Quick Take: Who Benefits from the ACA Medicaid Expansion?
A key element of the Affordable Care Act (ACA) is the expansion of Medicaid to nearly all individuals with incomes up to 138 percent of the federal poverty level (FPL) ($15,415 for an individual; $26,344 for a family of three in 2012) in 2014. Medicaid currently provides health coverage for over 60 million individuals, including 1 in 4 children, but low parent eligibility levels and restrictions in eligibility for other adults mean that many low income individuals remain uninsured. The ACA expands coverage by setting a national Medicaid eligibility floor for nearly all groups. By 2016, Medicaid, along with the Children’s Health Insurance Program (CHIP), will cover an additional 17 million individuals, mostly low-income adults, leading to a significant reduction in the number of uninsured people.
Medicaid does not cover many low-income adults today. To qualify for Medicaid prior to health reform, individuals had to meet financial eligibility criteria and belong to one of the following specific groups: children, parents, pregnant women, people with severe disability, and seniors. Non-disabled adults without dependent children were generally excluded from Medicaid unless the state obtained a waiver to cover them. The federal government sets minimum eligibility levels for each category, which are up to 133% FPL for pregnant women and children but are much lower for parents (under 50% FPL in most states). States have the option to expand coverage to higher incomes, but Medicaid eligibility levels for adults remain very limited (Figure 1). Seventeen states limit Medicaid coverage to parents earning less than 50 percent of poverty ($9,545 for a family of 3), and only eight states provide full Medicaid coverage to other low-income adults. State-by state Medicaid eligibility levels for parents and other adults are available here.
SOURCE: Based on the results of a national survey conducted by the Kaiser Commission on Medicaid and the Uninsured and the Georgetown University Center for Children and Families, 2012.
The ACA expands Medicaid to a national floor of 138% of poverty ($15,415 for an individual; $26,344 for a family of three). The threshold is 133% FPL, but 5% of an individual’s income is disregarded, effectively raising the limit to 138% FPL. The expansion of coverage will make many low-income adults newly eligible for Medicaid and reduce the current variation in eligibility levels across states. To preserve the current base of coverage, states must also maintain minimum eligibility levels in place as of March 2010, when the law was signed. This requirement remains in effect until 2014 for adults and 2019 for children. Under the ACA, states also have the option to expand coverage early to low-income adults prior to 2014. To date, eight states (CA, CT, CO, DC, MN, MO, NJ and WA) have taken up this option to extend Medicaid to adults. Nearly all of these states previously provided solely state- or county-funded coverage to some low-income adults. By moving these adults to Medicaid and obtaining federal financing, these states were able to maintain and, in some cases, expand coverage. Together these early expansions covered over half a million adults as of April 2012.
Eligibility requirements for the elderly and persons with disabilities do not change under reform although some individuals with disabilities may become newly eligible under the adult expansion. Lawfully residing immigrants will be eligible for the Medicaid expansion, although many will continue to be subject to a five-year waiting period before they may enroll in coverage. States have the option to eliminate this five-year waiting period for children and pregnant women but not for other adults. Undocumented immigrants will remain ineligible for Medicaid.
An additional 17 million individuals are expected to gain Medicaid and CHIP coverage by 2016, according to the Congressional Budget Office. Medicaid, along with new coverage options available through new Health Insurance Exchanges and tax credits, will help reduce the number of uninsured by approximately 30 million.
Most of the newly eligible will be low-income adults. Because of their high uninsured rates and current restrictions on Medicaid eligibility, many adults without dependent children and parents, some of whom may have children already enrolled in Medicaid, will be newly eligible for coverage in 2014 (Box 1).
For more examples of how health coverage will work under reform,
Over half of the nearly 50 million individuals who are currently uninsured have income below the new Medicaid eligibility thresholds, and 6 in 10 are adults without dependent children. About a quarter are parents (Figure 2).
SOURCE: KCMU/Urban Institute analysis of 2011 ASEC Supplement to the CPS. Medicaid also includes other public programs. Numbers may not add to 100 due to rounding.
Enrollment increases will vary by state. Large state variation in current adult eligibility levels, from under 25% to over 200% of poverty, helps explain differences in the number of uninsured across states. In states like Montana, Nevada, and Texas, where Medicaid eligibility levels for adults are low, Medicaid enrollment is expected to increase by at least 45 percent. In the District of Columbia, Massachusetts, and Vermont, which already provide more expansive coverage to low income adults and parents, Medicaid enrollment will increase by less than 10 percent.
The ACA will also streamline enrollment. To support the coverage expansions and ensure that all newly eligible individuals are able to enroll in coverage, the ACA includes new requirements for states to simplify Medicaid enrollment processes. Individuals must be able to apply online, by phone, or in person, and states will seek to verify income and other eligibility criteria electronically rather than requiring individuals to submit paper documentation, such as pay stubs. Many states are already moving forward with enrollment simplifications and eligibility system upgrades.
Overall, the federal government will finance about 95 percent of the cost of the Medicaid expansion from 2014 to 2019. The federal government will cover 100 percent of the states’ cost of covering newly eligible Medicaid beneficiaries from 2014 to 2016 and will then phase down its federal contribution to 90 percent by 2020. Coverage for previously eligible Medicaid beneficiaries will continue to be financed through a matching system between the states and the federal government which currently ranges from 50% to 74% federal funding.
The Medicaid coverage expansion has significant potential to reduce the number of uninsured and reduce disparities in coverage across states. With many uninsured adults expected to gain coverage and many likely to have unmet health needs, it will be important to connect newly eligible individuals to coverage and care in 2014.