the law was passed in March 2010, states were required to expand Medicaid to all adults with income up to 138% of FPL by 2014. If they did not, states would lose Medicaid funds. States were authorized to begin implementation of the expansion as early as April 2010.
Several states sued the federal government over the expansion requirement, and in 2011 the Supreme Court held that states could not be required to accept the expansion. Rather, Medicaid expansion had to be optional for each state. As a result, 19 states have refused to expand Medicaid.
In this section, we examine the Medicaid expansion under the ACA and the impact on states that refused the expansion.
A. Medicaid in Expansion States
Under the ACA, the federal government guarantees matching funds to states that expanded their Medicaid programs to almost all adults (even those without children) whose incomes are up to 138% of the FPL. In 2016, this meant that a family of four who made up to $33,465 was eligible for Medicaid coverage. From 2014 to 2016, the federal government would pay expansion states 100% of Medicaid costs of those newly eligible; after that, federal contribution would decrease to 90% by 2020 and thereafter.
Nearly 11 million people are estimated to be covered by the Medicaid expansion. In California alone, over 3 million people became newly covered under the expansion. Notably, the uninsured rate fell by roughly half in states that expanded Medicaid.
In addition, studies suggest that expansion states have not experienced negative impacts on their budgets. In a Kaiser Family Foundation-conducted 2015 study of three expansion states (New Mexico, Connecticut, and Washington state), all three states experienced cost savings and revenue gains as a result of the expansion. Medicaid programs and general budgets for each state also reported savings due to the expansion.
A 2016 study of eleven expansion states found similar results. In this study, all expansion states experienced “reduced spending on programs for the uninsured,” as well as additional revenue in the form of insurer or provider taxes. This report also indicated that benefits extended beyond the immediate budget, with expansion states reporting job growth, increased rates of insurance coverage, and “related decreases in hospital uncompensated care costs.”
According to another Kaiser Family Foundation report, expansion states spending increased by only 3.4% compared to 6.9% in non-expansion states.
B. Covered Benefits
Under federal law, all states that offer Medicaid must also offer a basic set of health benefits as defined by statute. The ACA sought to ensure that individuals who were gaining access to health insurance coverage through the expansion were also receiving necessary health benefits. To do so, the law requires that coverage under Medicaid expansion cover ten categories of Essential Health Benefits (“EHBs”) (which are also required of all plans offered on the marketplace). There are ten broad categories of services that are considered EHBs:
Ambulatory patient services;
Maternity and newborn care;
Mental health and substance abuse disorder services, including behavioral health treatment;
Rehabilitative and habilitative services and devices;
Preventative and wellness services and chronic disease management; and
Pediatric services, including oral and vision care.
Under the ACA, states have significant leeway in determining exactly what benefits fall within each of these categories. The ACA requires that adults who receive Medicaid under the expansion receive the same EHB coverage under their plan as they would if purchasing a private plan on the marketplace.
EHBs remain a relatively controversial aspect of the ACA. Those who oppose mandatory EHBs argue that these requirements are too broad, too prescriptive, and that they raise insurance costs (particularly insurance premiums for private plans). Proponents of EHBs assert that without a bare minimum of required benefits, health insurance can be rendered meaningless. The American Health Care Act, proposed by the GOP earlier this year, would removed the EHB requirement from Medicaid plans and was met with opposition by different organizations.
IV. Medicaid in Non-Expansion States
Because the federal government could not impose Medicaid expansion on the states, not all states have expanded their program. As of 2017, nineteen states have refused the Medicaid expansion; as a result, they are ineligible for enhanced Medicaid funding.
In August 2014, the Urban Institute produced a report that shows that non-expansion states will forego $423.6 billion in federal Medicaid dollars between 2013 to 2022. Hospitals in these states have also suffered losses due to a combination of continued uncompensated care and decreased Medicaid revenue. This is particularly true for hospitals in rural areas, which often serve more low-income individuals than urban counterparts. In contrast, rural hospitals in expansion states have received more compensation because Medicaid covers more individuals than before the ACA and, as a result, patients have experienced improved financial stability.
Non-expansion states continue to have higher uninsured rates. In nearly all non-expansion states, non-disabled, childless adults are ineligible for Medicaid. In addition, the median income limit for families to enroll in Medicaid is extremely low.
Unfortunately, because of the way the ACA was designed, these very low income individuals are also ineligible for subsidies to purchase health insurance on the health exchanges. Because legislators intended for states to cover these low income adults under Medicaid, the law does not offer financial assistance to those who fall below 100% FPL. As a result, approximately 2.5 million adults in non-expansion states fall into a coverage gap; they are ineligible for Medicaid but they also make too little income to qualify for subsidies to purchase private insurance on the marketplaces.
A few non-expansion states have obtained Section 1115 waivers to implement Medicaid expansion in nonstandard ways. Section 1115 waivers allow states to test new approaches to Medicaid that do not conform to federal requirements. If the federal government approves a state’s expansion plan under a Section 1115 waiver, a state has enhanced flexibility to adopt changes to their Medicaid program, such as delivery system reforms or use of managed care capitation.
As of April 2017, seven states (Arizona, Arkansas, Indiana, Iowa, Michigan, Montana, and New Hampshire) are operating the Medicaid expansion pursuant to Section 1115 waivers. Pennsylvania has requested a waiver that has not yet been approved. Although the waivers are all different, there are some common features. For instance, many of these states require non-disabled adults to make premium payments or copayments in order to enroll in the Medicaid expansion. Some states have included healthy behavior initiatives that reward enrollees who meet certain health standards with reduced premiums. Other states such as Iowa, have limited coverage for emergency medical transportation for expansion adults. It is unclear whether the Trump administration will extend these waivers, or grant new ones, when they lapse.
As Some Holdout States Revisit Medicaid Expansion, New Data Shows it Pays Off
Kaiser Health News
April 12, 2017
Myths about the Medicaid Expansion and the Able-Bodied
March 6, 2017
In Depressed Rural Kentucky, Worries Grow Over Medicaid
Kaiser Health News
November 21, 2016
The ACA and Medicaid Expansion Waivers
Kaiser Family Foundation
What is the Result of States not Expanding Medicaid?
The Urban Institute
Mortality and Access to Care among Adults after State Medicaid Expansions
New England Journal of Medicine