What the Affordable Care Act Means for the Medicaid Program

By Lisa Yagoda, Nicole Duritz, Joan Friedman

Copyright © 2014 AARP. All rights reserved.

Medicaid is a health coverage program for individuals and families with low income, as well as some older people, pregnant women, and people with disabilities. Under the Affordable Care Act (ACA), states have the option of expanding Medicaid eligibility so that it can include millions more people than it did before the ACA’s passage.

A key Medicaid-related provision sets a uniform income eligibility level that applies throughout the country. States that agree to extend Medicaid coverage to adults under age 65 who earn up to 138 percent of the federal poverty level receive federal funding supporting that expansion.

To ease states’ financial burden for enrolling new people in Medicaid, the federal government is footing the bill for three years starting in 2014 and will continue to pay the bulk of the associated costs for new eligible adults after the first three years.

The result of these changes is that some people who were previously not eligible for enrollment in Medicaid may be able to get coverage through this program as of 2014. Anyone who enrolls in Medicaid has met the requirement to have health insurance and doesn’t need to purchase any additional insurance coverage.

Now for the tricky part: When the Supreme Court ruled in June 2013 on the constitutionality of the ACA, it determined that the law cannot force states to expand Medicaid. Instead, each state may make its own decision regarding whether to expand the program.

Some states have opted to expand Medicaid, and others have opted not to. States that have chosen not to may alter that decision in the future. Therefore, people wanting to secure Medicaid benefits must find out the laws in their own state.

People who earn too much money to qualify for Medicaid in their state, but who have children and need low-cost access to healthcare coverage for them, can still apply for the Children’s Health Insurance Program (CHIP) in their state.

Every state offers CHIP coverage, although that coverage differs from state to state. In some states, parents and pregnant women can enroll in CHIP, as well. The ACA provides for funding for CHIP for several years.

In addition, in states that opt to participate in Medicaid expansion, the ACA enables some children and families previously covered by CHIP to transition to Medicaid. But CHIP remains intact and funded, and additional ACA provisions are encouraging more streamlined systems to help low-income families find the coverage they need among Medicaid, CHIP, and the Health Insurance Marketplace.