Medicaid

Medicaid provides health and long-term care to over 90 million low-income people in the U.S.

The COVID-19 pandemic affected Medicaid spending and enrollment. In 2023, states are ending continuous enrollment, which may cause millions to lose coverage. 

The pandemic highlighted health disparities, telehealth access, behavioral health, home care services, and workforce shortages.

The Biden Administration aims to maintain coverage, expand access, and close gaps in states that did not expand Medicaid under the Affordable Care Act (ACA).

Congressional Republicans propose reducing the deficit, limiting federal Medicaid spending, and adding work requirements.

A divided government and a recent budget deal make major Medicaid changes unlikely soon.

Medicaid Funding and State Control

Medicaid receives federal and state funding, with states managing programs under federal rules. States decide eligibility, services, care delivery, and provider payments.

Section 1115 waivers allow states to test different policies if they meet Medicaid’s goals. Medicaid rules vary by state.

States get federal matching funds with no set limit. The federal share follows a formula, covering at least 50%, with more funding for lower-income states. Some groups and services qualify for higher rates. 

The ACA expansion group gets a 90% federal match, and the American Rescue Plan Act gave extra funds to states that expanded Medicaid.

In FY 2021, Medicaid spending was $728 billion, with 69% from federal funds. Spending rose during economic downturns and increased after the ACA and the pandemic’s continuous enrollment policy.

Medicaid is a large part of state budgets, but K-12 education spending is higher. Medicaid is the largest source of federal funds for states.

In 2021, it accounted for 27% of state spending, 15% of state funds, and 45% of federal funds used by states.

Medicaid Funding and Coverage

Medicaid pays for various services and groups. It is a government health insurance plan for people with low incomes. Over 20% of Americans, including those with high medical expenses, rely on Medicaid.

It is the leading provider of long-term care in the U.S. Medicaid helps low-income Medicare recipients by covering premiums, cost-sharing, and services not covered by Medicare.

State and federal Medicaid funds comprise almost 20% of personal health spending. It supports hospitals, community health centers, doctors, nursing homes, and home-based care.

Medicaid Coverage Changes

Federal laws and regulations control Medicaid rules and state options. The Centers for Medicare and Medicaid Services (CMS) runs Medicaid and oversees state programs. States can join Medicaid but must follow federal rules. 

Medicaid began in 1965, but some states joined later. By the 1980s, every state had joined.

At first, Medicaid connected to financial aid programs such as Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI).

Later, Congress changed the rules to cover children, pregnant women, and disabled people.

In 1996, the government replaced AFDC with Temporary Assistance for Needy Families (TANF), removing Medicaid’s link to cash aid.

The Children’s Health Insurance Program (CHIP) started in 1997 to cover children who did not qualify for Medicaid.

The Affordable Care Act (ACA) expanded Medicaid in 2010 to include low-income adults earning up to 138% of the federal poverty level. A 2012 Supreme Court ruling made this expansion optional for states. 

By April 2023, 41 states, including DC, had expanded Medicaid, though North Carolina’s expansion depended on the state budget. The ACA required states to simplify Medicaid enrollment and eligibility.

During COVID-19, Congress required states to keep people enrolled in Medicaid for extra federal funding. Medicaid enrollment increased by 23 million, reaching 95 million by March 31, 2023. 

As states restart disenrollment, many may lose coverage. Studies show that two-thirds of those losing Medicaid or CHIP had a gap in health insurance. Policies that ease the switch to other health plans may lower this rate.

Medicaid’s Role

Medicaid guarantees coverage for those who meet eligibility rules. It covers 20% of the U.S. population and is essential for specific groups.

In 2021, Medicaid covered 40% of children, 80% of children in poverty, 16% of adults, and 50% of adults in poverty. 

A higher percentage of Black, Hispanic, and American Indian/Alaska Native individuals rely on Medicaid compared to White individuals.

It also covers 43% of non-elderly adults with disabilities, defined as having difficulties with hearing, vision, movement, thinking, self-care, or independent living.

Medicaid funds 41% of U.S. births, covers nearly half of children with special medical needs, and supports 63% of nursing home residents.

It provides care for 23% of non-elderly adults with mental illness and 40% of those with HIV.

Medicaid helps Medicare recipients by covering premiums and additional services, including long-term care, for 12.5 million people.

Among non-elderly Medicaid recipients, half are children under 19. People of color comprise 60% of enrollees, 57% are female, and 70% are in a household with a working adult. Most adult enrollees work but lack employer-sponsored insurance or cannot afford it.

Medicaid Covers Health and Long-Term Care Services

Medicaid provides required services under federal law and optional services chosen by states. All states cover prescription drugs, while most offer physical therapy, vision care, and dental services.

Children receive full benefits under Early Periodic Screening, Diagnosis, and Treatment (EPSDT), which covers more services than private insurance for children with disabilities. Medicaid also funds non-emergency medical transportation for appointments.

Medicaid covers long-term care, including nursing homes and home-based services. Nursing home coverage is mandatory, but states decide whether to cover home-based care.

Many states have expanded coverage to include behavioral health services and support for food and housing.

Medicaid Spending Is Highest for Older Adults and People with Disabilities

People who qualify based on age (65+) or disability make up 20% of enrollees but account for most Medicaid spending due to higher health and long-term care costs.

In 2019, Medicaid spending per enrollee ranged from $4,873 in Nevada to $10,573 in North Dakota.

State costs vary based on program rules, covered benefits, provider payments, and population needs. Even within states, costs differ. Expenses for individuals eligible due to disability can vary widely.

Medicaid Improves Access to Care

Studies show Medicaid enrollees receive better care than uninsured individuals. They are less likely to delay or skip treatment due to cost.

Access and satisfaction levels are similar to private insurance. Federal rules limit out-of-pocket costs to help enrollees afford care.

Research shows Medicaid coverage during childhood leads to better health and education outcomes.

Medicaid expansion for adults has improved care, better self-reported health, lower death rates, and more financial stability.

However, some enrollees face difficulties finding providers, particularly psychiatrists and dentists.

These challenges exist in other health programs but are worse in Medicaid due to lower payment rates and fewer providers accepting Medicaid. 

In 2021, 74% of doctors accepted new Medicaid patients, compared to 88% for Medicare and 96% for private insurance.

Acceptance rates were higher at community health centers, mental health clinics, and government clinics.

Most people with Medicaid get treatment from managed care plans. In 2020, these plans covered seven out of ten enrollees.

They must have enough providers. In May 2023, the Biden Administration suggested new rules to improve access, funding, and quality in Medicaid managed care.

1115 Demonstration Waivers in Medicaid

Most states use 1115 demonstration waivers to test new Medicaid approaches that federal law does not usually allow.

These waivers allow states to experiment with different policies if CMS believes they support Medicaid’s goals.

Over time, 1115 waivers have followed state and CMS priorities and shifted with different presidential administrations.

Different administrations use these waivers to:

• Expand healthcare coverage
• Adjust healthcare delivery systems
• Modify financing and other Medicaid elements

Nearly all states have at least one active 1115 waiver, and many have pending requests with CMS.

Impact of Presidential Administrations on Waivers

Recent administrations have used 1115 waivers in different ways:

• Trump Administration focused on work requirements, eligibility restrictions, and capped financing.
• Biden Administration removed work requirements, phased out premium requirements, and encouraged waivers that:
  • Expand healthcare coverage
  • Reduce health disparities
  • Improve “whole-person care”

Some states have proposed waivers to address social health needs and assist individuals transitioning from incarceration to community life. A few states have also requested continuous Medicaid coverage for children and confident adults beyond one year.

Medicaid’s Role in Economic Downturns and Emergencies

Medicaid is critical in responding to economic downturns and public health crises. The COVID-19 pandemic demonstrated how Medicaid helps during emergencies.

When the economy struggles, more people qualify for Medicaid, increasing costs while state tax revenues decline.

During economic downturns, Congress has supported states by temporarily increasing the Federal Medical Assistance Percentage (FMAP). For example:

• During the COVID-19 pandemic, extra federal funding required states to pause Medicaid disenrollments.
• That continuous enrollment policy ended on March 31, 2023, but states can still receive a temporary higher FMAP if they meet certain conditions.

Emergency Flexibility in Medicaid

States can request federal approval to adjust Medicaid policies in emergencies. Emergency authorities allow states to:

• Expand Medicaid capacity
• Adjust services for specific populations
• Focus on essential providers

During the COVID-19 pandemic, all 50 states and DC used emergency powers to:

• Expand telehealth services
• Adjust Medicaid eligibility and benefits
• Address workforce shortages in home and community-based services

Effects of the COVID-19 Public Health Emergency Ending

The expiration of the COVID-19 public health emergency (PHE) in May 2023 impacted:

• Healthcare costs
• Medicaid coverage
• Access to care

States must now phase out many emergency policies. However, some long-term changes remain, including:

• Expanded telehealth access
• Improved coordination between public health, behavioral health, and social service agencies
• Enhanced data collection for better response to future public health crises

Public Opinion on Medicaid

Most Americans hold a positive view of Medicaid. Polls show that two-thirds of U.S. adults have had some connection with Medicaid.

The program receives support across political groups, with most agreeing that it benefits low-income individuals.

Support for Medicaid Expansion

Medicaid expansion is widely favored. Seven states have adopted expansion through ballot measures:

• Iowa, Maine, Missouri, Nebraska, Oklahoma, South Dakota, and Utah

In states without Medicaid expansion, two-thirds of residents support expansion.

Political Views on Medicaid

Opinions on Medicaid vary by political affiliation:

• 79% of Democrats and 60% of independents see Medicaid as a health insurance program that helps people afford care.
• 54% of Republicans consider Medicaid a welfare program.
• Republicans with personal Medicaid experience are more likely to view it as a healthcare program.