Medicaid is the primary program providing comprehensive coverage of health care and long-term services and supports to more than 90 million low-income people in the United States. The COVID-19 pandemic profoundly affected Medicaid spending and enrollment. In 2023, Medicaid programs are facing new challenges and millions of enrollees are at risk of losing coverage as states unwind the continuous enrollment provision that was put in place early in the pandemic to ensure stable coverage. The pandemic also focused policy attention on longstanding issues including: initiatives to reduce health disparities, expand access to care through the use of telehealth, improve access to behavioral health and home and community based services, and address workforce challenges. The Biden Administration has efforts underway to help promote continuity of coverage, expand access, and has focused on closing the coverage gap in states that have not expanded Medicaid under the Affordable Care Act (ACA). Congressional Republicans have put forth proposals to reduce the deficit, limit federal spending for Medicaid, and impose work requirements in Medicaid. However, with divided government and recent passage of a bipartisan package to address the federal budget and increase the debt limit, there is unlikely to be much legislative activity on Medicaid in the next couple years. In this broad context, we examine ten key things to know about Medicaid.
1. Medicaid is jointly financed by the federal government and states and administered by states within broad federal guidelines.
Subject to federal standards, states administer Medicaid programs and have flexibility to determine what populations and services to cover, how to deliver care, and how much to reimburse providers. States can obtain Section 1115 waivers to test and implement approaches that differ from what is required by federal statute if the Secretary of HHS determines the waivers would advance program objectives. Because of this flexibility, there is significant variation across state Medicaid programs, and as a result, the share of state residents covered by the program (Figure 1, tab 1).
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States are guaranteed federal matching dollars without a cap for qualified services provided to eligible enrollees. The match rate for most Medicaid enrollees is determined by a formula in the law that provides a match of at least 50% and provides a higher federal match rate for states with lower per capita income (Figure 1, tab 2). States may receive a higher match rate for certain services and populations. The ACA expansion group is financed with a 90% federal match rate, so states pay 10%; however, the American Rescue Plan Act included an additional temporary fiscal incentive to states that newly adopt the Medicaid expansion. In FY 2021, Medicaid spending totaled $728 billion of which 69% was federal spending. Medicaid spending growth typically accelerates during economic downturns as enrollment increases. Spending growth also peaked after the implementation of the ACA and more recently due to enrollment growth tied to the pandemic-related continuous enrollment provision.
Overall, Medicaid is a large share of most states’ budgets; however, state spending on Medicaid is second to state spending on elementary and secondary education and the program is the largest source of federal revenue to states. In state fiscal year 2021, Medicaid accounted for 27% of total state expenditures, 15% of expenditures from state funds (general funds and other funds), and 45% of expenditures from federal funds (Figure 1, tab 3).
2. Medicaid provides financing for a variety of groups and for a wide range of services.
Medicaid is the nation’s public health insurance program for people with low income. The Medicaid program covers more than 1 in 5 Americans, including many with complex and costly needs for care. The program is the principal source of long-term care coverage for people in the United States. Medicaid also provides coverage for low-income Medicare beneficiaries to help pay for premiums, cost sharing, and services not covered by Medicare. Combined state and federal Medicaid spending comprised nearly one-fifth of all personal health care spending in the U.S., providing significant financing for hospitals, community health centers, physicians, nursing homes, and community-based long-term services and supports (Figure 2).
3. Medicaid coverage has evolved over time.
Title XIX of the Social Security Act and a large body of federal regulations and sub-regulatory guidance govern the program, defining federal Medicaid requirements and states’ options and authorities. At the federal level, the Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (HHS) administers Medicaid and oversees states’ programs. States may choose to participate in Medicaid, but if they do, they must comply with core federal requirements. Not all states opted to participate in Medicaid immediately after its enactment in 1965, but by the 1980s, all states had opted in (Figure 3). Medicaid coverage was historically tied to cash assistance—either Aid to Families with Dependent Children (AFDC) or federal Supplemental Security Income (SSI). Over time, Congress expanded federal minimum requirements and provided new coverage requirements and options for states especially for children, pregnant women, and people with disabilities. In 1996, legislation replaced Aid to Families with Dependent Children with Temporary Assistance to Needy Families (TANF) and severed the link between Medicaid eligibility and cash assistance for children, pregnant women, and low-income parents. The Children’s Health Insurance Program (CHIP) was established in 1997 to cover low-income children above the cut-off for Medicaid with an enhanced federal match rate.
In 2010, the ACA expanded Medicaid to nearly all nonelderly adults with income up to 138% FPL ($20,120 annually for an individual in 2023) through a new coverage pathway for adults without dependent children who had traditionally been excluded from Medicaid coverage. However, the ACA Medicaid expansion coverage is effectively optional for states because of a 2012 Supreme Court ruling. As of April 2023, 41 states including DC have expanded Medicaid; however, implementation of the expansion in North Carolina is contingent on passage of the SFY 2023-2024 biennial budget. States receive a higher rate of federal funding for people who are enrolled through the new coverage pathway. Under the ACA, all states were also required to modernize and streamline Medicaid eligibility and enrollment processes to help individuals obtain and maintain coverage.
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In response to the COVID-19 pandemic, Congress required states to maintain continuous enrollment in Medicaid in exchange for additional federal funding. Enrollment is estimated to have grown by 23 million during the continuous enrollment period and to have reached nearly 95 million when the period ended on March 31, 2023. As states resume disenrollments that had been on hold for three years, millions of people may lose Medicaid coverage during the unwinding of the continuous enrollment provision. Our recent analysis of coverage outcomes after disenrolling from Medicaid or CHIP found that nearly two-thirds of people experienced a period of uninsurance. Policies to smooth the transition from Medicaid to other coverage sources could reduce that rate as the Medicaid continuous enrollment period unwinds.
4. Medicaid is particularly important for certain populations.
Medicaid is an entitlement, which means that individuals who meet eligibility requirements are guaranteed coverage. While Medicaid covers one in five people living in the United States, Medicaid is a particularly important source of coverage for certain populations. In 2021, Medicaid covered four in ten children, eight in ten children in poverty, one in six adults, and almost half of adults in poverty. Relative to White children and adults, Medicaid covers a higher share of Black, Hispanic, and American Indian American Native (AIAN) children and adults. Medicaid covers 43% of nonelderly, noninstitutionalized adults with disabilities, who are defined as having one or more difficulty related to hearing, vision, cognition, ambulation, self-care, or independent living (Figure 4).
Medicaid covers 41% of all births in the United States, nearly half of children with special health care needs, five in eight nursing home residents, 23% of non-elderly adults with any mental illness, and 40% of non-elderly adults with HIV. Medicaid also pays Medicare premiums and often provides wrap around coverage for services not covered by Medicare (like most long-term services and supports) for nearly one in five Medicare beneficiaries (12.5 million).
Among the non-elderly covered by Medicaid, half are children under age 19; six in ten are people of color, 57% are female; and seven in ten are in a family with a full or part-time worker. Even though most adult Medicaid enrollees are working, many do not have an offer of employer sponsored coverage, or it is not affordable.
5. Medicaid covers a broad range of health and long term care services often not covered by other payers.
Medicaid covers a broad range of services to address the diverse needs of the populations it serves. In addition to covering the services required by federal Medicaid law, all states elect to cover at least some services that are not mandatory (Figure 5). All states cover prescription drugs, and most states cover physical therapy, eyeglasses, and dental care. Medicaid provides comprehensive benefits for children, known as Early Periodic Screening Diagnosis and Treatment (EPSDT) services. EPSDT is especially important for children with disabilities because it allows children access to a broader set of benefits to address complex health needs than what is traditionally covered by private insurance. Unlike commercial health insurance and Medicare, Medicaid also covers non-emergency medical transportation, which helps enrollees get to their appointments, and long-term care including nursing home care and many home and community-based services (coverage for nursing facilities is mandatory but most coverage of HCBS is optional). In recent years states have been expanding coverage of behavioral health services and benefits to help enrollees address social determinants of health (SDOH) like nutrition or housing.
6. Medicaid spending is concentrated among people eligible based on being age 65+ or having a disability.
People eligible on the basis of being ages 65 and older or on the basis of disability comprise one in five enrollees but account for more than half of Medicaid spending, reflecting high health care needs and in many cases, use of long-term services and supports (Figure 6, tab 1).
Across the states, spending per full-benefit enrollee ranged from a low of $4,873 in Nevada to $10,573 in North Dakota in 2019. Variation in spending across the states reflects considerable flexibility for states to design and administer their own programs – including what benefits are covered and how much providers are paid — and variation in the health and population characteristics of state residents. Within each state, there is also substantial variation in the average costs for each eligibility group and within each eligibility group, per enrollee costs may vary significantly, particularly for individuals eligible based on disability (Figure 6, tab 2).
7. Medicaid facilitates access to care and improved health outcomes.
A large body of research shows that Medicaid beneficiaries have substantially better access to care than people who are uninsured (who are also primarily low-income) and are less likely to postpone or go without needed care due to cost. Key measures of access to care and satisfaction with care among Medicaid enrollees are comparable to rates for people with private insurance (Figure 7). Given that Medicaid enrollees have low incomes, federal rules generally have protections to limit out of pocket costs that can help improve access. Longstanding research shows that Medicaid eligibility during childhood is associated with positive effects on health and effects beyond health such as improved long-run educational attainment. Early and updated research findings show that state Medicaid expansions to adults are associated with increased access to care, improved self-reported health status, reduced mortality among adults, and increases in economic security.
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Gaps in access to certain providers, particularly psychiatrists and dentists, are ongoing challenges in Medicaid. These and other gaps in access tend to mirror system-wide access problems that affect Medicare and the private insurance market, but they are exacerbated in Medicaid by provider shortages in low-income communities, Medicaid’s lower physician payment rates, and lower participation in Medicaid compared with private insurance. In 2021, MACPAC found physicians were less likely to accept new Medicaid patients (74%) than those with Medicare (88%) or private insurance (96%), but these rates may vary by state, provider type and setting. Medicaid acceptance was much higher where physicians practiced in community health centers, mental health centers, non-federal government clinics, and family clinics compared to the average for all settings. Provider acceptance rates may contribute to findings that Medicaid enrollees may experience more difficulty obtaining health care than those with private insurance.
States have flexibility in how to deliver services to enrollees, but comprehensive managed care is the dominant delivery model covering seven in ten enrollees in 2020 and managed care plans now serve most Medicaid beneficiaries. Those plans are responsible under their contracts with states for ensuring adequate provider networks. The Biden Administration issued two proposed rules focused on ensuring access to services in Medicaid and addressing access financing and quality in Medicaid managed care in May 2023.
8. The majority of states have 1115 demonstration waivers to test approaches not otherwise allowed under federal law.
Section 1115 demonstration waivers offer states the ability to test new approaches in Medicaid that differ from what is required by federal statute, if CMS determines that such proposals are “likely to assist in promoting the objectives of the [Medicaid] program.” Section 1115 waivers have been used over time and generally reflect priorities identified by the states and CMS, but they also reflect changing priorities from one presidential administration to another. Under different administrations, waivers have been used to expand coverage, modify delivery systems, and restructure financing and other program elements. Nearly all states have at least one 1115 waiver in place, and many have waivers pending with CMS (Figure 8).
Activity from the Trump Administration and into the Biden Administration has tested how these waivers can be used to advance administrative priorities and has also tested the balance between states’ flexibility and discretion by the federal government. The Trump Administration’s Section 1115 waiver policy emphasized work requirements and other eligibility restrictions, payment for institutional behavioral health services, and capped financing. The Biden Administration withdrew waiver approvals with work requirements, phased out approval of premium requirements, and has instead encouraged states to propose waivers that expand coverage, reduce health disparities, and/or advance “whole-person care”. Recent areas of focus have included leveraging Medicaid to address health related social needs and to provide health care to individuals transitioning from incarceration back into the community. A few states have also sought approval to provide continuous Medicaid coverage for children and certain adults for periods longer than a year.
9. Medicaid can help respond in economic downturns and other emergencies.
The COVID-19 pandemic has illustrated how Medicaid can be used to help respond during economic downturns and other emergencies. During economic downturns, more people qualify and enroll in Medicaid, increasing program spending when state tax revenues may fall. During the COVID-19 pandemic and during prior economic downturns, Congress has also passed temporary FMAP increases to help support Medicaid coverage and state economies. During the COVID-19 pandemic, extra federal funding was conditional on states halting Medicaid disenrollments. That continuous enrollment provision expired on March 31, 2023 and states are eligible for a phase-down enhanced match rate during the unwinding if certain conditions are met.
States can also seek federal approval for flexibility to adopt policy changes that help respond to emergencies (Figure 9). Flexibility is available under emergency authorities that expand Medicaid capacity and focus on specific services, providers, or groups of enrollees that are particularly impacted. During the COVID-19 pandemic, all 50 states and DC received approval to make changes using emergency authorities to facilitate access to care by expanding telehealth, eligibility, benefits and help address workforce issues for home- and community-based services.
The expiration of the COVID-19 PHE in May 2023 will have implications across the health care system for costs, coverage and access. States will need to unwind many emergency policies that are in place. However, many policies and lessons learned during the pandemic are expected to remain in place including access to telehealth, increased coordination among state agencies (like public health, behavioral health and other social service agencies), and improved data collection and analytics aimed at responding quickly to public health emergencies.
10. The majority of the public holds favorable views of Medicaid.
Public opinion polling suggests that Medicaid has broad support. Two-thirds of adults in the U.S. say they have ever had a connection with Medicaid; majorities across political parties hold positive views of Medicaid, and seven in ten say that the program is working well for low-income people (Figure 10). The Medicaid expansion is also popular. Seven states (Iowa, Maine, Missouri, Nebraska, Oklahoma, South Dakota, and Utah) have adopted Medicaid expansion through ballot measures and polling shows that two-thirds of people living in non-expansion states want their state to expand Medicaid. There is a political divide in terms of how Medicaid is viewed. Majorities of Democrats (79%) and independents (60%) view Medicaid primarily as a government health insurance program that helps people pay for health insurance while more than half of Republicans (54%) say the program is primarily a government welfare one. Republicans who have a connection to Medicaid have more favorable views of the program and are more likely to say the program is primarily one that helps people pay for health insurance.
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