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The Future of the Medicaid Program

Summary

Medicaid is the largest public health insurance program. It provides health coverage to nearly 75 million Americans or 1 in 5 Americans, including eligible low-income adults, children, pregnant women, elderly adults and people with disabilities.  Most of these people do not have access to the private health insurance system.  Federal law mandates that state Medicaid programs cover certain populations (e.g. low-income children), certain benefits, and applies limits on cost sharing among many other things.

The program is funded jointly by states and the federal government; therefore, both the federal government and states are responsible for ensuring that Medicaid is fiscally sustainable over time and effective in meeting the needs of the people it serves. Medicaid accounts for a sizeable portion of both the states’ budgets and that of the federal government. As a result, lawmakers are constantly looking for innovative ways to reduce costs.

Since the implementation of the Affordable Care Act (ACA) – which expanded Medicaid coverage to nonelderly adults with income up to 138 percent of the Federal Poverty Level (FPL), or $17,774 for an individual and $36,570 for a family of four, overall enrollment in Medicaid has increased. On June 28, 2012, the United States Supreme Court upheld the Medicaid expansion provision but found that the penalty to states for not participating in the Medicaid expansion (loss of the federal government funding for the existing Medicaid program) was unconstitutionally coercive. Therefore, the Supreme Court gave states the option to expand their Medicaid program without the threat of a reduction in federal funding.  The increase in enrollment is significant in states that choose to participate in Medicaid expansion. The federal government finances at least 90 percent of the cost of coverage for the expansion population.  As of July 22, 2021, 39 states (including the District of Columbia) have chosen to implement the ACA Medicaid expansion.

The pressure to reduce the federal cost of Medicaid has led to legislative proposals to restrict funding for Medicaid or transition the program to a block grant or per-capita cap. Generally, a per-capita block grant system would provide a fixed amount of federal funding per enrollee which would vary based on enrollee category (aged/blind/disabled enrollees would receive a larger amount than healthy childless adults).  This approach would allow enrollment to grow with demand but increases the risk of funding shortfalls if the per-enrollee amount is insufficient to cover care, payment, or is tied to a growth rate that is less than the cost of health care.  A block grant system would eliminate the exiting federal-state financing structure and give state Medicaid programs a fixed amount of federal money each year to fund coverage, provider payment and administration.  Funding would be more predictable for federal and state governments but the amount of federal funding would be insufficient and would not grow with the rate of health spending.

In 2017, legislation to repeal and replace the ACA, introduced by Republican lawmakers in Congress, all included provisions that would significantly slash funding for Medicaid through either per capita caps or block grants. So far, their attempts to repeal and replace the ACA, including major reforms to the Medicaid program, have failed.

Some states have used the federal 1115 waiver process to overhaul their Medicaid programs to include mandates on Medicaid recipients in order for them to receive benefits.  The mandates include requiring enrollees to work, pay premiums, and limiting the time they can receive benefits.

President Biden has called for expanded eligibility and coverage. On March 11, 2021, Congressed passed and President Biden signed into law the American Rescue Plan Act. The legislation included incentives for states to expand Medicaid by temporarily increasing the state’s base FMAP by five percentage points for two years for states that newly expand Medicaid; and allows states (for 5 years) to extend Medicaid postpartum coverage from 60 days to 12 months, beginning April 1, 2022. In addition, it requires Medicaid coverage of COVID-19 vaccines and treatment without beneficiary cost sharing with vaccines matched at a 100 percent federal medical assistance percentage (FMAP) through one year after the end of the Public Health Emergency.

ACP has long-supported the Medicaid program as vital in the effort to ensure that this nation’s most vulnerable population has access to health coverage.  ACP’s advocacy has focused on protecting the Medicaid program, encouraging states to expand their programs, and opposing efforts by federal lawmakers to cut or cap program funding, or otherwise imposing mandatory work requirements, premiums and cost-sharing for vulnerable individuals, and benefit cuts.

Resources