A Medicaid Overview – Q&A with Kaiser Family Foundation

Efforts to improve health in the U.S. have traditionally looked to the health care system as the key driver of health and health outcomes. However, there has been increased recognition that improving health and achieving health equity will require broader approaches that address social, economic, and environmental factors that influence health. Social determinants of health are the conditions in which people are born, grow, live, work, and age. They include factors like socioeconomic status, education, neighborhood and physical environment, employment, and social support networks, as well as access to health care. Given that Medicaid serves a high-need low-income population that faces an array of social and environmental challenges, there are a growing number of initiatives within Medicaid to identify and address social needs.

Medicaid not only serves as an avenue to identify and address social needs that influence health, but also has impacts that extend beyond improved health and health care. Research shows that Medicaid coverage of low-income pregnant women and children has contributed to dramatic declines in infant and child mortality in the U.S. Further, a growing body of research indicates that Medicaid eligibility during childhood is associated with reduced teen mortality, improved long-run educational attainment, reduced disability, and lower rates of hospitalization and emergency department visits in later life. Benefits also include second-order fiscal effects such as increased tax collections due to higher earnings in adulthood.

Research findings show that state Medicaid expansions to adults are not only associated with increased access to care, improved self-reported health, and reduced mortality, but also improved affordability of health care and financial stability and reductions in disparities by income or race. The ACA Medicaid expansion has had economic effects, including state budget savings, revenue gains, and overall economic growth. Some studies have also found a link between the ACA Medicaid expansion and job growth and increased employment.

Medicaid covers a high-need, low-income population. It covers 61% of non-elderly individuals with incomes below poverty and 43% of non-elderly individuals with incomes near poverty (100-199% FPL). It covers 39% of all children, 83% of poor children, and 46% of all births in the typical state. Medicaid also provides coverage for 45% of non-elderly adults with disabilities (physical disabilities, developmental disabilities such as autism, traumatic brain injury, serious mental illness, and Alzheimer’s disease) and 62% of nursing home residents. States can opt to provide Medicaid coverage for children with significant disabilities in higher-income families to fill gaps in private health insurance. Medicaid also assists 19% of Medicare beneficiaries with their premiums and cost-sharing and provides them with benefits not covered by Medicare, especially long-term care.

Medicaid helps fill gaps in private coverage for people of color, reducing racial and ethnic disparities in coverage. Groups of color are more likely to be covered by Medicaid compared to Whites. Since implementation of the ACA, there have been particularly large gains in coverage for people of color which helped narrow longstanding disparities in coverage. Despite these coverage gains, racial and ethnic disparities in coverage persist.

Medicaid also provides coverage to nearly one in four (24%) non-elderly individuals in rural areas. In many states, Medicaid coverage rates are higher in rural areas than in urban or other areas of the state.

Medicaid provides coverage for a wide range of primary, preventive, specialty, and long-term care services, which are important across the lifespan. Medicaid covers an array of reproductive health care services, including family planning and pregnancy-related care. Medicaid is the largest single payer of pregnancy-related services, financing 46% of all births in the typical state. Medicaid and CHIP cover nearly four in ten (39%) of all children, including significant shares of low-income children and children with special health care needs. Medicaid provides comprehensive and preventive health care services for children through EPSDT.

As people age, Medicaid covers services for screening and management of chronic disease, mental health care, and disability care. While most seniors have coverage through Medicare, many who are very low-income also qualify for Medicaid, and are referred to as “dual eligible.” Dual eligible beneficiaries typically qualify for both programs because they are 65 and older or younger persons with serious disabilities who have very low incomes. Medicaid fills gaps in Medicare’s benefit package for many low-income Medicare beneficiaries. Such assistance ranges from help paying for Medicare’s premiums and cost-sharing to coverage of benefits not offered under Medicare, such as long-term care and hearing, vision, and dental services (in some states). Dual eligible beneficiaries are among the sickest and poorest individuals covered by either Medicare or Medicaid.

In addition to providing services across the lifespan, Medicaid has long-term impacts that influence the health, education, and earning potential of individuals. For example, Medicaid has contributed to dramatic declines in infant and child mortality in the U.S. Research also indicates that Medicaid coverage in childhood is associated with long-term positive effects, including improved long-run educational attainment and higher earnings in adulthood. Additionally, extending Medicaid coverage to parents has positive implications for coverage and health care access of their children. For example, Medicaid coverage for parents is associated with coverage increases for children and greater access to preventive care.

Medicaid is financed jointly by the federal government and states. The federal government matches state Medicaid spending. The federal match rate varies by state based on a formula and ranges from a minimum of 50% to nearly 77% in the poorest state. Under the ACA, the match rate for adults newly eligible is 90%. The matching structure provides states with resources for coverage of their low-income residents and also permits state Medicaid programs to respond to demographic and economic shifts, changing coverage needs, technological innovations, public health emergencies, such as the opioid addiction crisis, and disasters and other events beyond states’ control. The guaranteed availability of federal Medicaid matching funds eases budgetary pressures on states during recessionary periods when enrollment rises.

Medicaid is a state budget driver as well as the largest source of federal revenue to states. Federal Medicaid matching funds are the largest source of federal revenue (57.8%) in state budgets. Medicaid accounts for 28.9% of total state spending (including state and federal funds) but only 16.5% of state fund spending ( a far second to elementary and secondary education. Given Medicaid’s share of state budgets, states have an interest in cost containment and program integrity.

Research shows that the influx of federal dollars from Medicaid spending has positive effects for state economies. Medicaid spending flows through a state’s economy and can generate impacts greater than the original spending alone. The infusion of federal dollars into the state’s economy results in a multiplier effect, directly affecting not only the providers who receive Medicaid payments for the services they provide, but indirectly affecting other businesses and industries as well. More recent analyses find positive effects of the Medicaid expansion on multiple economic outcomes, despite Medicaid enrollment growth initially exceeding projections in many states. Studies show that states expanding Medicaid under the ACA have realized budget savings, revenue gains, and overall economic growth.

Recently, there have been declines in Medicaid and CHIP enrollment, reversing a previous trend of increases following implementation of the ACA. Administrative data from the Centers for Medicare & Medicaid Services show that between December 2017 and July 2019, there was a net decline in total Medicaid and CHIP enrollment of 1.9 million people or -2.6%, from 74.3 to 72.4 million enrollees. Some of this decline may reflect people moving to other coverage due to the improving economy, as noted by the Trump administration and some state officials. However, survey data show that the uninsured rate increased between 2017 and 2018, driven, in part, by decreases in Medicaid and CHIP coverage. The increase in the uninsured rate suggests that some people being disenrolled from Medicaid and CHIP are becoming uninsured.

Experiences in some states suggest that renewal process requirements and growing use of periodic eligibility checks by states may be contributing to disenrollment among people who are still eligible for coverage as well as increased churn in coverage—people moving on and off of coverage over short periods of time. The administration is planning to take steps to tighten standards for eligibility verification as part of program integrity efforts. Increased verification requirements could reduce instances of ineligible people being enrolled in the program and other eligibility errors, but also result in greater enrollment barriers for people who are eligible for the program.

Other factors may also be leading to fall offs in Medicaid and CHIP coverage among individuals who remain eligible for the program. For example, the administration has reduced funds to support outreach and enrollment assistance, which is often important for getting and keeping eligible families enrolled in coverage. Moreover, a growing body of research indicates that the shifting immigration policy environment may be deterring some families from enrolling themselves or their children, who are primarily U.S.-born citizens, in coverage even though they are eligible.

As the provider of health insurance coverage for about one in five Americans and the largest payer for long-term care services in the community and nursing homes, Medicaid continues to be a central part of health policy debates at the federal and state level. Some Medicaid policy issues to watch include:

Medicaid expansion. To date, 37 states including DC have adopted the ACA’s Medicaid expansion to low-income adults. In the remaining 14 states, many poor adults continue to fall in a coverage gap, earning too much to qualify for Medicaid but not enough to qualify for the subsidies for Marketplace coverage. There is no deadline for states to opt to expand Medicaid under the ACA. The November 2018 election led to additional states taking up the expansion and some states that had long opposed expansion may also be exploring options, including through waivers that may place new restrictions or requirements on expansion coverage. Looking ahead, additional states may move to expand Medicaid. However, if they do so through waivers that limit or restrict coverage, the reach and positive impacts of expansion could be constrained.

Waivers. Section 1115 Medicaid demonstration waivers provide states an avenue to test new approaches not otherwise allowed under current law, provided the demonstrations meet the objectives of the program. The focus of waivers has changed over time reflecting shifting priorities for states and the Centers for Medicare and Medicaid Services (CMS).

On January 11, 2018, CMS released new guidance allowing states, for the first time, to pursue waivers to impose work requirements in Medicaid as a condition of eligibility. Seven states have waivers with work requirements approved; however, only Michigan is currently implementing a work requirement policy. Another three states have waivers that have been set aside by the courts. Ten states have work requirement waivers pending decision with CMS. In addition, states are implementing and proposing waivers that include other eligibility restrictions such as coverage lock-out periods for unpaid premiums or failure to timely report information. Looking ahead, key issues to watch include what other waivers CMS will approve, how litigation on work requirements will proceed, and what can be learned from states implementing waivers. The outcome of the Tennessee modified block grant waiver and any additional guidance about block grant waivers from CMS will also be key issues to watch.

Enrollment and spending. States reported declines in Medicaid enrollment and modest growth in total Medicaid spending for FY2019 and budgeted for nearly flat enrollment growth but a return to more typical rates of spending growth for FY2020. States attributed the decline in enrollment to stronger economies, changes in renewal processes, upgraded eligibility systems, and enhanced verification and data matching efforts. In addition, a growing body of research also suggests that fears stemming from the shifting immigration policy climate and increased immigration enforcement activities are contributing to declines in enrollment among individuals in immigrant families, including citizen children in those families. Looking ahead, states anticipate upward pressure on Medicaid spending due to the increasing cost of care stemming from rising costs for prescription drugs, provider rate increases, and costs for the elderly and people with disabilities.

Preparing for an aging population. By the year 2030, all baby boomers will be at least 65 years old and one in five US residents will be at retirement age. In preparation for these demographic changes, states have reported plans to rebalance delivery of long-term services and supports (LTSS) to reduce reliance on institutional care settings, use managed LTSS, adopt LTSS payment reforms, and better integrate care for Medicare-Medicaid dual eligibles.

Elections, ACA repeal, and the economy. Looking ahead, the factors driving Medicaid spending growth are likely to continue and could be exacerbated in the event of a future economic downturn that would likely have significant effects on Medicaid enrollment and spending. As the debate heats up for the November 2020 elections, health care remains a key issue for candidates and voters at both the state and federal levels. At the state level, continued debates about Medicaid expansion, drug costs, and waivers will be important to watch.

At the federal level, the health care debate is far-reaching. Democratic presidential candidates are proposing to further expand coverage while the Trump administration continues to support policies that would eliminate the ACA and fundamentally restructure Medicaid with less federal funding. A strong economy and lower Medicaid enrollment growth relieve some fiscal pressure on states, but a future economic downturn, as well as the outcomes of the elections could have significant implications for the Medicaid program, state budgets, and Medicaid enrollees.

Research shows that Medicaid coverage and the ACA Medicaid expansion are associated with significantly improved access to care compared to those who are uninsured. As such, actions that would support enrollment of eligible people in Medicaid coverage and continue to expand Medicaid eligibility through expansion in non-expansion states would facilitate improved access to care.

In light of reductions in federal funding for outreach and enrollment assistance, other sources of outreach will be important for ensuring individuals are able to access help when needed. Moreover, increased and targeted outreach and enrollment assistance will be key for helping immigrant families enroll eligible individuals amid growing fears due to the shifting immigration policy environment.

Debate continues in some of the 14 states that have not yet adopted the ACA Medicaid expansion. Efforts to expand Medicaid are occurring through a range of mechanisms, including ballot initiatives and governor and state legislative action.

In 2018, community health centers served nearly one in five (19%) Medicaid enrollees nationwide. Increased funding through the Medicaid expansion and the Community Health Center Fund established by the ACA have enabled health centers, especially in Medicaid expansion states, to expand dramatically the number of patients they serve and the breadth of services they provide. Stable support for health centers helps ensure they remain a source of care for those on Medicaid as well as those who are at risk of losing their Medicaid coverage and becoming uninsured.