What Is Medicaid? More Than Meets the Eye.

Medicaid is at the center of the current national policy debate. Republican proposals to partially repeal the Affordable Care Act (ACA) include substantial changes to Medicaid that could affect more than 70 million US individuals. How Medicaid works, whom it covers, and how it is funded is a complicated but critical topic. This Viewpoint summarizes the main features of the Medicaid program and how proposed legislation might affect it. Medicaid has become the nation’s largest source of health insurance, covering 77 million people in 2017 (Box). Yetthisstatementbeliesthemultifacetednatureoftheprogram, which covers numerous populations with different programfeatures.OneportionofMedicaidfunctionslargely asahealthinsuranceprogramforlow-incomefamilies.Contrary to popular perception, however, not all poor US residents are eligible for the program. Prior to the passage of the ACA, coverage was available only to low-income individuals in these categories of eligibility: children, pregnant women,parents,elderlyadults,andpeoplewithdisabilities. Medicaid, along with the Children’s Health Insurance Program(CHIP),providesnearlyuniversalcoveragetopoor children.Since1984,allchildren18yearsoryoungerinfamilies below the poverty line have been eligible for Medicaid, and since 1997 CHIP has extended eligibility to near-poor and middle-income families. Together, the programs cover nearly one-third of US children. Medicaid also includes the Early and Periodic Screening, Diagnosis, and Treatment benefit,offeringpreventivescreeningsandcomprehensive care for children with special care needs. Medicaid is also available to pregnant women with incomesnearorbelowthepovertylevel. Itpaysformorethan 40% of the nearly 4 million US births per year, although many women become uninsured when their Medicaid eligibility ends 60 days after delivery. Prior to the ACA, some low-income parents were eligible for Medicaid, but states had considerable discretion to set income cutoffs. For instance, a parent with 2 children needed to have an annual income below $4000 to qualify for Medicaid in Texas; in New York, the cutoff was approximately $27 500. Meanwhile, for adults without children or a disability, Medicaid was not available in any state without a federal waiver; accordingly, most states did not cover this population before the ACA. To close these coverage gaps, the ACA sought to broaden Medicaid eligibility to all adults with incomes up to 138% of the poverty level, regardless of eligibility category(subjecttoimmigrationrequirements). However,the Supreme Court made this expansion optional. Nineteen states chose not to expand, leaving several million lowincome adults without coverage. Medicaid’sothermainroleisprovidingcomprehensive insuranceandlong-termcarecoverageforolderadultsand disabled persons. These groups qualify for Medicaid based onstate-specificincomeandassetstandardsandfunctional limitation tests. Given their extensive care needs, these groups are expensive, representing less than one-fourth of Medicaid recipients but nearly two-thirds of expenditures. Medicaid is the nation’s dominant payer of long-term care services, accounting for more than half of all spending, estimated at $158 billion in 2015.3 Historically, Medicaid longterm care had a strong institutional focus because states weremandatedtocovernursinghomeservices.Overtime, substantialgrowthhasoccurredinhome-andcommunitybased services, and today more than half of Medicaid longterm care spending occurs in those settings.3 Due to age or disability, approximately 11 million Medicaid recipients also qualify for Medicare.1 For these “dually eligible” beneficiaries, Medicare covers their medical care, whereasMedicaidpaysforlong-termcareservicesandprovidescost-sharingassistanceforMedicareservices.Historically,carehasbeenpoorlyintegratedacrossthe2programs. UndertheACA,13statesaretestingmodelsthatalignMedicare and Medicaid financing with the goal of improving coordination of services in this population.1 For all groups, Medicaid coverage is generous in terms ofcoveredbenefits,andco-paymentsforpatientshavetraditionallybeenquitelimited,incontrasttoprivateinsurance orMedicare.However,severalstatesareproposingtoraise cost-sharing substantially for some Medicaid beneficiaries. ThecurrentdebateoverMedicaidfocuseson2primary issues. The first is the fate of the ACA’s Medicaid expansion; ifreversed,stateswouldlikelyreverttothepre-ACAsystem in which most childless adults and many low-income parents did not qualify for Medicaid. The second is a more fundamental restructuring of Medicaid’s financing. Currently, states administer their Medicaid programs and receive reimbursement from the federal government according to a prespecifiedformula(the“matchrate”). High-incomestates likeMassachusettsreceivea50%match,whereasthepoorest state (Mississippi) receives a 75% match. Certain populations, including children in CHIP, receive higher match rates, and newly eligible adults under the ACA expansion qualify for a 95% match (declining to 90% by 2020). Subject to program rules, states can receive matched funds on their Medicaid spending without limit. Republican proposals would replace this open-ended entitlementwithafixedfederalcontribution,eitherablock grant or a cap on per-person spending. Proponents argue thatthiswill leadtomorestateflexibilityandgreaterbudget certainty for the federal government, while critics contend itwill leadtomajorreductionsinbenefitsandeligibility.The CongressionalBudgetOffice(CBO)recentlyestimatedthat this proposal, combined with phasing out the ACA’s expansionfunding,wouldleadtoa26%reductioninfederalMedicaid spending within the next decade and 15 million fewer beneficiaries in the program (representing the majority of the 22 million projected to lose coverage overall under the proposal). 4 Inresponse,thebipartisanNationalAssociation of Medicaid Directors issued a statement that read, in part, “No amount of administrative or regulatory flexibility can compensateforthefederalspendingreductionsthatwould occur as a result of this bill. ”5 VIEWPOINT