Medicaid Expansion: Frequently Asked Questions

The Affordable Care Act (ACA) permits states to expand Medicaid coverage to adults with incomes up to 138 percent of the poverty level (about $20,780 annually for an individual or $35,630 for a family of three). States that have adopted the expansion have dramatically lowered their uninsured rates. Extensive research finds that the people who gained coverage have grown healthier and more financially secure, while long-standing racial inequities in health outcomes, coverage, and access to care have shrunk.

To date, 40 states plus Washington, D.C. have adopted the expansion, with South Dakota and North Carolina the most recent additions in 2023. This paper answers frequently asked questions about Medicaid expansion, using the latest studies and findings from expansion states.

How Does Medicaid Expansion Affect State Budgets and the Economy?

Expansion has produced net savings for many states. That’s because the federal government pays the vast majority of the cost of expansion coverage, while expansion generates offsetting savings and, in many states, raises revenue from the taxes that the state imposes on private health plans and providers.

Under the ACA, the federal government paid 100 percent of the cost of expansion coverage from 2014 to 2016, with the federal share then dropping gradually to 90 percent for 2020 and each year thereafter, leaving states to cover the small remaining share. For other Medicaid enrollees, by comparison, the federal government pays between 50 and 77 percent of the cost of health coverage, depending on the state.^[1] To receive the 90 percent match, states must expand Medicaid to people with incomes up to 138 percent of the poverty level; states that expand coverage but not up to the 138 percent level receive only the regular Medicaid match.^[2]

Expansion has produced savings in several areas of state budgets:

• As more people have gained coverage, hospitals’ uncompensated care costs — and, for some states, payments to hospitals to help cover those costs — have fallen. In states that expanded Medicaid under the ACA before September 30, 2020, hospital uncompensated care costs in fiscal year 2020 totaled 2.7 percent of their operating expenses, well below the 7.3 percent figure for hospitals in non-expansion states.^[3] More recent analyses also show Medicaid expansion generally has positive economic impacts on multiple types of health care providers.^[4]
• Expansion has enabled states to spend less on programs for people with mental health or substance use disorders, since federal Medicaid matching funds are now available to help pay for their treatment.
• Expansion has enabled states to lower their corrections spending as more incarcerated people became eligible for and enrolled in Medicaid. While Medicaid generally does not pay for health care costs for incarcerated individuals, Medicaid can pay for the care of Medicaid-eligible incarcerated individuals who receive services at inpatient facilities outside of the correctional institution, as long as the stay is longer than 24 hours. Thus, under Medicaid expansion, Medicaid can assume some costs for incarcerated people previously paid for by other state funds.
• States can cover some Medicaid enrollees whose costs otherwise would be matched at the regular Medicaid rate in the expansion group of adults instead, and thus receive the higher expansion matching rate for those enrollees. For example, before Medicaid expansion, states paid the regular matching rate for pregnant people; now, those states can claim the expansion matching rate for people in that group who become pregnant, and they can stay in the “expansion” category during their pregnancy. This ability to cover some enrollees at the expansion rather than the regular rate can reduce state spending on traditional Medicaid (that is, the non-expansion part of the program).
• Between 2014 and 2017, Medicaid expansion was associated with a 4.4 percent to 4.7 percent reduction in state spending on traditional Medicaid.^[5] In some states, the net cost of Medicaid expansion was negative.^[6]
• In states that tax managed care plans and health care providers serving Medicaid enrollees, enrollment increases due to Medicaid expansion generate revenue gains that further offset the cost of expansion.^[7]

What Additional Financial Benefits Are Available for Newly Expanding States?

The 2021 American Rescue Plan created a large new financial incentive that makes expansion an even better deal for states that haven’t expanded. States that expand Medicaid after March 2021 receive a two-year, five-percentage-point increase in the federal matching rate for their non-expansion enrollees. Non-expansion enrollees account for most of a state’s Medicaid enrollees and costs, so this increase generates substantial additional federal funding for states. South Dakota and North Carolina, the most recent states to adopt Medicaid expansion, will gain an estimated $115 million and $1.6 billion in additional funding over two years, respectively.^[8] The remaining non-expansion states would gain some $13.1 billion combined in federal funding from this provision if they expanded. (See Table 1.)

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Expansion is a good financial deal for states even without the added incentives from the American Rescue Plan. According to recent Urban Institute estimates that do not include the Rescue Plan financial incentive, if the ten remaining non-expansion states fully implemented Medicaid expansion 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,^[9] and the remaining state spending would likely be largely or fully offset by savings in other areas and potentially by new revenue, as has occurred in other states.^[10]

How Has Medicaid Expansion Improved Health Coverage Rates?

Since the ACA’s major coverage provisions took effect in 2014, states that expanded Medicaid have made far more progress in increasing health coverage rates than states that did not expand. In expansion states, the uninsured rate among low-income, non-elderly adults fell by more than half between 2013 and 2022, from 35 percent to 15 percent. In non-expansion states, it dropped only modestly, from 44 percent to 30 percent, leaving it twice the rate in expansion states.^[11] (See Figure 1.)

Over 1.6 million uninsured people who would become eligible for Medicaid under expansion fall in a “coverage gap,” meaning their incomes are too low to qualify for subsidized marketplace coverage but too high to qualify for Medicaid.^[12] (In non-expansion states, the median income limit for parents to qualify for Medicaid is just 35 percent of the poverty level, or just $9,037 annually for a family of three, and childless adults do not qualify at all.)^[13] About 65 percent of those in the coverage gap are people of color; most of whom live in the South.^[14] (See Figure 2.) If the ten remaining non-expansion states adopted the expansion, some 2.3 million fewer people would be uninsured, including people in the coverage gap who would become newly eligible as well as people who currently are eligible but uninsured.^[15]

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Millions of workers have gained coverage through Medicaid expansion, including people working in industries that provide critical goods and services such as health care, transportation, grocery stores, food manufacturers, and child care. Many have no access to health coverage through their jobs. In expansion states, the uninsured rate among low-income workers fell from 38 percent in 2013 to 17 percent in 2022; this sharp decline coincided with a large increase in the share of low-income workers enrolled in Medicaid.^[16] In non-expansion states, the uninsured rate among low-income workers fell much less, from 46 percent to 31 percent. (See Figure 3.)

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How Does Medicaid Expansion Affect People’s Health and Financial Well-Being?

Health coverage through Medicaid expansion makes people healthier and more financially secure by improving their access to preventive and primary care, providing care for serious diseases, preventing premature deaths, and reducing cases of catastrophic out-of-pocket medical costs, a large body of research shows.^[17] The benefits, also shown in Figure 4, include:

• Improved access to care. Medicaid expansion improved access to care and use of high-value services for millions of Medicaid enrollees, without reducing access or quality for those enrolled in another type of insurance.^[18] Medicaid expansion increased access to primary and preventive care (e.g., having a personal doctor, getting a check-up in the past year) for adults with low incomes.^[19] In expansion states, people without dependent children who could be in the coverage gap if their state had not expanded 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 tested for cholesterol, high blood sugar, or diabetes.^[20] And for people with chronic diseases, Medicaid expansion is associated with greater access to treatment and more timely treatment, including for non-elderly women with gynecologic cancer.^[21]

  In addition, Medicaid expansion enrollees in Michigan reported less forgone care and better access to care after enrolling. And the share of enrollees relying on the emergency room as their regular source of care dropped from 16.2 percent to 1.7 percent after they enrolled in Medicaid.^[22]

  Medicaid expansion also is associated with a significant rise in patients taking their medications as directed and with a decrease in low-income adults skipping their medication due to cost.^[23]

• Improved health outcomes. Medicaid expansion is associated with improvements in overall self-reported health among adults with low incomes.^[24] Among people with chronic disease, it is associated with improved access to care, better health outcomes and disease management, and decreased mortality.^[25] Medicaid expansion also is linked to earlier detection, diagnosis, and treatment of serious medical conditions, such as breast cancer, and is associated with a decrease in late-stage breast cancer detection.^[26] Among patients with newly diagnosed breast, colorectal, or lung cancers, Medicaid expansion is associated with decreased mortality.^[27]

  In addition, patients with end-stage renal disease who live in a Medicaid expansion state have lower one-year mortality rates than those in non-expansion states, and Black patients experienced the greatest decline in mortality rates after expansion.^[28] Medicaid expansion also is associated with improvement in one-year survival among patients with ovarian cancer and with improved cancer outcomes in young adults generally.^[29]

• Improved outcomes for people with substance use disorders (SUD). Medicaid expansion is associated with increased insurance coverage among adults with SUD,^[30] and with reductions in total opioid overdose deaths and in deaths involving heroin.^[31]
• Improved mental health outcomes. Medicaid expansion is associated with improved access to care and medications for adults with depression.^[32] Among individuals with serious psychological distress, expanded Medicaid eligibility led to a decrease in people delaying and/or forgoing necessary care.^[33] One study found that expansion was associated with improvements in self-reported mental health among low-income adults.^[34]

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• Premature deaths prevented. Medicaid expansion prevents thousands of premature deaths each year, saving the lives of at least 19,200 adults aged 55 to 64 between 2014 and 2017, a landmark study found. Conversely, 15,600 older adults died prematurely due to state decisions not to expand Medicaid.^[35] (See Figure 5.) Older adults who gained coverage through Medicaid expansion experienced an estimated 39 to 64 percent reduction in annual mortality rates.^[36]

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• Decrease in maternal and infant mortality rates. Medicaid expansion improves access to health care before, during, and after pregnancy, thereby improving maternal and infant health.^[37] It has reduced maternal mortality, preventing over 200 deaths in 2017 alone.^[38] Medicaid expansion is also linked to reduced infant mortality.^[39]While infant mortality fell in both expansion and non-expansion states between 2010 and 2016, it fell 50 percent more in expansion states. Racial disparities in infant mortality rates fell in expansion states as well.^[40]

  In addition, Medicaid expansion led to improved postpartum health for low-income populations. One recent study found that expansion states saw a 17 percent reduction, relative to non-expansion states, in hospitalizations during the first 60 days postpartum.^[41] Medicaid expansion also has driven more pre-conception health counseling and more use of the most effective birth control measures after childbirth.^[42]

• Improved financial well-being. Medicaid expansion protects enrollees from catastrophic out-of-pocket medical costs and improves their overall financial well-being. In its first two years, Medicaid expansion reduced medical debt sent to third-party collections by $3.4 billion and reduced bankruptcies nationwide by 50,000.^[43] Between 2013 and 2020, new medical debt dropped by 34 percentage points more than in states that expanded Medicaid in 2014 than in states that did not expand Medicaid over this period.^[44] After enrolling in Medicaid expansion coverage, low-income adults had about $1,140 less in overall unpaid debt sent to third-party collections, a study found.^[45] And enrollees in Virginia’s Medicaid expansion program reported decreased worry about paying for housing, food, monthly bills, and minimum loan payments one year after enrolling.^[46]

  In addition, by preventing medical debt and bankruptcies, Medicaid expansion provides indirect financial benefits to low-income adults by way of improved credit scores and, in turn, better terms for credit cards, mortgages, and other loans.^[47] California’s Medicaid expansion, for example, drove a 21-percentage-point decrease in payday loan borrowing among adults aged 18 to 34, a 2017 study showed.^[48] Medicaid expansion also reduces evictions.^[49]

How Has Medicaid Expansion Advanced Racial Health Equity?

The nation’s long-standing racial inequities in health coverage, access to care, and health outcomes reflect a number of factors, including racism, historical and current inequities in economic and health systems, and restrictions on immigrants’ eligibility for Medicaid and other public health coverage. While still large, these inequities have narrowed since the ACA’s major coverage provisions took effect in 2014.

Between 2013 and 2022, the gap in uninsured rates between white and Black adults under age 65 shrank by 67 percent in expansion states (versus 47 percent in non-expansion states), while the gap between white and Latino adults shrank by 48 percent in expansion states (versus 30 percent in non-expansion states).^[50] (See Figure 6.) Medicaid expansion has also improved coverage among American Indians and Alaska Natives; their uninsured rate among non-elderly adults fell from 30 percent in 2013 to 15 percent in 2022 in expansion states, while falling from 30 percent to 24 percent in non-expansion states.^[51]

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Expansion is also improving health outcomes for people of color, evidence suggests. Mortality rates from end-stage renal disease fell more in expansion than non-expansion states, with Black people (who are at higher risk for kidney failure) experiencing particularly large improvements.^[52]Also, among all women, there was a lower rate of maternal deaths in expansion states than non-expansion states, and the largest drop in maternal deaths after expansion occurred among Black women.^[53]

In addition, disparities in preventable hospitalizations and emergency department visits between non-Latino Black and white non-elderly adults fell by 10 percent or more in expansion states between 2011 and 2018.^[54] Another study found that expansion is associated with reduced disparity in in-hospital mortality between Black and white young adult trauma patients.^[55]And, in the initial years of Michigan’s Medicaid expansion, Black people experienced the largest drop in the number of days of poor physical health of any racial or ethnic group.^[56]

Also of note, nearly 60 percent of those who the Urban Institute projected would gain coverage if the remaining states adopted the Medicaid expansion are people of color.^[57]

How Has Expansion Helped Children and People With Disabilities?

Medicaid expansion drives gains in health coverage and improved access to care even among who might be eligible for traditional Medicaid, including children and people with disabilities. Most children in families with low incomes were eligible for Medicaid before the ACA, but Medicaid eligibility for parents was limited and varied considerably across states. Parents’ median pre-ACA income eligibility limit was just 64 percent of the poverty level.^[58](In 2023, the median limit in the ten remaining non-expansion states was 35 percent of the poverty level, with the lowest rates in Texas and Alabama at 16 percent and 18 percent of poverty, respectively.)^[59]

Medicaid expansion produces a “welcome mat” effect, research has found, so that extending coverage to adults increases children’s coverage as well. Children in states that extended Medicaid coverage to parents before the ACA, for instance, participated in Medicaid at a rate that was 20 percentage points higher than children in states with no such extensions.^[60] The ACA’s Medicaid expansion has had a similar impact, with enrollment increasing disproportionately among children of parents who became newly eligible. Over 700,000 children who were previously eligible but not enrolled in Medicaid gained coverage from 2013 to 2015, and the gains were twice as large in expansion states as in non-expansion states.^[61]

Coverage gains for parents, and the associated coverage gains for children, also improve children’s access to care and their overall well-being. A 2017 study found that children are 29 percentage points likelier to have an annual well-child visit if their parents are enrolled in Medicaid.^[62] Parents’ access to coverage and care improves children’s well-being by improving the family’s financial security and enabling the parents to receive treatment for health conditions like maternal depression, which can harm children’s cognitive and social-emotional development.^[63]

Medicaid expansion also benefits people with disabilities, especially people who don’t qualify for traditional Medicaid on the basis of disability. People with disabilities who receive Supplemental Security Income generally also qualify for Medicaid, but more than 6 in 10 non-elderly adults with disabilities qualify for Medicaid on another basis, including the Medicaid expansion. That’s because many people with a disability don’t meet strict state or federal standards for disability, yet they gain access to health care coverage through Medicaid expansion based on their income.^[64] As a result, Medicaid expansion has helped improve coverage and access to care among people with disabilities, enabling them to lead healthier lives and have more employment options.

Among adults overall who gained Medicaid coverage through expansion, those with disabilities had larger improvements in full-year insurance coverage and use of primary and preventive care than those without disabilities.^[65] People with disabilities who live in expansion states are more likely to be employed than those in non-expansion states because many of them are able to enter the workforce or increase their earnings without losing their coverage.^[66] Some states have even used the budget savings generated by expansion to improve access to services for people with disabilities and people with chronic conditions, including long-term services and supports.^[67]

Opponents of Medicaid expansion have falsely claimed that expansion harms the “truly needy” by forcing seniors and people with disabilities on to waiting lists for Medicaid.^[68] In reality, there are no waiting lists to enroll in Medicaid. States must enroll all eligible enrollees, including children, seniors, people with disabilities, and adults, without exception. Dating back to the early 1980s, states could (and many still do) have waiting lists for seniors and people with disabilities to receive home- and community-based services (HCBS) — i.e., care in the community for people who would otherwise have to go into a nursing home or other institution. But as of 2023, 71 percent of the people on a waiting list for HCBS services lived in a non-expansion state. ^[69]

How Does Medicaid Expansion Affect Employment?

Ninety-one percent of non-elderly Medicaid adults in 2022 worked full or part time, acted as caregivers for family members or loved ones, attended school, or had an illness or disability affecting their ability to work; 61 percent were employed. ^[70] Most people enrolled in Medicaid expansion who can work do work; their jobs generally don’t offer employer-based coverage or pay enough for them to cover the costs of individual market coverage.

While expansion critics often claim that Medicaid is a disincentive to work, expansion has not reduced labor force participation among those who become eligible for Medicaid.^[71] Medicaid, in fact, is an important work support because health coverage makes it easier for enrollees to look for a job and to work. Enrollees also say that having Medicaid coverage makes them better at their jobs. In surveys in Ohio and Michigan, 84 percent and 69 percent of working Medicaid expansion enrollees, respectively, said health coverage made it easier to work or helped them do a better job at work.^[72]

Also, as noted above, Medicaid expansion is a work support for people with disabilities and chronic conditions; those in expansion states are likelier to be employed than those in non-expansion states.^[73]

Some states have pushed to add policies taking Medicaid coverage away from people not meeting work requirements. But these initiatives have been counterproductive, taking coverage away from working people and vulnerable populations without increasing employment. In Arkansas, the one state to fully implement such a harsh work requirement policy, 18,000 Medicaid enrollees — nearly 1 in 4 adults subject to the requirements — lost their coverage.^[74] Those losing coverage included working people as well as vulnerable populations such as people living with a disability or serious health condition and those caring for ill, aging, or disabled family members. In focus groups, Arkansas enrollees explained that coverage losses resulting from the new requirement led to worsening of their health conditions, higher stress, and hindrances to work.^[75] In New Hampshire, about 40 percent of adults subject to work requirements would have lost their coverage if the state had not put the policy on hold.

When people lose coverage due to work requirements, it is primarily because they struggle to complete burdensome paperwork, not because they are not working or do not qualify for an exemption.^[76] Also, evidence from Arkansas’ failed Medicaid work requirement policy and from work requirements in other federal programs shows that taking away assistance does little to improve long-term employment outcomes.^[77]

Currently, Georgia is implementing a Medicaid waiver that offers coverage to adults with incomes only up to the poverty level (not the full Medicaid expansion group) and requires them to report 80 hours a month of qualifying activities to receive and maintain coverage. The program is only reaching a tiny fraction of the state’s estimated number of people who could be eligible, and the state is paying five times more per enrollee than it would have under a standard Medicaid expansion model.^[78]

How Does Medicaid Expansion Affect Hospitals?

Medicaid expansion reduces the uncompensated care burdens of hospitals and improves their operating margins, particularly for rural and safety net hospitals.^[79] Hospitals and other providers have seen improvements in their payer mix (a decline in uninsured patients and/or increase in patients covered by Medicaid) and an increase in their overall revenue.^[80]

From 2013 to 2015, Medicaid expansion reduced uncompensated care costs by an estimated $6.2 billion across the 31 states (plus the District of Columbia) that expanded during that time. Of every dollar of uncompensated care costs that hospitals had in 2013, expansion had eliminated 41 cents by 2015.^[81] Researchers have found that immediately after a state expands Medicaid, the state’s hospitals experience increases in both their Medicaid revenue and their overall operating margins.^[82] Thus, it is not surprising that hospitals in expansion states are about 84 percent less likely to close than hospitals in non-expansion states.^[83]

Medicaid expansion is especially important to rural hospitals, whose operating margins are often so low that uncompensated care costs — which are typically higher when more people in the area lack insurance — can prove catastrophic. While the uninsured rate has come down in all states under the ACA, the sharpest declines in rural uninsured rates have occurred in expansion states.^[84]

A recent review found that rural hospitals had median operating margins of 3.9 percent in expansion states between July 2021 and June 2022, but just 2.1 percent in non-expansion states. If federal pandemic-related aid is disregarded, rural hospitals still had positive operating margins in expansion states but not in non-expansion states.^[85] Since 2010, 82 rural hospitals have completely closed across the country, mostly in non-expansion states;^[86] data for the 2010-2019 period show that a rural hospital is 62 percent less likely to close on average if it is in an expansion state.^[87] When rural hospitals close, a critical source of health care and employment disappears in rural communities, and strain falls on surrounding hospitals.^[88]