Overview

Medicaid—a federal/state partnership with shared authority and financing—is a public health coverage program for low-income children, their parents, the elderly and people with disabilities. Medicaid pays for health and long-term care services for more than 55 million people.  Although participation is optional, all 50 states participate.
 
Eligibility varies widely among states because, although states must meet federal minimum requirements such as covering certain people and offering specific benefits, they may also choose to cover additional “optional” people and services. Provisions of the Patient Protection and Affordable Care Act (PPACA) expanded Medicaid to all Americans under age 65 whose family income is at or below 133 percent of federal poverty guidelines ($14,484 for an individual and $29,726 for a family of four in 2011) by Jan. 1, 2014. Under PPACA, states failing to participate in this expansion would risk losing their entire federal Medicaid allotment.
 
The Medicaid expansion provision of the federal health reform law led to challenges that rose to the Supreme Court where, on June 28, 2012, the court ruled that Congress may not make a state’s entire existing Medicaid funds contingent upon the state’s compliance with the PPACA Medicaid expansion.  In practice, this ruling makes the Medicaid expansion a voluntary action by states. 
 
The Court's decision sparked many questions from state policymakers. In a series of letters, the  Department of Health and Human Services (HHS) has begun to clarify its interpretation of the ruling. In the initial letter on July 10, HHS Secretary Kathleen Sebelius addressed the decision and the next steps. Furthermore, responding to a letter from the Republican Governors Association (RGA) requesting additional guidance from the Obama administration, Marilyn Tavenner, the acting administrator of the Centers for Medicare and Medicaid Services,  clarified in a letter that no deadlines had been set for states to make a decision concerning the expansion of their Medicaid programs. 
 
The optional expansion is not the only PPACA-related Medicaid change state policymakers face. The law also made several changes that influence Medicaid operations and the program’s cost to states.  The federal health reform law:
 

• Modifies how income is calculated for most Medicaid applicants, including those in the new eligibility group. Beginning in 2014, states must use Modified Adjusted Gross Income (MAGI) to determine eligibility of most applicants. MAGI is adjusted gross income as defined in the Internal Revenue Code, modified by applying a 5 percent “disregard.” This method eliminates resource tests. The combined effect of requiring coverage for people with incomes up to 133 percent of poverty and then use of MAGI budgeting effectively raises the income level for most Medicaid applicants to 138 percent of poverty.
• Requires that states maintain eligibility standards that were in place as of March 23, 2010.
• Provides all newly eligible adults with a benchmark benefit package that meets the minimum essential health benefits that will be available in the new health insurance exchanges.
• Requires states to improve outreach and enrollment for Medicaid and to coordinate Medicaid eligibility with the new health benefit exchange, which must be operational by 2014.
• Reduces Medicaid disproportionate share hospital (DSH) allotments.
• Increases primary care provider payments for a two year period.
• Expands state options for home and community-based services.

For a complete list of PPACA Medicaid provisions, please click here.

States remain the laboratory of innovation for Medicaid and are not waiting for implementation or repeal of PPACA to address Medicaid issues. State lawmakers are exploring innovative ways to improve the value of the Medicaid program. To improve quality, states are aligning incentives with their desired outcomes and experimenting with new payment models, such as attaching provider payments to patients’ health outcomes.  There are also adopting new delivery systems by creating medical homes and streamlining services for those eligible for both Medicaid and Medicare.
 
For more information on state Medicaid actions, please refer to the right-hand column for additional NCSL resources 
 

Children's Health Insurance Program (CHIP)

The Children's Health Insurance Program (CHIP, formerly SCHIP) was created by the Balanced Budget Act of 1997, enacted Title XXI of the Social Security Act, and has allocated about $20 billion over 10 years to help states insure low-income children who are ineligible for Medicaid but cannot afford private insurance. States receive an enhanced federal match (greater than the state's Medicaid match) to provide for this coverage.  Each state is entitled to a specific allotment of federal funds each year. 

NCSL has tracked and reported on the many changes, expansions and state-based discussions about CHIP programs and has more than 50 online reports, articles, legislative tracking databases on this topic.

Medicare and SSI/SSDI

 The federal Medicare program provides health coverage for more than 40 million Americans who are age 65 and over, or have a certified disability. Because the program is designed by congressional action and federal regulations, states have played a limited role in the operation of Medicare. However, state legislatures increasingly must consider Medicare features when designing state funded or state regulated health programs.  In particular certain parts of Medicare have a stronger relation to state policy. These include:

• Medicare "Part D" Prescription drug benefits.
• "Medigap" supplemental insurance.
• Residents "dually-eligible for both Medicaid and Medicare.
• Medicare provider reimbursement rates, which frequently are also used when setting rates for non-federal insurance and programs.

NCSL has several reports and articles that describe such Medicare-related activities.