Center on Budget and Policy Priorities: Frequently Asked Questions About Medicaid
Recent proposals at the federal and state levels to radically restructure Medicaid raise questions about how the program works and its current role for states, beneficiaries, and health care providers and plans. This report addresses some of these questions./1
How Efficient Is Medicaid?
Medicaid's costs per beneficiary are substantially lower than for private insurance and have been growing more slowly than per-beneficiary costs under private employer coverage.
Medicaid provides more comprehensive benefits than private insurance at significantly lower out-of-pocket cost to beneficiaries, but its lower payment rates to health care providers and lower administrative costs make the program very efficient. It costs Medicaid much less than private insurance to cover people of similar health status. For example, adults on Medicaid cost about 22 percent less than if they were covered by private insurance,
Over the past 30 years, Medicaid costs per beneficiary have essentially tracked costs in the health care system as a whole, public and private. In fact, costs per beneficiary grew more slowly for Medicaid than for private insurance between 1987 and 2017, and are expected to continue growing more slowly than for private insurance in coming years, according to the Medicaid and
Moreover, the
How Much Flexibility Do States Have to Design Their Own Programs?
Medicaid gives states expansive flexibility to design their own programs -- whom they cover, what benefits they provide, and how they deliver health care services.
The federal government sets minimum standards, including specifying certain categories of people that all states must cover and certain health coverage they must provide. Beyond that, states are free to set their own rules. For example, states have broad flexibility to decide which "optional" categories of low-income people to cover, and up to what income levels. As a result, Medicaid eligibility varies substantially from state to state.
Medicaid benefit packages vary significantly by state as well. States have flexibility to determine whether to cover services like dental and vision care for adults and can determine the amount, duration, and scope of the services they provide.
States also have flexibility over how they deliver health care services. Many states rely heavily on managed care plans to deliver care, while others use provider-sponsored organizations, health homes, and accountable care organizations (groups of providers and other entities that partner to provide a range of health care services in a coordinated way)./4
See chart here (https://www.cbpp.org/research/health/frequently-asked-questions-about-medicaid).
Medicaid is the primary payer for long-term services and supports, including nursing home care and home health services, the need for which is expected to grow considerably as the population ages./5 Using Medicaid's flexibility -- including a number of new state options created by the ACA -- states have greatly expanded home- and community-based services (HCBS) so more people with long-term service and support needs can stay in their homes and communities rather than move to nursing homes and other institutions. The share of Medicaid spending on long-term services and supports going to HCBS rose from 18 percent to 57 percent between 1995 and 2016./6 (See Figure 3.)
States have taken advantage of Medicaid's flexibility in other ways to improve beneficiary health outcomes while lowering costs./7 For example, states are employing strategies to improve the delivery of care, particularly for beneficiaries with chronic conditions who use the most care./8 For example, a
Similarly,
Do Beneficiaries Have Adequate Access to Health Care?
Numerous studies show that Medicaid helps make millions of Americans healthier by improving access to preventive and primary care and by protecting against (and providing care for) serious diseases.
Notably, the ACA's expansion of Medicaid to low-income adults prevents thousands of premature deaths each year, a landmark study found./13 It saved the lives of at least 19,200 adults aged 55 to 64 over the four-year period from 2014 to 2017. Conversely, 15,600 older adults died prematurely because of some states' decisions not to expand Medicaid. (See Figure 4.) The lifesaving impacts of Medicaid expansion are large: an estimated 39 to 64 percent reduction in annual mortality rates for older adults gaining coverage./14
See chart here (https://www.cbpp.org/research/health/frequently-asked-questions-about-medicaid).
This new research is consistent with earlier studies finding that the ACA's Medicaid expansion improves the health and financial well-being of those who newly gain coverage./15 One recent study, for example, found that expansion states had a lower mortality rate for near-elderly adults than non-expansion states./16 Another study, comparing low-income adults in
See chart here (https://www.cbpp.org/research/health/frequently-asked-questions-about-medicaid).
Another important study, of
Other pre-ACA expansions of Medicaid coverage for low-income adults, in
Surveys have found that Medicaid enrollees are largely satisfied with their access to care.
Finally, obtaining access to health care through Medicaid offers long-term benefits. For example, for black children, Medicaid eligibility during early childhood reduced mortality rates in their later teenage years by 13 to 20 percent, research from
How Does Medicaid Affect Work Incentives?
Medicaid supports work, evidence shows./28 Most Medicaid beneficiaries who can work do so: two-thirds of non-elderly adults enrolled in Medicaid who don't receive federal disability benefits live in a family with at least one worker./29 Moreover, one recent study found that people in states with more generous Medicaid eligibility levels and benefits are more likely to leave a job for another position with greater growth potential./30 This research suggests that comprehensive Medicaid coverage can support work and help beneficiaries take advantage of promising job opportunities without worrying about losing their coverage.
In 2018, the
In contrast, studies conducted in
In fact, the Medicaid expansion significantly reduces work disincentives among working-poor parents. Before it took effect in 2014, Medicaid eligibility for working parents cut off at just 61 percent of the poverty line in the typical state, or roughly
Now, in the 33 states and the
Thus, the Medicaid expansion enables tens of millions of working parents to seek higher wages or to work more hours without forgoing health coverage. As a
Two recent studies comparing changes in the labor market participation of low-income adults in expansion and non-expansion states show that the expansion has not reduced work among those newly eligible. One found that low-income workers in expansion states did not lose jobs, switch jobs, or change from full- to part-time work more frequently than low-income workers in non-expansion states./39 The other found that the Medicaid expansion did not meaningfully affect the incidence of job loss, number of hours usually worked, or probability of working more than 30 hours./40
How Does the ACA's Medicaid Expansion Affect State Budgets?
Under the ACA, the federal government paid 100 percent of the cost of Medicaid expansion coverage from 2014 to 2016. The federal share then dropped gradually to 93 percent in 2019 and will settle at 90 percent in 2020 and each year thereafter. By comparison, the federal government pays between 50 and 76 percent of the cost of other Medicaid enrollees, depending on the state.
Many states and independent analyses have found that the Medicaid expansion has not only helped more than 12 million low-income people gain health coverage but also produced net savings for state budgets./41 It has done so by allowing states to move people who previously received health services through targeted Medicaid programs financed at the state's regular match rate, such as family-planning services and care for certain women with breast and cervical cancer, into the new expansion group, for which the federal government pays nearly all of the cost. And as more low-income uninsured residents have gained coverage, demand for entirely state-funded services that serve the uninsured has declined, such as funding for hospitals' uncompensated care costs and for mental health services. States like
Despite this evidence, critics of Medicaid expansion have claimed that expansion has financially harmed states because some states underestimated the number of people who would enroll. This argument doesn't hold up under scrutiny. As a review of studies on the cost of expansion concluded, "(c)laims that the costs of Medicaid expansion have far exceeded expectations are overstated, misleading, and substantially inaccurate, based on a review of the credible evidence from either academic or government sources."/42
Does Medicaid Primarily Cover People Who Otherwise Would Have Private Coverage?
The overwhelming majority of people who get coverage under the ACA's Medicaid expansion are low-income individuals who would otherwise be uninsured. Many work in low-wage jobs for small firms or service industries that typically don't offer health insurance. And unsubsidized coverage in the individual insurance market would be unaffordable for most of those eligible for the Medicaid expansion.
* Some 79 percent of workers earning less than 138 percent of the poverty line -- the limit to qualify for Medicaid under the expansion -- do not get coverage through their employer. (See Figure 7.)
* The median annual cost of single coverage in the pre-ACA individual market, including premiums and out-of-pocket costs, would have consumed more than one-third of the total income of a family of three at the poverty line, making such coverage essentially unaffordable.
A study by
What Share of Eligible People Participate in Medicaid?
Medicaid participation is quite high, particularly among children in states that have made concerted efforts to simplify and streamline their enrollment processes. For example, prior to the Medicaid expansion, some 68 percent of low-income adults with children who are eligible for Medicaid were enrolled, according to the
In addition, nearly 94 percent of eligible children participated in Medicaid or CHIP in 2016, according to the
Focus groups with low-income, uninsured adults that the
Footnotes:
(1) See also
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(3) Medicaid and
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(16) Miller et al., op. cit.
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(20) Baicker et al., op. cit.
(21)
(22) Coughlin et al., op. cit.
(23) "MACStats: Medicaid and CHIP Data Book," Medicaid and
(24)
(25)Ibid.
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(27)
(28)
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(31) For more information on the effects of taking coverage away from people who don't meet work requirements, see
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(33) National Health Law Program, "
(34) Sommers 2019, op cit.
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(45) Government Accountability Office, "Means-Tested Programs: Information on Program Access Can Be an Important Management Tool,"
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(47) Haley et al., op. cit.
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