To date, 38 states and Washington, D.C., have fully implemented the Affordable Care Act’s (ACA) Medicaid expansion, resulting in an increase of 13 million adults with Medicaid coverage in expansion states from the summer of 2013 through March 2020. Yet, there remains a major hole in the coverage options created by the ACA: About 2.2 million uninsured, low-income adults live in the 11 nonexpansion states* where they do not qualify for either Medicaid or financial assistance with marketplace coverage.
The most straightforward solution to the coverage gap is to implement the ACA’s Medicaid expansion, as Missouri and Oklahoma did earlier this year. The benefits of Medicaid expansion ripple beyond coverage gains, and the policy is associated with reductions in mortality, evictions, and medical debt. Medicaid expansion is also a good value for states: Under the ACA, federal funding covers 90 percent of the costs of expansion enrollees, and the American Rescue Plan Act provided additional financial incentives for expansion, further sweetening the deal for states that have yet to do so. In addition, expansion has been shown to reduce state spending on traditional Medicaid and generate savings on uncompensated care and the corrections system. According to estimates from a previous Center for American Progress analysis, fully expanding Medicaid in the remaining states that have a coverage gap would reduce the number of public safety offenses by about 53,000 annually and generate approximately $6 billion in savings to communities through enhanced public safety.
However, despite the clear benefits, 12 states have yet to fully adopt the ACA’s Medicaid expansion. Given states’ yearslong neglect of the gap, Congress is considering ways to ensure that low-income residents of all states have access to affordable coverage options as part of the proposed budget reconciliation package.
New estimates from CAP quantify some of the benefits of extending coverage to the uninsured in states that have yet to expand Medicaid. Based on research on the effects of closing the Medicaid gap, the authors estimate that a federal policy to provide affordable, comprehensive coverage to uninsured adults in the nonexpansion states’ coverage gap would lead to at least:
- 7,000 lives saved each year
- 48,640 fewer evictions each year
- A $2 billion reduction in medical debt in collection
A federal policy to insure people in the Medicaid coverage gap would generate wide-ranging benefits. Newly insured people and their families would see significant health and economic gains.
The coverage gap problem
Prior to the ACA, Medicaid coverage was generally limited to low-income children and some of their parents, low-income pregnant people, and certain individuals with disabilities. Eligibility was contingent upon different financial requirements and other factors such as disability, age, pregnancy, or parenting status.
The ACA offered states the opportunity to expand Medicaid eligibility, allowing all adults under age 65 with family incomes up to 138 percent of the federal poverty level (FPL) to qualify for Medicaid coverage. Under the ACA, the federal government covered all Medicaid expansion costs for the first three years. As of 2020, the federal government contributes 90 percent of the cost of coverage. The Medicaid expansion federal funding match is more generous than under traditional Medicaid, in which the federal government contributes an average of 64.4 percent of the costs.
People in the so-called coverage gap are both ineligible for traditional Medicaid coverage in their states and have family incomes less than 100 percent of the FPL—the minimum to qualify for subsidies for private plans in the ACA marketplaces. In the 12 states that have not expanded Medicaid under the ACA, 2.2 million low-income uninsured nonelderly adults find themselves with no options for affordable coverage. Most live in states in the South, and about 60 percent are people of color.
Quantifying the benefits of closing the coverage gap
Closing the coverage gap would have tangible, meaningful benefits for low-income populations in nonexpansion states well beyond that of affordable, comprehensive health insurance. Some recent data points from the literature on the effects of expanded Medicaid coverage can be used to illustrate the magnitude of the impact of closing the gap on mortality, medical debt, and housing evictions.**
The authors’ calculations described below are based on the number of people in the Medicaid gap and may understate the potential benefits of a policy to fill the gap. First, the estimates do not include the potential effects of switching between coverage types for low-income people currently covered by job-based insurance or other plans. For example, a policy analysis published by the Commonwealth Fund finds that making marketplace financial assistance newly available to people with incomes below 100 percent of the FPL could reduce the number of uninsured by 3 million to 5 million, depending on the generosity of the assistance. Second, the estimates do not include potential spillover effects to those already eligible for Medicaid. In states that implemented the ACA expansion, the changes in eligibility and expanded outreach efforts generated a “welcome-mat effect” that boosted enrollment among people previously eligible for Medicaid. Closing the gap will likely have positive effects for those in nonexpansion states that are currently uninsured in the gap as well as others who are uninsured or underinsured.
The benefits of Medicaid expansion for health care access and outcomes are well documented. Coverage improves people’s access to care and care utilization. States that have expanded Medicaid have seen lower rates of hospitalizations related to opioid use disorder as well as earlier detection of cancer. Medicaid expansion can literally save lives: It is associated with reductions in cardiovascular mortality, maternal mortality, infant mortality, mortality of the near-elderly, and overall mortality. Medicaid expansion has also been shown to narrow racial disparities in health outcomes, with gains in birth weight for Black infants and reductions in maternal mortality for Black women.
In a 2017 study, health economist Benjamin Sommers found that state Medicaid expansion was associated with “one life saved annually for every 239 to 316 adults gaining insurance.” Using the more conservative end of Sommers’ range, the authors estimate that covering the 2.2 million adults in the gap would result in about 7,000 fewer deaths each year. (see Table 1 for state-by-state estimates)
Less medical debt
People who are uninsured are more likely to postpone or forgo needed care due to cost, and those who are uninsured at least part of the year have more medical debt on average than those with full coverage. By providing more people with better protection against medical costs, Medicaid expansion can help reduce families’ medical debt and improve their credit scores.
According to a recent study in the Journal of the American Medical Association, the flow of medical debt has declined in all states over the past decade, but those that expanded Medicaid experienced a larger drop. As of June 2020, 17.8 percent of people had medical debt in collection, and people in states in the South—most of which have not expanded Medicaid—had higher amounts of debt. Data from the U.S. Census Bureau reveal disparities in who carries medical debt: Households in the South are more likely to have medical debt than those in other regions, and Black householders are about 62 percent more likely to have medical debt than white non-Hispanic householders.
Even on an individual basis, the reduction in medical debt from Medicaid expansion is sizable. In a 2017 study, economists Kenneth P. Brevoort, Daniel Grodzicki, and Martin B. Hackmann examined the effects of Medicaid expansion on unpaid medical bills. On average, newly insured individuals experienced a reduction of $920 in medical debt in collection. Multiplying that amount by 2.2 million people implies that closing the coverage gap could reduce the amount of medical debt in collection by $2 billion, including more than $700 million in Texas alone.
A reduction in medical debt would also be a boon to health care providers, who end up writing off a portion of unpaid bills as bad debt. Medicaid expansion leads to lower levels of uncompensated care and better financial sustainability.
Medicaid coverage also affords enrollees better financial and housing stability. For example, a study that used administrative records in Michigan found that Medicaid coverage improves enrollees’ financial well-being in a number of ways—including less debt past due, fewer bankruptcies, and reduced chance of being classified as “subprime” or “deep subprime.” As early as 2015, low-income adults in ACA Medicaid expansion states reported greater improvements in satisfaction with their financial situation than their counterparts in nonexpansion states.
Medicaid expansion appears to lower rates of eviction, and eviction in turn is associated with poorer health, depressive symptoms, higher mortality, adverse birth outcomes, and poorer caregiver-reported child health. In a 2019 study of California Medicaid enrollment published in Health Affairs, Heidi Allen and other researchers found that there were 22 fewer evictions annually for every 1,000 people newly covered by Medicaid. That finding suggests that insuring people in the coverage gap would result in approximately 48,640 fewer evictions annually across the current nonexpansion states.
A reduction in evictions, in turn, would have other benefits for health and health equity. A recent study found that people of color are more likely to face eviction, and that eviction contributes to greater rates of COVID-19 infection because it leads to overcrowded housing and limits people’s ability to properly social distance or quarantine.
The benefits of closing the Medicaid coverage gap would reach far beyond improved coverage—it would improve the health and financial well-being of uninsured residents of states that have refused to expand Medicaid. A comprehensive policy to permanently fill the hole—ensuring that low-income people have access to affordable coverage no matter which state they live in—will save lives for years to come.
Emily Gee is a senior fellow and the senior economist for Health Policy at the Center for American Progress. Nicole Rapfogel is a research assistant for Health Policy at the Center.
*Authors’ note: While Wisconsin has not expanded Medicaid, it extends Medicaid coverage to adults and families with incomes up to 100 percent of the federal poverty level and is omitted from this analysis.
**Authors’ note: The authors’ calculations for mortality and medical debt are similar to those from a 2018 CAP study, which estimated the benefits of full Medicaid expansion—rather than closing the Medicaid gap—for a larger suite of health and nonhealth metrics.