The states and the federal government jointly fund Medicaid. It costs states on average about 16 cents per dollar to pay for Medicaid, and that number has been rapidly growing. Because the recession has reduced state budgets, many states have been forced to cut Medicaid benefits, such as dental care.
Expanding Medicaid Coverage
Medicaid is an important part of the health reform law’s primary goal, which is to make health insurance available to millions of Americans who do not have it.
Beginning in 2014, people with incomes as high as 138% of the federal poverty level -- $15,415 for individuals and $31,809 for a family of four in 2012 -- would be eligible for coverage. These income requirements now include millions of people who previously made too much money to qualify for Medicaid, but often, too little to afford private insurance. It also includes adults without dependent children to enroll, a group previously not eligible for Medicaid coverage in most states.
The law does not make insurance available to people who are in this country illegally.
Paying for Medicaid Expansion
Under health reform, the federal government pays for 100% of states’ costs to expand coverage between 2014 and 2016. After that, federal support scales back to 95% in 2017 and an additional 1% in the following years until it covers 90% of the cost by the year 2020. States pick up the remaining 10% cost at that point.
Supreme Court Changed the Rules
Initially, the health reform law made the expansion of Medicaid mandatory. States that failed to comply would have been at risk of losing all of their federal Medicaid matching funds.
The recent Supreme Court ruling on the law allows states to choose whether they wish to accept the federal funds to extend Medicaid. That means people living in states that choose to opt out of the program may not qualify for Medicaid coverage, even if they meet the eligibility guidelines under federal law.
Already several states have said they would opt out of the program.
Initially, Medicaid’s expansion was expected to cover about 15 million people nationwide. It’s unknown at this time how many additional Americans will gain Medicaid coverage.
More State Control
Other proposals for managing the Medicaid program include transferring control to the states. This plan would turn the federal portion of Medicaid funding into block grants. These are lump-sum payments that a state would receive for its Medicaid program. States would have more control over how the funds were used. The annual growth of the federal funds allotted would be capped to match the rate of inflation, plus 1%.