What Is Medicaid’s Value?

What is Medicaid?

Medicaid is the public health insurance program for people with low income, including children, some adults, pregnant women, and people with disabilities. It was created in 1965 along with Medicare, the federal program that covers adults over age 65 and some people with disabilities, to expand access to a range of health services and to improve health outcomes for these groups.

More than 72 million people are enrolled in Medicaid, making it the single largest insurer in the United States. It is the principal source of health insurance for Americans with low incomes and covers a wide range of services, from preventive care to hospital stays and prescription drugs. Medicaid also pays for nearly half of all U.S. births, as well as end-of-life care for millions of Americans.

While the federal government and the states jointly fund Medicaid, each state runs its own program, subject to federal requirements. The federal government covers between 50 percent and 77 percent of the cost of insuring people with Medicaid, depending on the state.

What is Medicaid expansion?

The Affordable Care Act (ACA) expanded the number of Americans who are eligible for Medicaid and increased the federal government’s contribution toward covering these new enrollees. Starting in 2014, states became eligible for this additional federal funding if they expanded Medicaid eligibility for all adults up to 138 percent of the federal poverty level ($28,207 for a family of two, as of 2024). The ACA also made it easier for people to enroll in Medicaid, such as by eliminating the need for in-person interviews, reducing the amount of information applicants need to provide, and using data from other federal and state agencies to electronically verify eligibility information.

So far, 40 states, along with Washington, D.C., have expanded Medicaid as allowed under the ACA. The federal government pays for 90 percent of the coverage costs for new enrollees under the expansion; states pay for the remaining 10 percent.

What is Medicaid’s impact on health care access and health outcomes?

There is ample evidence showing that Medicaid coverage helps people gain better access to health care services, leading to improvements in health and well-being. Researchers found that low-income adults in Arkansas, which expanded Medicaid eligibility in 2014, have better access to primary care and preventive health services, improved medication compliance, and better self-reported health status than their counterparts in Texas, which has not expanded eligibility for the program. (It should be noted, however, that some of Arkansas’s gains were eroded in 2018, when the state became the first to implement work requirements for Medicaid beneficiaries.)

Other studies show Medicaid expansion is associated with decreased mortality rates, increased rates of early cancer diagnosis and insurance coverage among cancer patients, improved access to care for chronic disease, improved maternal and infant health outcomes, and better access to medications and services for people with behavioral and mental health conditions.

How does Medicaid expansion affect uninsured rates?

States that have expanded Medicaid have a much lower uninsured rate than states that haven’t, and the gap continues to widen. The uninsured rate in expansion states dropped 6.4 percentage points between 2013 and 2017, from 13 percent to 6.6 percent, according to census data. Moreover, health care disparities narrowed between whites, Blacks, and Hispanics in expansion states, with smaller differences seen in uninsured rates among working-age adults, as well as in the percentages who skipped needed care because of costs or who lacked a usual care provider.

The coverage gains in states that have expanded their Medicaid program are not solely the result of newly eligible individuals enrolling. Some of the gains are due to the enrollment of individuals already eligible for Medicaid who took the opportunity to sign up for the first time (sometimes referred to as the “welcome mat effect”).

What are the financial impacts of Medicaid expansion?

Medicaid expansion protects beneficiaries from financial stress by improving access to affordable care. A national study found that expansion was associated with significant improvements in low-income people’s financial well-being, leading to reduced levels of debt in collections and unpaid bills. People living in expansion states are also less likely than those in nonexpansion states to have medical debt. Another study comparing the experiences of low-income adults in Texas, which has not expanded Medicaid, to those of low-income adults in three southern states that have expanded Medicaid found that Texas respondents were much more likely to report financial barriers to getting health care.

Medicaid expansion has improved the financial stability of community health centers and safety-net hospitals. There is also evidence that Medicaid expansion provides an economic boost to states. Recent studies of expansion’s financial impacts all find positive economic effects for states, such as growth in the health sector and greater tax revenue from increased economic activity. Expanding Medicaid can also save states money by offsetting costs in other areas, including uncompensated care for the uninsured, mental health and substance use disorder treatment, and other non-Medicaid health programs. After accounting for these new savings and revenues, the net cost of expansion for states is much lower than its 10 percent “sticker price.” In some states, expansion has already paid for itself.