How the Affordable Care Act Affects Medicaid


The 2010 Affordable Care Act (ACA) includes provisions that improve and strengthen Medicaid. These include a state option to expand Medicaid eligibility, expansion of coverage for Medicaid-covered preventive services, an option to cover health homes, and enrollment simplification requirements.

Eligibility expansion: Under the ACA, states may expand Medicaid eligibility to cover adults without dependent children if their incomes are at or below 138 percent of the federal poverty level. States choosing this option receive enhanced federal funds to pay for it. This option eliminates an asset test for determining eligibility. Instead, it uses a modified adjusted gross income standard to determine income eligibility. Modified adjusted gross income MAGI is defined as an individual’s or a couple’s gross income (for federal tax purposes), with adjustments that add back certain deductions such as foreign income and tax-exempt interest.

When people who qualify for Medicaid under the expansion option become eligible for Medicare, they are required to give up their Medicaid-expansion coverage. However, some of them will still be eligible for coverage under Traditional Medicaid rules because they meet a state’s income and asset requirements. Others may be able to get help with their Medicare cost-sharing obligations through one of the Medicare Savings Programs, commonly referred to as MSPs (see also Medicaid Assistance for Medicare Beneficiaries with Low Incomes). Thus, individuals with low incomes who are transitioning from the Medicaid expansion into Medicare must receive timely outreach and education so that they are aware of and can gain access to these important benefits.

Legal immigrants: Legal immigrants who have lived in the U.S. for less than five years may only access Medicaid if they need emergency services or if the state pays 100 percent of their costs. The ACA allows legal immigrants who have not yet met that requirement to buy coverage and receive subsidies through the health insurance exchanges.

Selected U.S. territories: In general, territories must operate Medicaid within broad federal guidelines and under federally approved plans. But American Samoa and the Northern Mariana Islands have federal waivers that exempt them from federal eligibility rules. The remaining territories have some leeway in how they cover their Medicaid populations. Federal Medical Assistance Percentage for the territories is set by statute at 50 percent.

Preventive services: The ACA expands Medicaid coverage to include certain clinical preventive services and recommended vaccines. It also allows states to choose to make these services available to enrollees without cost-sharing. States that do so qualify for a 1-percentage-point Federal Medical Assistance Percentage increase.

Health homes: The ACA gives state Medicaid programs the option to enroll individuals with chronic conditions in a health home. Health homes are composed of a team of health professionals who provide a comprehensive set of medical services, including care coordination. To qualify, individuals must have at least two chronic conditions, have one chronic condition and be at risk for a second, or have one serious and persistent mental health condition.

Enrollment simplification: The ACA requires states to conduct a range of activities to reduce enrollment barriers in Medicaid. Examples include enrollment simplification requirements, making enrollment options for other low-income programs available on websites, and conducting more outreach to potentially eligible people.

States are required to:

  • create procedures that allow people to apply for, become enrolled in, or renew enrollment in Medicaid or a waiver program on a website that is linked to the state’s exchange website and the state’s Children’s Health Insurance Program (CHIP) website;
  • conduct outreach to and enroll members of vulnerable and underserved populations who are eligible for Medicaid or CHIP;
  • allow people to enroll or re-enroll using an electronic signature;
  • ensure that applicants for Medicaid under the state plan or a waiver, as well as those who apply for CHIP but are found ineligible, are screened for eligibility for a qualified exchange plan and any premium assistance;
  • create procedures for using the state’s website to enroll those who have been identified by the exchange as being Medicaid-eligible under a state plan or waiver, or as CHIP-eligible, without any further enrollment determination by the state;
  • ensure the use of a secure electronic interface that can make eligibility determinations for Medicaid, CHIP, premium assistance, or enrollment in a qualified health plan; and
  • conduct outreach to and enroll members of vulnerable and underserved populations who are eligible for Medicaid or CHIP.

Payment provisions for health care-acquired conditions: The ACA does not allow Medicaid payments for certain health care-acquired medical conditions that can be prevented by providers. Applicable rules set minimum conditions under which providers will not be paid for certain preventable conditions in inpatient hospitals and other health care settings.

Disproportionate share hospital payments: The ACA reduces states’ disproportionate share hospital (DSH) allotments by amounts ranging from 25 percent to 50 percent once the state’s uninsured rate decreases by 45 percent. As the rate of uninsurance continues to decline, states’ DSH allotments will be reduced by corresponding amounts.

Medicaid and CHIP Payment and Access Commission: The ACA expands the duties of the Medicaid and CHIP Payment and Access Commission (MACPAC) to include coordinating with the Medicare Payment Advisory Commission, especially with respect to dually eligible beneficiaries. The ACA also changes the MACPAC’s reporting requirements and provides funding for the body.



Participation and coverage

Federal and state governments should:

  • ensure that all people living at or below 138 percent of the federal poverty level are covered by Medicaid;
  • increase Medicaid participation among eligible people of all ages; and
  • ensure adequate provider participation in Medicaid, including participation by dental and long-term services and supports providers.

Eligibility and services

All states should elect the option to expand Medicaid to cover uninsured populations with low incomes.

States should exercise available options to cover optional services, including the Program of All-Inclusive Care for the Elderly (known as PACE) and dental services for adults.

Enrollment expansion and outreach

States should conduct robust outreach and enrollment activities to identify newly eligible individuals. These efforts must be tailored to meet the needs of culturally diverse populations, including legal immigrants.