Understanding Medicaid

Soo-Yeon Cho, Ph.D.
Page Body

Medicaid provides health insurance coverage to low-income children, pregnant women, the elderly, and people with disabilities to pay for their medical costs. Medicaid is the largest single health insurance provider serving over 68 million Americans, which is about 20 percent of the U.S. population as of December 2016, according to a Center for Medicare and Medicaid Services (CMS) report.[1]Previous studies have found that low-income Americans experience poor health outcomes across their lifespan and they tend to have higher rates of infant mortality, disease, and disability while living shorter lives.[2] In addition, they often use more expensive healthcare services as they delay seeking healthcare due to financial barriers.[3] Medicaid is a necessary safety-net program for the poorest Americans who are most in need. It is not only for reasons of justice, but also to lower healthcare costs for all.

Federal and State Share Ratio in Medicaid Funding

The federal and state government jointly fund Medicaid; however, each state has flexibility to set standards for eligibility, benefits, and service delivery.  The ratio of federal to state shares of Medicaid spending can vary from 80 percent in Kentucky to 51 percent in Virginia. For Missouri, the Federal share was 64 percent, meaning that the state paid 36 percent of Medicaid expenditures in FY 2015.[4] The federal share becomes larger as per capita incomes become lower.[5] How each state sets eligibility criteria is differentiated by how financially distressed an individual or family must be to be eligible for insurance and services, which has significant consequences for nonelderly adults with children who are not “poor enough” to be eligible for Medicaid, though they are making a low wage. Moreover, the adults without children are not eligible for Medicaid in the states that have not adopted Medicaid expansion.

Medicaid Expansion States vs. Non-Medicaid Expansion States

The Affordable Care Act (ACA), which was passed in 2010 and became effective in January 2014, expanded health insurance coverage to low-income adults under 65 years old with income up to 138 percent of the Federal Poverty Line (FPL). To provide context, the FPL for a family of three is an annual income of $27,821.[6]  In March 2017, 32 states (including DC) adopted the Medicaid expansion option while 19 states did not adopt Medicaid expansion.[7] Missouri is one of the 19 non-expansion states. Consequently, millions of additional Americans gained insurance coverage in the Medicaid expansion states.

In Missouri, Medicaid eligibility is limited to children, up to age 18 with a family income up to 300 percent FPL; for the elderly, blind and disabled individuals, the income limit is 85 percent FPL; for pregnant women with a family income up to 196 percent FPL; and for parents of children with a family income up to 18 percent FPL.[8] As of January 2017, a family of three is at the Federal Poverty Line if they earn only an annual income of $20,420; therefore, a parent with two children who makes any more than $3,676 a year is not eligible for Medicaid even though his/her children are eligible. Missouri Medicaid does not cover any adults without children, despite the fact that they live in poverty. In 2016, there were more than 500,000 nonelderly adults who were uninsured in Missouri out of 27 million nonelderly adults uninsured in the U.S.[9]

Medicaid Enrollments vs. Medicaid Expenditure

Medicaid enrollment rates do not reflect Medicaid expenditures. Close to 50 percent of Medicaid, enrollees are children; however, they account for approximately 20 percent of Medicaid expenditures. Disabled and elderly adults make up about 25 percent of enrollees, but they account for approximately 70 percent of Medicaid expenditures. A small share of enrollees consistently account for a large share of expenditures. According to a Government Accountability Office report in 2015, the enrollees with the highest expenditures account for half of all Medicaid expenditures.[10]

Changing Medicaid through Section 1115 Demonstrations: Who Benefits (Cui bono)?

The ACA expanded health coverage to millions of Americans by raising eligibility standards up to 138 percent FPL for Medicaid expansion states and providing subsidies to health plans offered through the ACA marketplace. However, it is now possible that key provisions of the ACA may be repealed. Medicaid could additionally be redesigned through additional use of Section 1115 demonstration waivers.[11]  Rosenblum and colleagues predict that the use of Section 1115 waivers may provide states additional ways to restructure their Medicaid programs. States can propose to add new eligibility restrictions, such as work and health requirements for adults, premium contributions, and limit coverage.[12] Section 1115 waivers allow the Secretary of Health and Human Services to waive certain provisions of Medicaid statutes, so that states can broaden control of the scope and operation of Medicaid in their state.[13]Section 1115 demonstrations could increase and strengthen coverage, but they can also restrict delivery and coverage under the guise of focusing on the efficiency and quality of care.[14] Using Section 1115 to restrict access to Medicaid is, in fact, a contradiction of previous usages of this innovative authority as the Section 1115 waiver is a major tool to expand Medicaid to previously ineligible adults, such as individuals with mental illness. Who benefits from the Section 1115 waivers can be significantly different depending on why Section 1115 waivers are implemented and the potential consequences on the poorest and the most vulnerable nonelderly adults are enormous. A clear vision of the function of Section 1115 demonstration waivers is more important than ever in this uncertain time for the poorest and the most vulnerable Americans.


[1] Center for Medicare and Medicaid Services.

[2] Kaiser Family Foundation. (August 2016). Disparities in health and Health Care: Five Key Questions and Answers. Available at: http://files.kff.org/attachment/Issue-Brief-Disparities-in-Health-and-Health-Care-Five-Key-Questions-and-Answers

[3] Kaiser Family Foundation. (November 2016). The Uninsured: A Primer, Key Facts about Health Insurance and the Uninsured in the Era of Health Reform. Available at: http://files.kff.org/attachment/Report-The-Uninsured-A percent20Primer-Key-Facts-about-Health-Insurance-and-the-Unisured-in-America-in-the-Era-of-Health-Reform

[4] Kaiser Family Foundation. (FY2015). State Health Facts. Federal and State Share of Medicaid Spending. Available at: http://kff.org/medicaid/state-indicator/federalstate-share-of-spending/?currentTimeframe=0&sortModel= percent7B percent22colId percent22: percent22Federal percent22, percent22sort percent22: percent22desc percent22 percent7D

[5] Federal Register. Nov. 10, 2010.  https://www.gpo.gov/fdsys/pkg/FR-2010-11-10/pdf/2010-28319.pdf

[6] U.S. Department of Health & Human Services. (2017). U.S. Federal Poverty Guidelines Used to determine Financial Eligibility for Certain Federal Programs. Available at: https://aspe.hhs.gov/poverty-guidelines

[7] Kaiser Family Foundation. (January 2017). Status of State Action on the Medicaid Expansion Decision. Available at: http://kff.org/health-reform/slide/current-status-of-the-medicaid-expansion-decision/

[8] Centers for Medicare & Medicaid Services. (June 2016). Medicaid & CHIP in Missouri. Available at: https://www.medicaid.gov/medicaid/by-state/by-state.html

[9] Kaiser Family Foundation. (2016). Estimates of Eligibility for ACA Coverage among the Uninsured in 2016. Kaiser Family Foundation analysis based on 2016 Medicaid eligibility levels and 2016 Current Population Survey. Available at: http://kff.org/health-reform/issue-brief/estimates-of-eligibility-for-aca-coverage-among-the-uninsured-in-2016/

[10] U.S. Government Accountability Office. (2015). A Small Share of Enrollees Consistently Accounted for a Large Share of Expenditures. GAO-15-460.

[11] S. Rosenbaum, S. Rothenberg, R. Gunsalus et al., Medicaid’s Future: What Might ACA Repeal Mean? The Commonwealth Fund, January 2017.

[12] Ibid.

[13] Center for Medicaid and Medicare Services. (accessed March 1, 2017). About Section 1115 Demonstrations. Available at: https://www.medicaid.gov/medicaid/section-1115-demo/about-1115/index.html

[14] Ibid.