With North Carolina Adopting Medicaid Expansion, a Dwindling Number of States Are Missing Out on Its Economic and Health Benefits

North Carolina recently became the 41st state (including the District of Columbia) to expand Medicaid to adults with incomes up to 138 percent of the federal poverty level, enacting the move in its 2023-2024 fiscal budget. This leaves just ten non-expansion states that continue to deny lifesaving Medicaid health coverage — and the financial protections that come with it — to hundreds of thousands of people with low incomes.^[1] These outliers are forgoing expansion’s economic benefits, including significant federal funding that goes to states. Remaining non-expansion states could learn from North Carolina’s example and begin accessing the health and economic benefits going to the rest of the country.

Under the Affordable Care Act (ACA), states have the option to expand Medicaid coverage to more adults with low incomes and to access an enhanced federal matching rate (known as FMAP^[2]) for their expansion populations. Under the American Rescue Plan, states that expand Medicaid receive a sizable federal funding incentive. The ACA provides new expansion states with a 90 percent matching rate for the expansion population, and the Rescue Plan provides a two-year, 5 percentage point increase in the traditional Medicaid FMAP for states that expand Medicaid after March 2021.^[3]

Expansion states have brought in billions of dollars thanks to Medicaid expansion. The ten states that have not opted to expand Medicaid are missing out on between $60 million and $4.4 billion from the Rescue Plan. (See Table 1. For a timeline of state Medicaid expansions, see Figure 1.)^[4] This is on top of forgoing federal funding that would pay for 90 percent of the cost of the expansion.^[5] In addition to the enhanced FMAP, North Carolina will receive an estimated $1.63 billion in federal funding through the two-year Rescue Plan fiscal incentive.^[6]

This is additional federal funding that the remaining non-expansion states could use to support underfunded state priorities like behavioral health and rural health care. Alabama, Kansas, Mississippi, Tennessee, and Texas are all facing double-digit closures of rural hospitals; Mississippi alone has 24 at risk.^[7] These and other states that expand can help protect these hospitals, and their patients, while realizing expansion’s other benefits, including significantly better health coverage rates, advancements in equitable access to care, and protections against catastrophic out-of-pocket costs.

Outlier States Denying Lifesaving Benefits, Financial Security to Their Residents

A decade of research shows major health benefits for people living in states that have expanded Medicaid.^[8] That includes improved health and access to care, reductions in racial and ethnic disparities in coverage rates, protections against catastrophic costs, and even lives saved, given reduced rates of preventable deaths in expansion states. More specifically:

• Medicaid expansion is linked to significantly better health coverage rates. The uninsured rate among expansion states is nearly half that of non-expansion states.^[9] In the ten states that haven’t adopted expansion, nearly 2 million uninsured adults are in the Medicaid coverage gap.^[10] Adults in this gap don’t qualify for Medicaid under their states’ rules, because their states have not enacted the expansion — or for subsidized health insurance coverage in the ACA marketplaces, because their incomes are below the federal poverty level ($14,580 for an individual in 2023).
• Medicaid expansion can advance racial equity. People of color are disproportionately likely to lack access to care due to factors such as labor market discrimination that make them less likely to have access to employer-provided coverage.^[11] The ACA helped reduce disparities in health insurance coverage among states that expanded. But the coverage gap worsens these disparities in non-expansion states by disproportionately denying coverage to people of color, who make up an outsized share of those in the gap.^[12] Expanding Medicaid would therefore go a long way toward providing equitable access to the program’s health and financial benefits.
• Medicaid expansion is linked to earlier detection, diagnosis, and treatment of serious medical conditions.^[13] Medicaid expansion increases people’s use of preventive care and significantly reduces the use of emergency care, resulting in earlier detection of cancers and more effective treatment of chronic illnesses.^[14] People in the coverage gap are at greater risk of preventable premature deaths, just as expansion has saved thousands of lives.^[15] Medicaid expansion is specifically associated with better survival rates for people who give birth.^[16]
• Medicaid expansion helps protect people from catastrophically high out-of-pocket medical costs. People in the coverage gap are more susceptible to medical bankruptcy. Medicaid expansion is a powerful safeguard against financial hardship and bankruptcy. In its first two years, Medicaid expansion led to a $3.4 billion reduction in medical debt sent to collections and 50,000 fewer bankruptcies nationwide.^[17] Charity care and bad debt among hospitals fell by $8.6 billion (23 percent) from 2013 to 2015. Declines were several times larger in expansion than in non-expansion states.^[18]
• Medicaid expansion provides an especially critical boost to rural hospitals, many of which are at risk of closing.^[19] At least 136 rural hospitals have closed between 2010 and 2021, most of them (74 percent) in states where Medicaid expansion was not in place or had been in place for less than a year.^[20] Many more rural hospitals are at immediate risk of closing, especially in non-expansion states.^[21] Rural hospitals in non-expansion states experience poorer financial performance, and greater challenges to covering operating costs. This affects not only hospitals and patients, but the entire community if hospitals must reduce staff or eliminate important services because of lower revenues and increased uncompensated care.^[22] Nationwide, more than 20 percent of rural adults living in an expansion state are covered by Medicaid, compared to just 13 percent of rural adults in non-expansion states.^[23]

All of these benefits make Medicaid expansion a crucial policy approach for the health and financial well-being of states and their residents. They also make expansion popular with members of the public across the political spectrum.^[24] For state leaders on the sidelines, it is time to join the rest of the country and ensure their state and residents gain access to the health and economic benefits that come with Medicaid expansion.