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Medicaid covers health care and long-term services for over 90 million low-income people in the U.S. The COVID-19 pandemic increased Medicaid enrollment and spending.
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In 2023, states removed the continuous enrollment rule that kept people covered during the pandemic. Many enrollees may lose coverage.
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The pandemic highlighted issues like reducing health gaps, using telehealth, expanding behavioral health services, and solving workforce problems.
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The Biden Administration is working to stabilize coverage, increase access, and close coverage gaps in states that did not expand Medicaid under the ACA.
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Congressional Republicans have suggested cutting the deficit, limiting Medicaid funding, and requiring work for eligibility.
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However, with a divided government and a recent bipartisan budget deal, significant Medicaid changes are unlikely soon.
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Medicaid Funding and Administration
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The federal and state governments jointly fund Medicaid, but states manage their programs under federal rules. States decide who qualifies, what services to cover, and how much to pay providers.
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They can also apply for Section 1115 waivers to test new approaches if these changes align with Medicaid’s goals.
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Because states have flexibility, Medicaid programs vary widely, including the percentage of state residents enrolled.
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The federal government matches state Medicaid spending with no set limit. The match rate depends on state income levels, with poorer states receiving more federal funds.
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Some populations and services qualify for higher federal contributions. The ACA expansion group gets a 90% federal match, leaving states to cover 10%.
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The American Rescue Plan Act offered extra funds to states that newly expanded Medicaid.
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In 2021, Medicaid spending reached $728 billion, with 69% coming from the federal government. Medicaid costs usually rise during economic downturns when more people enroll.
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Costs also increased after the ACA expansion and during the pandemic due to continuous enrollment policies.
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Medicaid makes up a large part of state budgets, but education remains the most significant state-funded program.
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However, Medicaid is the largest source of federal money for states. In 2021, Medicaid spending accounted for 27% of total state budgets, 15% of state-only expenditures, and 45% of federal funds received by states.
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Medicaid Funding and Coverage
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Medicaid pays for many services and helps different groups. It is the public health insurance program for people with low income.
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More than 20% of Americans use Medicaid, including those with high medical costs.
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The main program for long-term care in the U.S. Medicaid also helps low-income Medicare users by covering premiums, cost-sharing, and services that Medicare does not include.
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Federal and state spending on Medicaid makes up nearly 20% of personal health care costs in the U.S.
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It provides significant funding for hospitals, doctors, community health centers, nursing homes, and long-term support services.
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Changes in Medicaid Over Time
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Medicaid rules come from Title XIX of the Social Security Act and federal regulations.
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The Centers for Medicare and Medicaid Services (CMS) manages the program under the Department of Health and Human Services (HHS). States can join Medicaid, but they must follow federal guidelines.
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Medicaid began in 1965, but some states did not join right away. By the 1980s, every state participated. Cash aid programs once linked to Medicaid, including Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI).
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Over time, Congress changed coverage rules, adding more requirements for children, pregnant women, and people with disabilities.
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In 1996, the government replaced AFDC with Temporary Assistance to Needy Families (TANF). The change separated Medicaid from cash aid for low-income parents, pregnant women, and children.
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In 1997 the government launched the Children’s Health Insurance Program (CHIP).
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It provided coverage for low-income children who exceeded Medicaid limits and received more federal funds.
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The Affordable Care Act (ACA) 2010 expanded Medicaid for most nonelderly adults, earning up to 138% of the federal poverty level ($20,120 annually for an individual in 2023).
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This expansion included adults without dependent children, who were previously not eligible.
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However, a 2012 Supreme Court decision made the expansion optional for states. By April 2023, 41 states and Washington, DC, had expanded Medicaid.
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In North Carolina, expansion depends on passing the 2023-2024 budget.
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States that expanded Medicaid get more federal funding for people under the new eligibility rules.
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The ACA also required states to simplify Medicaid eligibility and enrollment to help more people get and keep coverage.
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During the COVID-19 pandemic, Congress made states keep people in Medicaid in exchange for extra federal funding. As a result, enrollment grew by 23 million, reaching about 95 million by March 31, 2023.
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Now that states remove people who no longer qualify, millions may lose coverage. Studies show that nearly two-thirds of those removed had a gap in health insurance.
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Policies that help people move from Medicaid to other coverage could lower that number.
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Medicaid Supports Key Groups
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Medicaid is essential for specific groups of people. It guarantees coverage for those who qualify. One in five people in the U.S. has Medicaid.
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It is crucial for particular populations. In 2021, Medicaid covered 40% of children, 80% of children in poverty, 16% of adults, and almost half of adults in poverty.
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Compared to White children and adults, a higher percentage of Black, Hispanic, and American Indian/Alaska Native (AIAN) children and adults rely on Medicaid.
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It also covers 43% of nonelderly adults with disabilities. These disabilities may include hearing, vision, movement, self-care, or independent living difficulties.
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Medicaid funds 41% of births in the U.S. It supports nearly half of children with special health care needs.
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It also covers five out of eight nursing home residents, 23% of nonelderly adults with mental illness and 40% of nonelderly adults with HIV.
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Additionally, Medicaid helps pay Medicare premiums and covers services that Medicare does not, such as long-term care, for 12.5 million Medicare beneficiaries.
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Among nonelderly Medicaid enrollees, half are children under 19. About 60% are people of color, 57% are female, and 70% live in households with at least one worker.
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Most adults with Medicaid have jobs. However, many do not receive employer-sponsored insurance, or it is too expensive.
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Medicaid Provides Extensive Health and Long-Term Care Services
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Medicaid offers many health services that other programs do not. It includes required services under federal law and extra services that states choose to provide.
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Every state covers prescription drugs. Most also offer physical therapy, dental care, and eyeglasses.
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Children receive full benefits under Early Periodic Screening, Diagnosis, and Treatment (EPSDT). EPSDT helps children with disabilities by covering additional services that private insurance does not.
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Unlike Medicare and commercial insurance, Medicaid covers transportation for medical visits.
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It also funds long-term care, including nursing homes and home-based services. While all states must cover nursing home care, most home-based services are optional.
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Recently, states have expanded Medicaid to include behavioral health care and programs that address social factors like food and housing.
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Medicaid Spending Is Higher for Seniors and People With Disabilities
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People who qualify for Medicaid due to age or disability make up one-fifth of enrollees.
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However, they account for over half of Medicaid spending. Their higher medical needs and long-term care services drive these costs.
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Spending per enrollee differs by state. In 2019, costs ranged from $4,873 in Nevada to $10,573 in North Dakota.
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These differences reflect how states design their Medicaid programs, including covered services and provider payments.
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Costs also vary within states due to different health needs and eligibility groups. Those qualifying due to disabilities often have the highest costs.
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Medicaid Improves Access to Care and Health Outcomes
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Medicaid helps people get medical care and leads to better health. Studies show Medicaid patients have better access to care than those without insurance.
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Uninsured people, primarily low-income, often delay or skip care due to high costs.
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Medicaid enrollees report access and satisfaction levels similar to those with private insurance.
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Since Medicaid serves low-income groups, federal rules limit out-of-pocket costs to improve access.
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Research links childhood Medicaid coverage to better health and higher education levels. Studies also show expanding Medicaid for adults improves care, health status, and economic stability.
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However, access gaps exist, especially for psychiatrists and dentists. These challenges also affect Medicare and private insurance but are worse in Medicaid.
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Reasons include fewer providers in low-income areas, lower Medicaid payments, and fewer doctors accepting Medicaid patients.
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A 2021 report found that 74% of doctors accepted new Medicaid patients, compared to 88% for Medicare and 96% for private insurance.
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Acceptance rates vary by state, provider, and setting. Community health centers and family clinics have higher Medicaid acceptance than other facilities.
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Limited provider participation makes it harder for Medicaid enrollees to get care than those with private insurance.
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States decide how to run Medicaid, with managed care being the most common system. In 2020, seven in ten Medicaid enrollees were in managed care.
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These plans must provide enough doctors to meet state requirements. In May 2023, the Biden Administration proposed new rules to improve Medicaid access, funding, and quality in managed care.
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States Use 1115 Waivers to Test New Medicaid Approaches
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Section 1115 waivers let states try different Medicaid programs that federal law does not allow.
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CMS approves these waivers if they support Medicaid’s goals. States and CMS set priorities based on changing federal policies.
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States use waivers to increase coverage, modify care delivery, and revise funding rules. Nearly all states have at least one waiver, and many await approval.
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Policies from the Trump and Biden administrations have shaped the use of waivers.
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The Trump Administration focused on work requirements, eligibility rules, behavioral health services, and fixed Medicaid funding.
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The Biden Administration removed work requirements, reduced premium obligations, and promoted waivers that expand coverage and reduce disparities. Some states use waivers to address social health needs or provide Medicaid for people leaving prison.
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A few states have sought approval for continuous Medicaid coverage for children and confident adults beyond one year.
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Medicaid Helps During Economic Crises and Emergencies
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Medicaid plays a key role during economic downturns and crises. When the economy struggles, more people qualify for Medicaid, increasing spending while state tax revenue drops.
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Congress provided extra federal Medicaid funding during past recessions and the COVID-19 pandemic.
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In 2020, states received additional funds but had to cover Medicaid enrollees. That rule ended on March 31, 2023, but states still receive extra funding under certain conditions.
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States can also request emergency flexibility to change Medicaid policies. These changes can focus on specific services, providers, or groups of enrollees.
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During the COVID-19 pandemic, all 50 states and Washington, D.C., got approval to expand telehealth, eligibility, and benefits.
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States also adjusted workforce policies for home and community-based services.
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The public health emergency officially ended in May 2023, affecting coverage, costs, and access. States must now reverse temporary policies, but some changes will remain.
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These include telehealth services, better coordination among state agencies, and improved data systems for faster emergency response.
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Public Support for Medicaid Remains Strong
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Polls show most Americans have a favorable view of Medicaid. About two-thirds of adults have had some connection to the program.
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Support for Medicaid exists across political parties. Seven in ten Americans say Medicaid works well for low-income people.
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Medicaid expansion is also widespread. Voters in seven states—Maine, Missouri, Iowa, Nebraska, South Dakota, Oklahoma, and Utah—approved expansion through ballot measures.
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In states without expansion, two-thirds of residents want their state to expand Medicaid.
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However, political differences remain. Most Democrats (79%) and independents (60%) see Medicaid as a health insurance program that helps people.
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More than half of Republicans (54%) view Medicaid as a welfare program.
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However, Republicans with personal Medicaid experience are more likely to support the program and see it as health coverage rather than welfare.
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