What Is Medicaid Expansion

Medicaid Expansion Defined & Explained

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Medicaid Expansion—Definition

Medicaid expansion is the process of increasing the number of people enrolled in Medicaid, the joint state and federal social welfare program that provides health insurance coverage to low-income people. Medicaid expansion is accomplished by making it easier for people to qualify for Medicaid. It’s called Medicaid expansion because enrolling more people expands the list of people receiving Medicaid benefits.

The Affordable Care Act is responsible for Medicaid expansion in some states.

Medicaid Expansion—an Explanation

Before the Affordable Care Act took effect, Medicaid eligibility rules were strict. In order to qualify for Medicaid, you had to meet low-income criteria and have limited assets. For example, even if you had no income because you’d lost your job, if you had a bank account with $30,000 in it, you probably wouldn’t have qualified for Medicaid because you would have had too much in the way of assets.

In addition to meeting low-income criteria and asset limitations, many states required you to be a member of a particularly vulnerable group to qualify for Medicaid. These groups included the elderly, disabled, blind, pregnant women, children, or parents caring for young children. For example, a low-income 80-year-old man without much in the way of assets would have qualified for Medicaid because he was elderly.

However, a 40-year-old man with the exact same income and assets wouldn’t have been eligible for Medicaid because he wasn’t a member of one of the vulnerable groups.

The Affordable Care Act was supposed to make it easier to qualify for Medicaid. It expanded Medicaid eligibility to everyone who made 138% of federal poverty level or less and was younger than 65 years old.

By making it easier for people to qualify for Medicaid, the ACA would have expanded Medicaid enrollment by hundreds of thousands of people across the country. However, thanks to a Supreme Court ruling, that’s not exactly what happened.

The ACA included a carrot and stick approach to getting individual states to expand their Medicaid enrollment. The federal government traditionally provided 50%-83% of the funds for each state’s Medicaid program. The carrot approach provided that, in states that expanded Medicaid, the federal government would initially pay 100% of the cost of providing Medicaid to the new enrollees, eventually tapering down to shouldering 90% of the cost for expansion enrollees. The stick approach provided that states not expanding Medicaid would forfeit their existing federal Medicaid funds, not just miss out on funds for new enrollees.

The Supreme Court ruled that the federal government couldn’t coerce the states into Medicaid expansion by threatening to withhold all Medicaid funds if they didn’t expand. In effect, the Supreme Court overturned the stick part of the ACA’s carrot-and-stick approach to getting states to expand Medicaid. Without the stick, Medicaid expansion became optional for states since there was no longer a punishment for refusing to expand.

Some States Expanded Medicaid & Some States Didn’t

Most conservative  governors opted out of Medicaid expansion for their states; most states led by liberals expanded Medicaid. As of the summer of 2015, 21 states have not expanded Medicaid, but three of those are considering expanding. This Kaiser Family Foundation map shows which states have expanded Medicaid, and which haven’t.

Generally loath to create or expand entitlement and social welfare programs, conservatives frowned on Medicaid expansion citing concerns about increasing financial burdens on states. Conservative leaders were hesitant to commit their states to shouldering the burden of the 10% of the cost remaining after the federal government paid its share for expansion enrollees.

There was also concern that future law changes might decrease the federal government’s contribution percentage placing a larger financial burden on the states.

Liberal-led states generally expanded Medicaid. Liberal leaders saw Medicaid expansion as a step towards financial and health security for their poorest residents. They welcomed both an influx of federal dollars into their states via Medicaid, and a decrease in the number of uninsured residents.

Unintended Consequences

Unfortunately, one of the unintended consequences of the Supreme Court’s decision was the creation of a gap in health insurance financial aid for the poorest of the poor in states that didn’t expand Medicaid. People living below poverty level aren’t eligible for subsidies to help them buy health insurance on ACA health insurance exchanges. Since they’re not eligible for Medicaid either, in states that didn’t expand Medicaid, these people essentially get no help from the ACA. Learn how this came about in “Why the Poorest of the Poor Get No Help Paying for Health Insurance.”

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