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Arizona Shows Why House GOP Plan Would Likely End Medicaid Expansion

We’ve explained that the House Republican health plan would likely end the Affordable Care Act’s (ACA) Medicaid expansion to low-income adults in most — if not all — states by limiting the enhanced federal matching funds to states to cover adults who enroll before January 1, 2020 and stay enrolled without a one-month break in coverage. That’s not mere speculation. It’s what happened in Arizona, which froze enrollment in 2011 and saw an immediate, steep decline in enrollment.

Arizona implemented its Medicaid program with a demonstration project (often called a waiver). Over time, it added new benefits and groups of beneficiaries, including low-income adults with incomes up to the poverty line, a group that largely couldn’t access Medicaid before health reform. When the Great Recession hit, Arizona, like many other states, had to make painful decisions about Medicaid, including whether to maintain coverage for low-income adults.

Arizona chose to freeze enrollment for low-income adults enrolled in its waiver beginning in July 2011. It stopped accepting new enrollees and continued coverage for existing enrollees only as long as their income remained below the poverty line and they turned in their annual renewal paperwork on time; people who rose above poverty but then fell back below it couldn’t re-enroll.

The federal Centers for Medicare & Medicaid Services required Arizona to implement some coverage safeguards, such as notifying all low-income adults about the freeze and checking whether adults about to lose coverage were eligible for other Medicaid coverage groups, such as low-income parents or pregnant women, before disenrolling them. Despite these safeguards, enrollment fell dramatically — by nearly 45 percent within a year and by almost 70 percent by December 2013, two and a half years after the freeze took effect (see graph).

Fortunately, the ACA’s Medicaid expansion allowed Arizona to lift its freeze, and the state quickly saw a 40 percent increase in enrollment by January 2014, the first month the program re-opened for new enrollees.

Arizona's experience is consistent with a 2011 study that showed fewer than half of low-income adults are continuously eligible for Medicaid over the course of one year. Findings from two studies suggest that most of the current expansion population would become ineligible for the enhanced match in less than two years, so states could only continue covering them by picking up a much higher share of the cost. Because the states wouldn’t likely find the money to pay those higher costs, losing the enhanced match ultimately would mean losing the expansion itself.