UPDATE: On December 10, 2012, the Department of Health and Human Services announced that if states choose not to participate fully in the Medicaid expansion and instead choose to expand eligibility for a subset of that group, the enhanced matching rate under the Affordable Care Act will not apply. If a state proposes a partial expansion, the Department will consider those waiver proposals. If approved, those waivers will be subject to the regular, state-specific federal matching rate.
The Supreme Court’s decision upholding the Affordable Care Act was a huge victory for millions of Americans. But the Court’s ruling on Medicaid expansion creates uncertainty about whether Americans with incomes below the poverty line can access health insurance.
Each state largely determines eligibility for Medicaid, a federal-state partnership to provide health care to nearly 50 million low-income Americans. Although all states must meet minimum federal requirements, state Medicaid programs vary widely. In most states Medicaid only covers certain groups of low-income individuals—mostly working parents with incomes well below the poverty line.
To ensure that those who most needed health coverage could access care, the Affordable Care Act expanded the federal minimum Medicaid eligibility level to all people with incomes up to 133 percent of the poverty line—$14,856 for individuals and $30,657 for a family of four.* Estimates showed that, once implemented, this expansion would result in 17 million Americans gaining critical health coverage.
The federal government would cover the vast majority of this expansion. Federal payments would provide 100 percent of the needed expansion funding from 2014–2016, gradually transitioning to 90 percent of needed funding for 2020 and future years. This arrangement would allow states to increase the number of insured people by an average of 25 percent, with an increased state cost of less than 3 percent.
This cost may even overstate the net effect on state budgets: If a state chooses to expand Medicaid, it will no longer have the same expense of paying for the care provided to its population’s uninsured.
But the Court ruled that this change to the Medicaid program was large enough to constitute not just an expansion of the existing program but the creation of an entirely new one. Because this is a new program, the Court concluded that Congress may not condition the receipt of a state’s existing federal Medicaid funds on its agreement to expand Medicaid eligibility. That eliminated the biggest incentive for states to agree to expand their Medicaid programs to meet the Affordable Care Act requirements. Now if states reject this offer, they will not lose their existing federal Medicaid funding.
If states opt not to expand their Medicaid programs, many low-income individuals and families living in those states will not gain needed coverage through Medicaid. The Affordable Care Act provides tax credits to help pay for coverage to people with incomes starting at the federal poverty line—$11,170 for individuals and $23,050 for a family of four—and up to 400 percent of the poverty line —$43,320 for individuals and $88,200 for a family of four. But even with these tax credits, the cost of insurance may still not be affordable for some low-income families.
Additionally, Americans with incomes below the federal poverty line are not eligible for tax credits because Congress assumed these people would be eligible for Medicaid under the provisions in the Affordable Care Act. Due to the Supreme Court’s decision, states may decide to not expand Medicaid coverage to these people because they no longer risk losing their existing Medicaid funds.
The result is that those who most need financial assistance to purchase insurance will be without any help.
In the map above, the Center for American Progress illustrates how people in each state will potentially be affected by their state’s decision.
*The numbers in the map include individuals and families with incomes equal to 138 percent of the poverty line. The Affordable Care Act includes a special deduction to income that effectively raises the eligibility level by 5 percentage points.