The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) extended Medicaid eligibility to all adults under age 65 (including parents and adults without dependent children) with incomes below 138 percent of the federal poverty level (FPL). However, the Supreme Court ruling in June 2012 effectively made the expansion an option for states. As of February 2018, 32 states and the District of Columbia have chosen to adopt the adult expansion. The ACA provided the territories with additional funds for their Medicaid programs, but gave them the option of expanding Medicaid.
Alternative approaches to Medicaid expansion
Some states have chosen to expand Medicaid using Section 1115 waivers. These waivers allow states to test policies not allowed under traditional Medicaid, such as imposing higher cost sharing for some enrollees and placing limitations on certain mandatory benefits.
Specifically, eight states—Arizona, Arkansas, Iowa, Indiana, Kentucky, Michigan, Montana, and New Hampshire—are using Section 1115 research and demonstration waivers to extend coverage to this new adult group. Arkansas and New Hampshire are using premium assistance to purchase plans on the exchange under their waivers. Most of these waiver states are also implementing changes to the premium and cost sharing schedules so that all enrollees pay something, even nominally, toward the cost of coverage. Two of these states, Indiana and Kentucky, are implementing work and community engagement requirements as conditions of eligibility.
Under the ACA, Medicaid eligibility for most enrollees is determined using Internal Revenue Service definitions of modified adjusted gross income (MAGI). The goal of these new income counting rules is to coordinate Medicaid determinations with eligibility determinations for the subsidies for coverage available through health insurance exchanges. Prior to the ACA, states could use their own income disregards when determining eligibility for Medicaid. However, with the move to MAGI, states are no longer able to use state-specific disregards, deductions, or assets when determining Medicaid eligibility. The ACA also set a single income eligibility disregard equal to 5 percentage points of the FPL. For this reason, eligibility is often referred to at its effective level of 138 percent FPL, even though the federal statute specifies 133 percent FPL. The MAGI methodology is used for the new adult group as well as for children, pregnant women, and parents. Eligibility for those who are over age 65 and eligible on the basis of a disability or a need for long-term services and supports continues to be determined through pre-ACA methods.
Individuals also must be able to apply for Medicaid and subsidized coverage on the exchanges through a single application, and states must be able to share eligibility information with their state or federal exchanges. Additionally, state Medicaid agencies must rely on electronic data sources to the greatest extent possible to verify eligibility and to conduct administrative renewals. These changes, along with the move to MAGI-based eligibility, required states to upgrade their existing eligibility and enrollment systems. In late 2013 and into 2014, a number of states experienced early coordination problems between Medicaid and the exchanges and with the new systems, and developed mitigation strategies with the Centers for Medicare & Medicaid Services (CMS) to address them. In some states, issues may remain resulting in gaps or duplication in coverage (GAO 2015).
Individuals enrolled as part of the new adult group receive an alternative benefit plan (ABP), which is a benchmark plan modeled on commercial insurance coverage, rather than the traditional Medicaid benefit plan. Individuals with special medical needs are exempt from the ABP and states have flexibility to include additional benefits. In addition, these benefit packages must cover the 10 essential health benefits specified in the ACA. Essential health benefits are defined as ambulatory services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services, chronic disease management, and pediatric services, including oral and vision care. While states are allowed to offer ABPs to the new adult group that are less comprehensive than benefits offered to other Medicaid beneficiaries, most states have chosen to align their ABPs with traditional Medicaid benefits (Planalp 2015).
Federal matching rate
The ACA also required the federal government to pay 100 percent of state Medicaid costs for certain newly eligible individuals through 2016; at that point the matching rate began phasing down to 90 percent in 2020 and thereafter. The term newly eligible applies to individuals who would not have been eligible for Medicaid in the state as of December 1, 2009, or who were eligible under a waiver but not enrolled because of limits or caps on waiver enrollment. In states that expanded eligibility to low-income parents and adults without children prior to the ACA, the traditional matching rate is increased gradually until it equals the newly eligible matching rate in 2020. For more information, see state and federal spending under the ACA.