Updated December 3, 2018
Overview of the ACA Medicaid Expansion
The primary goals of the Patient Protection and Affordable
Care Act (ACA; P.L. 111-148, as amended) are to increase
access to affordable health insurance for the uninsured and
to make health insurance more affordable for those already
covered. The ACA Medicaid expansion is one of the major
insurance coverage provisions included in the law.
Supreme Court Decision
As enacted, the ACA Medicaid expansion was a mandatory
expansion of Medicaid eligibility to non-elderly adults with
incomes up to 133% of the federal poverty level (FPL).
However, on June 28, 2012, in National Federation of
Independent Business v. Sebelius, the U.S. Supreme Court
found that the federal government could not withhold
payment for a state’s entire Medicaid program for failure to
implement the ACA Medicaid expansion. Instead, the
federal government could withhold only funding for the
ACA Medicaid expansion if a state did not implement the
expansion, which effectively made the expansion optional.
After the Supreme Court ruling, the Centers for Medicare &
Medicaid Services (CMS) issued guidance specifying that
states have no deadline for deciding when to implement the
ACA Medicaid expansion. The guidance also stated that
states opting to implement the ACA Medicaid expansion
may end the expansion at any time.
Figure 1. States Implementing the ACA Medicaid
Expansion, November 2018
(January 1, 2015), Indiana (February 1, 2015), Alaska
(September 1, 2015), Montana (January 1, 2016), and
Louisiana (July 1, 2016). (See Figure 1.)
Virginia is expected to begin coverage of the ACA
Medicaid expansion on January 1, 2019. Maine adopted the
expansion through a ballot initiative in November 2017,
and Maine’s current governor has refused to implement the
expansion. However, the governor-elect has stated publicly
that she will implement the expansion.
The results of the November 2018 election could have
implications for the ACA Medicaid expansion. In Idaho,
Nebraska, and Utah, voters approved ballot initiatives to
implement the expansion. Also, new governors and changes
in the composition of state legislatures could change states’
decisions regarding the expansion. Some non-expansion
states might decide to adopt the expansion, and some
expansion states could decide to end that coverage.
ACA Medicaid Expansion Waivers
Most states implementing the ACA Medicaid expansion
have done so through an expansion of their existing
Medicaid programs. However, seven states (Arizona,
Arkansas, Indiana, Iowa, Michigan, Montana, and New
Hampshire) operate their expansions through Section 1115
waivers. Under Section 1115 of the Social Security Act, the
Secretary of the Department of Health and Human Services
(HHS) may authorize a state to conduct experimental, pilot,
or demonstration projects that, in the judgment of the
Secretary, are likely to assist in promoting the objectives of
Medicaid.
The waivers for these seven states vary significantly, but
there are a few common provisions, such as: (1) premiums
and/or monthly contributions on enrollees with income
above 100% of FPL (Arizona, Arkansas, Indiana, Iowa,
Michigan, and Montana); (2) healthy behavior incentives
(Arizona, Indiana, Iowa, and Michigan); (3) waivers of the
requirement to provide coverage of nonemergency medical
transportation (Indiana and Iowa); and (4) disenrollment or
lock-out provisions (Arizona, Arkansas, Indiana, Iowa, and
Montana).
Source: Congressional Research Service.
Note: ACA = Patient Protection and Affordable Care Act.
States’ Decisions
Since January 1, 2014, states have had the option to extend
Medicaid coverage to most non-elderly, nonpregnant adults
with income up to 133% of FPL. Twenty-four states and the
District of Columbia implemented the ACA Medicaid
expansion at that time. Since then, the following seven
states have implemented the expansion: Michigan (April 1,
2014), New Hampshire (July 1, 2014), Pennsylvania
Private Option
Arkansas and Michigan have waivers that allow mandatory
enrollment in the private option, which provides premium
assistance for Medicaid enrollees to purchase private health
insurance through the health insurance exchanges.
Michigan is currently in the process of phasing out the
private option.
Work and Community Engagement Requirements
State requests to include work requirements in Section 1115
waivers for the expansion population were denied under the
https://crsreports.congress.gov
Overview of the ACA Medicaid Expansion
Obama Administration. In January 2018, under the Trump
Administration, CMS issued a State Medicaid Director
Letter advising states that they could apply for Section 1115
waivers to implement work and community engagement
requirements as a condition of eligibility for expansion
adults and other non-elderly, nonpregnant Medicaid
enrollees.
2019, the expansion state matching rate varies by state; it is
higher than states’ regular FMAP rate but lower than the
newly eligible matching rate. In 2019 and subsequent years,
the expansion state matching rate is the same as the newly
eligible matching rate (i.e., 93% in 2019 and 90% in 2020
and subsequent years).
To date, four states (Arkansas, Indiana, Kentucky, and New
Hampshire) have received approval to implement work and
community engagement requirements that affect expansion
adults. Three states (Arizona, Ohio, and Michigan) have
waiver requests pending that would affect expansion adults.
The ACA Medicaid expansion has significantly increased
Medicaid enrollment and federal Medicaid expenditures. In
FY2017, an estimated 12 million individuals were newly
eligible for Medicaid through the ACA Medicaid expansion
(i.e., expansion adults), and total Medicaid expenditures for
the expansion adults were an estimated $71 billion.
Enrollment for the expansion adults is projected to be
13 million in FY2026, and expenditures for the expansion
adults are projected to be $120 billion in FY2026 (with the
federal government paying $108 billion and states paying
$12 billion).
Partial Expansion
In 2012, CMS issued guidance saying that states were not
able to receive the enhanced federal matching rates for the
expansion for 2014 and 2015 with a partial Medicaid
expansion (i.e., covering expansion adults up to an income
level lower than 133% of FPL). The guidance noted that,
starting in 2017, a partial expansion may be considered in
coordination with a Section 1332 waiver.
Two current expansion states (Arkansas and Massachusetts)
and one current non-expansion state (Utah) have requested
Section 1115 waivers to partially expand Medicaid. Thus
far, CMS has approved other components of the waiver
requests from Arkansas and Massachusetts but did not
approve the partial expansion requests. Utah’s waiver
request is still pending.
Financing of the Expansion
The federal government’s share of most Medicaid
expenditures is determined according to the federal medical
assistance percentage (FMAP) rate, but exceptions to the
regular FMAP rate have been made for certain states,
situations, populations, providers, and services. The ACA
adds a few FMAP exceptions for the ACA Medicaid
expansion, including the newly eligible matching rate and
the expansion state matching rate.
Newly Eligible Matching Rate
The newly eligible matching rate is used to reimburse states
for Medicaid expenditures for newly eligible individuals
who gained Medicaid eligibility due to the ACA Medicaid
expansion. The newly eligible matching rate started at
100% in 2014 and phases down to 93% in 2019, and then
down to 90% in 2020 and subsequent years. Federal statute
specifies the newly eligible matching rate for each year,
which means the newly eligible matching rates are available
for these specific years regardless of when a state
implements the ACA Medicaid expansion.
Expansion State Matching Rate
In this context, expansion state refers to states that had
already implemented (or partially implemented) the ACA
Medicaid expansion at the time the ACA was enacted. The
expansion state matching rate is available for expansion
enrollees without dependent children in expansion states
who were eligible for Medicaid on March 23, 2010. Before
Enrollment and Expenditures
Between FY2014 and FY2015, the average per enrollee
costs for expansion adults is projected to have increased
from $5,511 to $6,365 (see Figure 2). States originally
included adjustments to expansion adult per enrollee costs
to account for pent-up demand, adverse selection, and
expected higher health care needs. Per enrollee costs
dropped to $5,965 in FY2016 and $5,813 in FY2017, as the
effects of the pent-up demand were expected to end and
evidence showed that the actual average costs for the
expansion enrollees were lower than anticipated.
Figure 2. Projected ACA Medicaid Expansion and
Non-Expansion Adult Per Enrollee Costs
Source: Centers for Medicare & Medicaid Services (CMS), 2017
Actuarial Report on the Financial Outlook for Medicaid, 2018.
Note: ACA = Patient Protection and Affordable Care Act.
As shown in Figure 2, the projected per enrollee costs for
expansion adults also have been higher than the projected
per enrollee costs for non-expansion adults. After FY2017,
per enrollee costs for the expansion adults are still projected
to remain higher than costs for the non-expansion adults but
to grow at a similar rate.
Alison Mitchell, Specialist in Health Care Financing
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IF10399
Overview of the ACA Medicaid Expansion
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