The Affordable Care Act (ACA) allows states to expand Medicaid coverage to adults with incomes up to 138 percent of the poverty level (about $20,780 per year for a single person or $35,630 for a family of three). States that have adopted the program's expansion have significantly reduced the uninsured rate. Extensive research shows that people who gained insurance became healthier and more financially secure, and long-standing racial disparities in health outcomes, coverage, and access to care narrowed.
To date, 40 states have adopted the program expansion, as well as Washington, D.C., with South Dakota and North Carolina added most recently in 2023. This paper answers frequently asked questions about Medicaid expansion using the latest research and findings from states that have expanded the program.
How does Medicaid expansion affect state budgets and the economy?
Expansion of the program has brought net savings to many states . This is because the federal government pays the vast majority of the cost of expanded coverage, while the expansion provides offsetting savings and, in many states, increases revenue through taxes the state levies on private health plans and providers.
Under the ACA, the federal government pays 100 percent of the cost of expanded coverage from 2014 through 2016, then the federal share gradually declines to 90 percent in 2020 and each year thereafter, leaving states to cover the small remaining share. By comparison, for other Medicaid enrollees, the federal government pays between 50 and 77 percent of the cost of health insurance, depending on the state. To get the 90 percent share, states must expand Medicaid to people with incomes up to 138 percent of the poverty level; states that expand coverage but not to 138 percent get only the regular Medicaid share.
The expansion of the program has resulted in savings in several areas of the state budget:
- As more people gained coverage, hospitals' spending on uncompensated care - and, in some states, payments to hospitals to cover that spending - declined. In states that expanded Medicaid under the ACA through September 30, 2020, hospitals' spending on uncompensated care in FY 2020 was 2.7 percent of their operating costs, well below the 7.3 percent for hospitals in states that did not expand the program. More recent analyses also show that Medicaid expansion has an overall positive economic impact on different types of health care providers.
- Expanding the program has allowed states to spend less money on programs for people with mental health and substance use disorders because federal Medicaid funds can now help pay for their treatment.
- The expansion of the program allowed states to reduce correctional costs as more inmates became eligible for and enrolled in Medicaid. Although the Medicaid program generally does not pay for inmate health care costs, it can pay for the care of Medicaid-eligible inmates who receive services in residential facilities outside the correctional facility if the stay exceeds 24 hours. Thus, as part of the Medicaid expansion, the Medicaid program can pick up some of the cost of inmate care that was previously paid for with other state funds.
- States may include some Medicaid enrollees whose costs would otherwise be covered at the regular Medicaid rate in the expansion adult group and thus obtain a higher expansion eligibility rate for these enrollees. For example, before Medicaid expansion, states paid the regular rate for pregnant women; now those states can claim the rate for pregnant women in the expansion group, and they can remain in the expansion category while pregnant. This ability to cover some enrollees at the expanded rate rather than the regular rate may reduce states' spending on the traditional Medicaid program (i.e., the non-expansion portion of the program).
- Between 2014 and 2017, Medicaid expansion was associated with a 4.4 to 4.7 percent reduction in states' spending on the traditional Medicaid program. In some states, net spending on Medicaid expansion was negative.
- In states that tax managed care plans and health care facilities that serve Medicaid enrollees, increased enrollment as a result of Medicaid expansion results in increased revenues that further offset the costs of expansion.
What additional financial benefits are available to newly expanded states?
America's 2021 bailout plan includes a major new financial incentive that makes program expansion an even better deal for states that have not yet expanded the program. States that expand Medicaid after March 2021 receive a two-year increase of five percentage points in the federal reimbursement rate for their non-expansion enrollees. Non-expanders account for the majority of state Medicaid enrollment and expenditures, so this increase provides states with significant additional federal funding. South Dakota and North Carolina, the most recent states to opt into Medicaid expansion, will receive $115 million and $1.6 billion in additional funding over two years, respectively. The remaining states that did not opt to expand the program would receive a combined total of about $13.1 billion in federal funding if expanded. (See Table 1.)
* On July 1, 2023, Georgia enacted a section 1115 waiver that differs from the ACA Medicaid expansion; it applies only to adults with income up to 100 percent of the poverty level who meet the 80-hour per month work reporting requirement. Georgia originally estimated that about 25,000 people would enter the program in the first year and about 53,000 in the fifth year, but as of February 14, 2024, only 3,499 people had entered the program. In contrast, the Urban Institute estimates that adopting the full ACA Medicaid expansion would reduce the number of uninsured by 293,000 in 2024.
** Calculations assume that childless adults currently enrolled in BadgerCare would be moved to the Medicaid expansion group, allowing Wisconsin to access the higher federal share. This transition would reduce the number of people enrolled at the traditional rate, reducing the fiscal stimulus of the Bailout Plan.
Note: Estimates assume the expansion begins July 1, 2024, and include projected enrollment declines due to the elimination of the continuous Medicaid coverage requirement as described in this report. Estimates include only the federal fiscal stimulus.
Source: CBPP calculations using 2022 Medicaid budget expenditure system data, Congressional Budget Office baseline projections for May 2023, Commission on Medicaid Payment and Access and CHIP data compendium, and Georgia Budget and Policy Institute, "Pathways to Coverage".
Expanding the program is a good financial deal for states, even without the additional incentives provided by the American Recovery Plan. According to the Urban Institute's latest estimates, which do not take into account the Bailout Plan's financial incentives, if the ten remaining states not covered by Medicaid expansion fully implement the program in 2024, their Medicaid spending would increase by 3 percent, or $1.5 billion. But this would be partially offset by $457 million in state and local government savings on uncompensated care, and the remaining state costs would likely be largely or entirely offset by savings in other areas and possibly new revenue, as has happened in other states.
How has Medicaid expansion improved health care coverage rates?
Since the ACA's major provisions went into effect in 2014, states that expanded Medicaid have made much more progress in improving health coverage rates than states that did not expand the program. In states that expanded the program, the uninsured rate among low-income nonelderly adults fell by more than half between 2013 and 2022, from 35 percent to 15 percent. In non-expansion states, the rate fell only slightly, from 44 percent to 30 percent, making it twice the rate in expansion states.
The more than 1.6 million uninsured people who will qualify for Medicaid under the program's expansion fall into the "coverage gap," meaning their incomes are too low to qualify for subsidized coverage in the marketplace but too high to qualify for Medicaid. (In non-expansion states, the median parental income for Medicaid eligibility is just 35% of the poverty level, or just $9,037 a year for a family of three, and childless adults are not eligible for the program at all.) About 65% of those in the coverage gap are people of color; most of them live in the South. If the ten remaining non-expansion states adopt the program, about 2.3 million fewer people would become uninsured, including people in the coverage gap who would become eligible again and people who are eligible but not currently insured.
Millions of workers have gained health insurance through Medicaid expansion, including people working in industries that provide essential goods and services such as health care, transportation, grocery stores, food manufacturers and child care. Many do not have access to health insurance through their jobs. In states where the program was expanded, the uninsured rate among low-income workers fell from 38 percent in 2013 to 17 percent in 2022; this sharp decline coincided with a significant increase in the share of low-income workers enrolled in Medicaid. In states not covered by the program expansion, the uninsured rate among low-income workers fell much less, from 46 percent to 31 percent.
How does Medicaid expansion affect people's health and financial well-being?
As numerous studies have shown, health coverage under Medicaid expansion makes people healthier and more financially secure by improving their access to preventive and primary care, providing treatment for serious illnesses, preventing premature death, and reducing the incidence of catastrophic health care costs. Benefits include:
Improved access to health care. Medicaid expansion has improved access to health care and utilization of high-cost services for millions of Medicaid enrollees without reducing access or quality for those enrolled in other types of insurance. Medicaid expansion increased access to primary and preventive care (e.g., having a personal physician, getting a checkup in the last year) for low-income adults. In states where the program was expanded, people without dependent children, who might have been in the coverage gap if their state had not expanded the program, were 6.7 percentage points more likely than those in non-expansion states to have a mammogram and about 5 percentage points more likely to be screened for cholesterol, high blood sugar, or diabetes. And for people with chronic conditions, Medicaid expansion is associated with greater access to care and more timely treatment, including for non-elderly women with gynecologic cancer.
In addition, participants in Michigan's Medicaid expansion program reported losing less money on care and having better access to care after enrolling in the program. And the percentage of program participants who regularly went to the emergency department decreased from 16.2 percent to 1.7 percent after enrolling in Medicaid.
Medicaid expansion is also associated with a significant increase in the number of patients taking medications as prescribed by a physician and a decrease in the number of low-income adults skipping medications because of cost.
Improved health outcomes. Medicaid expansion is associated with improved overall health among low-income adults. Among people with chronic conditions, it is associated with improved access to care, better health and disease management, and lower mortality. Medicaid expansion is also associated with earlier detection, diagnosis, and treatment of serious diseases, such as breast cancer, and is associated with fewer cases of late-stage breast cancer detection. Among patients with newly diagnosed breast, colorectal, or lung cancer, Medicaid expansion is associated with reduced mortality.
In addition, patients with end-stage renal disease living in a state with Medicaid expansion have lower one-year mortality rates than those in states not covered by the program, and black patients had the greatest reduction in mortality rates after program expansion. Medicaid expansion is also associated with improved one-year survival among ovarian cancer patients and with improved cancer outcomes for young adults in general.
- Improved outcomes for people with substance use disorders (SUDs). Medicaid expansion is associated with increased insurance coverage for adults with substance use disorders and a reduction in the total number of opioid overdose deaths and heroin deaths.
- Mental Health Improvement. Medicaid expansion is associated with improved access to treatment and medication for adults with depression. Among people with serious psychological disorders, Medicaid expansion has resulted in fewer people delaying and/or refusing needed care. One study found that program expansion was associated with improved self-rated mental health among low-income adults.
- Preventing premature deaths. Medicaid expansion prevents thousands of premature deaths each year, saving the lives of at least 19,200 adults ages 55 to 64 between 2014 and 2017, a landmark study found. Conversely, 15,600 seniors died prematurely because of states' decision not to expand Medicaid. Seniors who gained insurance coverage through Medicaid expansion had annual mortality rate reductions ranging from 39 percent to 64 percent.
Reduced maternal and infant mortality rates. Medicaid expansion improves access to health care before, during, and after pregnancy, thereby improving the health of mothers and babies. It has reduced maternal mortality, preventing more than 200 deaths in 2017 alone. Medicaid expansion has also been linked to a decrease in infant mortality. Although infant mortality declined from 2010 to 2016 in both states with and without the expanded program, it declined 50% more in states with the expanded program. Racial disparities in infant mortality rates also declined in expanded states.
In addition, Medicaid expansion has led to improved postpartum health outcomes for low-income populations. One recent study found that states that expanded the program had a 17 percent reduction in hospitalizations in the first 60 days after delivery compared to states that did not expand the program. Medicaid expansion has also increased preconception health counseling and use of the most effective contraception after childbirth.
Improved financial well-being. Medicaid expansion protects participants from catastrophic health care costs and improves their overall financial well-being. In the first two years of Medicaid expansion, the amount of medical debt referred to third-party collection decreased by $3.4 billion and the number of bankruptcies nationwide decreased by 50,000. Between 2013 and 2020, new medical debt decreased 34 percentage points more in states that expanded Medicaid in 2014 than in states that did not expand Medicaid during that period. After enrolling in the Medicaid expansion program, low-income adults had about $1,140 less in total unpaid debts referred to third parties for collection, the study found. And participants in Virginia's Medicaid expansion program reported less worry about paying for housing, groceries, monthly bills and minimum loan payments a year after enrolling in the program.
In addition, by preventing medical debt and bankruptcy, Medicaid expansion provides indirect financial benefits to low-income adults through improved credit scores and, in turn, more favorable terms on credit cards, mortgages, and other loans. For example, Medicaid expansion in California led to a 21 percentage point decrease in borrowing among adults ages 18 to 34, a 2017 study found. Medicaid expansion also reduces evictions.
How has the expansion of the Medicaid program contributed to racial health equity?
Longstanding racial disparities in health care coverage, access, and health outcomes reflect a variety of factors, including racism, historical and contemporary inequities in the economic and health care systems, and restrictions on immigrants' eligibility for Medicaid and other public health insurance. While these disparities are still large, they have diminished since the ACA's major coverage provisions went into effect in 2014.
Between 2013 and 2022, the gap in uninsured rates between white and black adults under age 65 decreased by 67 percent in states covered by the program expansion (compared with 47 percent in non-expansion states), and the gap between white and Hispanic adults decreased by 48 percent in expansion states (compared with 30 percent in non-expansion states). Medicaid expansion also improved coverage for American Indians and Alaska Natives: the uninsured rate among nonelderly adults fell from 30 percent in 2013 to 15 percent in 2022 in expansion states and from 30 percent to 24 percent in non-expansion states.
Expanding the program also improves health outcomes for people of color, data show. End-stage renal disease mortality rates declined more in states that expanded the program than in states that did not, with particularly large improvements for blacks (who have a higher risk of kidney failure). In addition, among all women, maternal mortality rates were lower in expansion states than in non-expansion states, and the largest reductions in maternal mortality rates after program expansion occurred among black women.
In addition, disparities in preventable hospitalizations and emergency department visits between black and white non-Hispanic nonelderly adults decreased by 10 percent or more in states covered by the program expansion from 2011 to 2018. Another study found that program expansion was associated with reduced differences in in-hospital mortality between black and white young adult trauma patients. In addition, in the early years of Medicaid expansion in Michigan, blacks experienced the largest decline in poor physical health days among all racial and ethnic groups.
It's also worth noting that nearly 60 percent of those who the Urban Institute predicts will gain coverage if the remaining states adopt Medicaid expansion are people of color.
How has the expansion helped children and people with disabilities?
Medicaid expansion helps increase health care coverage and improve access to services even among those who may be eligible for traditional Medicaid, including children and people with disabilities. Prior to the ACA, most children in low-income families were eligible for Medicaid, but Medicaid eligibility for parents was limited and varied greatly from state to state. The median parental income limit before the ACA was only 64 percent of the poverty level. (In 2023, the median limit in the ten remaining non-ACA states will be 35 percent of the poverty level, and the lowest rates will be in Texas and Alabama at 16 percent and 18 percent of the poverty level, respectively.)
According to research, Medicaid expansion causes a "welcome mat" effect, so that expanding adult coverage increases coverage for children as well. For example, children in states that expanded Medicaid coverage to parents prior to the ACA were 20 percentage points more likely to participate in the Medicaid program than children in states that did not have such an expansion. Medicaid expansion under the ACA had a similar impact, with enrollment increasing disproportionately among children of parents who became newly eligible. More than 700,000 children who were previously eligible but not enrolled in Medicaid between 2013 and 2015 gained coverage, and this increase was twice as large in states with expansion as in states without expansion.
Increased parental coverage and the associated increase in child coverage also improves children's access to health care and their overall well-being. A 2017 study found that children are 29 percentage points more likely to visit an annual doctor if their parents are enrolled in Medicaid. Parents' access to insurance coverage and care improves children's well-being by increasing family financial security and allowing parents to receive treatment for health conditions, such as maternal depression, that can harm children's cognitive and social-emotional development.
Medicaid expansion also benefits people with disabilities, especially those who are ineligible for traditional Medicaid because of a disability. People with disabilities who receive Supplemental Security Income are generally also eligible for Medicaid, but more than 6 out of 10 nonelderly adults with disabilities are eligible for Medicaid on other grounds, including Medicaid expansion. This is because many people with disabilities do not meet strict state or federal disability standards, yet they access health insurance coverage under Medicaid expansion based on their income. As a result, Medicaid expansion has helped improve coverage and access to health care among people with disabilities, allowing them to lead healthier lives and have more employment opportunities.
Among adults who gained Medicaid coverage as a result of the expansion, people with disabilities made greater improvements in full-year insurance coverage and utilization of primary and preventive care than those without disabilities. People with disabilities living in states where the program has been expanded are more likely to be employed than those living in states where the program has not been expanded because many of them can go to work or increase their earnings without losing insurance. Some states have even used budget savings from expanding the program to improve access to services for people with disabilities and people with chronic conditions, including long-term services and supports.
Opponents of Medicaid expansion falsely claim that the expansion hurts the "truly needy" by forcing seniors and people with disabilities onto Medicaid waiting lists. In fact, waiting lists for Medicaid enrollment do not exist. States are required to enroll all eligible individuals without exception, including children, seniors, people with disabilities, and adults. As recently as the early 1980s, states could (and many still do) create waiting lists for seniors and people with disabilities for home and community-based services (HCBS) - that is, care in the community for people who would otherwise have to go to a nursing home or other facility. However, as of 2023, 71 percent of people on the HCBS waiting list lived in states not covered by the program expansion.
How does Medicaid expansion affect employment?
Ninety-one percent of nonelderly adult Medicaid enrollees in 2022 were working full-time or part-time, caring for family members or loved ones, attending school, or had an illness or disability affecting their ability to work; 61 percent were employed. Most people enrolled in the Medicaid expansion program who can work are employed ; their jobs typically do not offer employer-based coverage and do not pay enough to cover the cost of insurance in the individual market.
Although critics of program expansion often argue that Medicaid discourages employment, the expansion of the program has not led to a decline in labor force participation among those eligible for Medicaid. Medicaid, in fact, is an important enabler of employment because health insurance makes it easier to find and obtain a job. Program participants also say that they are better able to manage their jobs because of Medicaid coverage. In surveys conducted in Ohio and Michigan, 84% and 69% of employed Medicaid participants, respectively, said that health insurance makes work easier or helps them do a better job.
In addition, as noted above, Medicaid expansion promotes employment for people with disabilities and chronic conditions; states with expansion are more likely to have jobs than states without expansion.
Some states have tried to implement policies that deny Medicaid coverage to people who do not meet employment requirements. However, these initiatives have proven counterproductive: they deny working people and vulnerable populations coverage without increasing employment rates. In Arkansas, the only state to fully implement such a strict work requirement policy, 18,000 Medicaid enrollees - nearly one in four adults subject to these requirements - lost coverage. Those who lost insurance included both working people and vulnerable populations, such as people living with disabilities or serious illnesses, as well as those caring for sick, aging, or disabled family members. In focus groups, Arkansas residents told us that the loss of insurance coverage as a result of the new requirement has resulted in poorer health, increased stress, and interference with work. In New Hampshire, about 40 percent of adults covered by the work requirement would have lost insurance if the state had not suspended it.
When people lose coverage because of work requirements, it is mostly because they have difficulty completing burdensome paperwork, not because they are not working or do not qualify for an exemption. In addition, data from Arkansas' failed policies on Medicaid work requirements and work requirements for other federal programs show that forfeiting assistance does little to improve long-term employment outcomes.
Georgia currently has a Medicaid waiver program that offers coverage to adults with incomes only up to the poverty level (rather than the full Medicaid expansion group) and requires them to report 80 hours of work per month to obtain and maintain coverage. The program covers only a small fraction of the estimated number of people who may be eligible, and the state pays five times more per participant than under the standard Medicaid expansion model.
How does Medicaid expansion affect hospital operations?
Medicaid expansion reduces the burden of uncompensated care for hospitals and increases their operating margins, especially for rural and safety net hospitals. Hospitals and other providers have seen improvements in payer mix (fewer uninsured patients and/or more Medicaid beneficiaries) and overall revenue.
From 2013 to 2015, Medicaid expansion reduced uncompensated care spending by $6.2 billion in the 31 states (plus the District of Columbia) that expanded the program during that time. Of every dollar of uncompensated care costs that hospitals incurred in 2013, by 2015, program expansion had reduced 41 cents. The researchers found that immediately after Medicaid expansion, hospitals in the state increase both their Medicaid revenues and overall operating profits. So it is not surprising that hospitals in states that expanded Medicaid are 84 percent less likely to close than those in states that did not expand the program.
Medicaid expansion is especially important for rural hospitals, whose operating margins are often so small that uncompensated care costs, which are typically higher when more people in an area are uninsured, can be catastrophic. Although uninsured rates have declined in all states under the ACA, the sharpest declines in rural uninsured rates have occurred in states where the program has been expanded.
A recent review found that between July 2021 and June 2022, rural hospitals had an average operating margin of 3.9% in states that expanded the program, but only 2.1% in states that did not expand. Excluding federal pandemic-related assistance, rural hospitals still had positive operating margins in states with expansion but not in states without expansion. Since 2010, 82 rural hospitals have closed completely nationwide, mostly in non-expansion states; data from 2010-2019 show that a rural hospital is, on average, 62 percent less likely to close if it is in an expansion state. When rural hospitals close, a critical source of health care and employment in rural communities disappears, and the burden falls on nearby hospitals.