How the Health Law Affects Medicaid

Medicaid Under Health Reform


The Affordable Care Act took action to reform Medicaid nationwide by making the low-income health program available to more people. Expansion of the Medicaid program is one of the most crucial parts of the extensive law, offering more Americans public health benefits than ever before. While each state can choose whether or not to expand Medicaid, at least half of states increased eligibility by the first year of implementation in 2014.

Like the individual and employer mandates, Medicaid expansion under health reform was mandatory or otherwise a penalty was issued, according to the first version of the ACA. It was then made optional after the Supreme Court case closed in June 2012.

Certain states were concerned they wouldn’t be able to afford the expansion, and therefore opted out. Some of those states later switched gears, deciding to accept federal funds for expansion, giving low-income individuals and families hope in some of the nation’s most populous areas, like California and New York.

A few red states created their own versions of Medicaid expansion to insure more low-income residents with Medicaid expansion funds. These proposals were approved by the Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS), enabling more needy individuals to purchase an affordable health plan.

If all states expanded, an estimated 6 million Americans would gain coverage. As more states decide to expand, it is likely that several million will get insured, though a few of the most densely populated states have opted out (Texas and Florida).

The Supreme Court also made it acceptable for members to be cut from the program if it was a hardship for the state budget, and making it more difficult to be eligible in some cases. After this decision was reached, each state could decide whether to expand or contract Medicaid.

What is Medicaid Expansion?

When states expand Medicaid, they increase eligibility for poor people to apply for free or low-cost medical care.

Since January 1, 2014, states expanding Medicaid must allow childless adults under 65 with income up to 133 percent of the Federal Poverty Level (FPL). You must be an American citizen or legal resident to qualify.

133 percent of poverty is a considerable increase to the previous limit for most states. Many did not even offer Medicaid to low-income individuals without dependent children, and set the income guidelines extremely low for parents, as well.

In addition to childless adults, other Medicaid-eligible groups such as pregnant women, children and parents can also apply with income up to 133 percent of poverty.

Federal funding is what sets the ACA’s Medicaid expansion apart from previous expansions. Between 2014 and 2016, the federal government intends to fund the entirety of the program’s expansion in each participating state. The federal support will taper off gradually, covering 90 percent of expansion costs in 2020 and going forward.

States that do not choose to offer Medicaid to a larger number of individuals do not receive any federal funding.


Benefits of Medicaid Expansion

While some states whined about the state budget being drained by Medicaid expansion, others considered a more humanitarian approach — and considered that more Medicaid might mean fewer emergency room visits.

According to a Harvard study, a longer life expectancy is projected in states where Medicaid has already been expanded, as people with access to care are healthier. This statistic would suggest Medicaid helps people in a primary care setting first so they don’t have to use the emergency room at the expense of taxpayers.

Large states such as Florida and Texas, whose governors were the first to emphasize their favor for opting out, plan to block millions of people from obtaining coverage. The difference in mortality rates (shown by the Harvard study) in Florida would result in about 5,680 less deaths per year for adults under age 65. A consultant’s report also stated that Iowa Medicaid will cover up to 182,000 more residents if every eligible resident took advantage of their expansion efforts.


Medicaid Cuts

Between 2012 to 2013, when states were deciding whether or not to expand, Medicaid cuts also began to take place around the nation.

13 states deciding to reduce benefits, pay health care providers less or restrict eligibility. Most changes went into effect July 1, 2012, others became effective later that year and some were denied approval. The states participating in the cuts, causing people to lose their coverage, included some that also expanded coverage to residents.

Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Louisiana, Maine, Maryland, New Hampshire, South Dakota and Wisconsin each took measures to reduce the cost of their programs.


Medicaid expansion is a helpful tool for the low-income, uninsured population, and there are mixed reviews on whether it costs more or less for states to implement. As a law, it is beneficial for ensuring a broader population of low-income residents can afford medical care.