The Importance of Medicaid

Medicaid is crucial in supporting low-income households in obtaining healthcare coverage and provides health insurance to nearly 60 million children and families. Since Medicaid has strict rules for eligibility, the expansion of Medicaid benefits those who had not been previously eligible for any type of affordable health coverage. Under the current eligibility requirements, state Medicaid programs must cover children under the age of 6 living in families with incomes below 133% of the federal poverty level and children ages 6-18 with family incomes below 100% of the FPL. However, states can decide whether or not to extend eligibility further. For example, states must cover children up to 18 years of age, but have the option to cover 19 and 20 year olds. In addition, states must provide coverage to pregnant women with family incomes below 133% of the FPL and parents with incomes below 50% of the FPL, but have the option to provide coverage to these groups above the minimums.

Adults who are not disabled, pregnant, or elderly, and have no minor children generally have been excluded from Medicaid.  In the past, to extend Medicaid to these adults, states had to receive a waiver and could not receive additional federal Medicaid funds for this coverage; instead, states needed to redirect existing federal Medicaid funds or create program savings to offset the cost of the coverage.  As a result, the expansion of Medicaid will cover an additional 22.3 million uninsured individuals with incomes below 138% of the FPL.

Medicaid is jointly funded by the federal government and states. To finance the expansion, the federal government will cover 100% of the states’ cost in covering newly eligible Medicaid recipients, then phase down its federal contribution to 95% between  2014 and 2019, then again to 90% in 2020. Since April 2010, California, Connecticut, Minnesota, New Jersey, Washington, and the District of Columbia have expanded Medicaid to low-income adults and have been able to cover an additional 600,000 people.  These states were able to preserve, expand, and strengthen coverage for their low-income residents.

 According to The Urban Institute, if a state does not implement the expansion, some individuals would receive federal tax credits and other subsidies instead of Medicaid; however, cost-sharing requirements would be higher. Federal tax credits and subsidies would not be available for most people with incomes below the federal poverty line, which means uninsured individuals living above poverty can receive help, but those living below poverty would not. Rejecting federal funds and refraining from the expansion could have adverse impacts on more than 27 million uninsured Americans with incomes below 138 percent of the poverty level.

For state policymakers, it is important to consider the economic and societal benefits of providing healthcare to those who currently lack access to affordable coverage and to reduce coverage disparities.  

For state policy strategies to ensure that children are healthy, visit PolicyforResults.org.