Medicaid, the largest payer in the U.S. healthcare system, is of significance to almost all in the industry. Many members of the College are familiar with the program, but for those who aren’t, I hope this column will help clarify the fundamentals of Medicaid — allowing for a better understanding of its current and future role.
Enacted as part of the Social Security Act Amendments of 1965 (the same legislation that created Medicare), Medicaid is an entitlement program giving eligible individuals rights to payment for medically necessary healthcare services. By 2019, the program covered 76 million Americans, accounted for nearly 20% of the nation’s personal healthcare spending, and played a particularly important role in financing healthcare costs for impoverished children, adults with disabilities, and nursing home residents.
Medicaid is a federal/state partnership, with CMS accountable for implementing the program while individual states are responsible for its administration. Within broad guidelines, states are at liberty to define covered populations, services, healthcare delivery models, and payment methods. As one can imagine, variability is the rule, rather than the exception, in Medicaid programs, and there are substantial differences from state to state — with covered population percentages varying from 10% in Utah to 33% in New Mexico. Funding is jointly but not equally shared, with federal support (known as the federal match rate) determined by the wealth of a given state and ranging from 50% of Medicaid costs for the wealthiest states to 75% for the poorest.
In 2010, the Affordable Care Act expanded Medicaid to cover those under the age of 65 and earning below 138% of the federal poverty level ($17,236 per annum for an individual with no dependents). To date, 38 states and the District of Columbia have adopted Medicaid expansion and 12.5 million of the newly eligible have enrolled. Although 12 states have not yet expanded their rolls, the politics of expansion appear to have changed and the number of states doing so is expected to grow. Expansion enrollees are funded by the federal government at a significantly higher rate (90% of Medicaid costs) than pre-expansion populations, which is of particular significance for state budgets during times of economic stress.
Many studies now indicate that Medicaid expansion has had positive effects on a variety of outcomes, starting with a reduction in the overall uninsured rate. More specifically, there has been an improvement in racial imbalances affecting both access to and utilization of healthcare. Overall, expansion appears to have significantly narrowed but not entirely closed the income and race-based gap in healthcare utilization. This is encouraging, but the elimination of socioeconomic health disparities depends on far more than a robust, equitable healthcare system. Much that influences the diseases afflicting disadvantaged Americans is independent of healthcare.
To date, 38 states and the District of Columbia have adopted Medicaid expansion and 12.5 million of the newly eligible have enrolled.
That said, the beneficial effects of Medicaid are many and there is now ample evidence of Medicaid’s role in reducing poverty and inequality: income, economic mobility, attainment of higher education and even tax paid increases in populations who have had access to the program at some point in their lifetimes.
COVID-19 has major implications as Medicaid is a counter-cyclical program, seeing enrollment growth during economic downturns — which consequently pressures state budgets as tax revenues fall. Assumptions of stable Medicaid enrollee numbers in 2020 and very modest spending growth have changed dramatically over the past months.
Nearly all states now project growth in Medicaid enrollment over the coming years and it is estimated there will be 17 million Americans newly eligible by January 2021 — at which time state tax revenues may have decreased by 50%. The federal government has responded by authorizing a 6.2% increase in the federal match rate (which, as discussed above, applies to states’ pre-expansion Medicaid populations), given the intensity of the downturn and the consequent effects on state revenues.
Medicaid is about to get larger as millions lose private health insurance as a result of the COVID-19 pandemic. The program will continue to play its intended role, ensuring the provision of healthcare to America’s most vulnerable.