MEDICAID 

EXPANSION

States’ Implementation 

of the Patient 

Protection and 

Affordable Care Act

Report to the Ranking Member, 

Committee on the Judiciary, U.S. 

Senate

August 2012

GAO-12-821

United States Government Accountability Office

GAO
Page i GAO-12-821 Medicaid Expansion 

Letter 1 

Background 5

Summary of Findings 6

Concluding Observations 9

Agency Comments and Our Evaluation 9

Appendix I States Must Expand Medicaid Eligibility Levels and Streamline the 

Enrollment Process 11

Appendix II States Have Taken Some Steps to Prepare for Medicaid Expansion 17

Appendix III States Expect Some Budgetary Impacts from Expanding Medicaid, 

and Expressed a Need for Additional Guidance 23

Appendix IV Objectives, Scope, and Methodology 28

Appendix V Comments from the Department of Health and Human Services 34

Appendix VI GAO Contacts and Staff Acknowledgments 38

Tables

Table 1: Description of Selected Provisions of PPACA Included in 

Our Review 3

Table 2: State Budget Director Views on Challenges Affecting 

Medicaid Expansion 25

Table 3: State Budget Director Views on Usefulness of CMS 

Guidance 26

Table 4: Characteristics of the Six Selected States Included in Our 

Review 31

Contents
Page ii GAO-12-821 Medicaid Expansion 

Figures

Figure 1: Timeline for Selected PPACA Provisions 15

Figure 2: State Budget Director Views on Fiscal Implications of 

Medicaid Expansion Aspects 23

Abbreviations

CHIP Children’s Health Insurance Program

CMS Centers for Medicare & Medicaid Services

FPL federal poverty level

FMAP Federal Medical Assistance Percentage

HCERA Health Care and Education Reconciliation Act

HHS Department of Health and Human Services

MAGI Modified Adjusted Gross Income

PPACA Patient Protection and Affordable Care Act

View GAO-12-944SP Key Components

Medicaid Expansion: States’ Implementation of the Patient Protection 

and Affordable Care Act (GAO-12-944SP), an e-supplement to 

GAO-12-821. 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-12-821 Medicaid Expansion 

United States Government Accountability Office 

Washington, DC 20548

August 1, 2012

The Honorable Charles E. Grassley

Ranking Member

Committee on the Judiciary

United States Senate

Dear Senator Grassley:

The Patient Protection and Affordable Care Act (PPACA), signed into law 

on March 23, 2010, made significant changes to the way eligibility for the 

Medicaid program will be determined and who the program will cover.1

Under PPACA, eligibility for Medicaid—a joint federal-state program that 

finances health care for certain categories of low-income individuals—

must be expanded to non-elderly individuals with incomes at or below 133 

percent of the federal poverty level (FPL) beginning on January 1, 

2014.2,3

 

1

Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010) (PPACA), as amended by the Health 

Care and Education Reconciliation Act, Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 

2010).

Through this expansion, states will provide Medicaid coverage to 

eligible low-income parents and childless adults. PPACA also requires the 

establishment of American Health Benefit Exchanges (referred to as 

exchanges)—marketplaces where eligible individuals can purchase 

2

PPACA § 2001(a)(1),124 Stat. 271. In this report, we refer to this group as the “newly 

eligible.” We use FPL to refer to federal poverty guidelines issued by the Department of 

Health and Human Services each year in the Federal Register. These guidelines provide 

income thresholds that vary by family size and for certain states, and which are updated 

using the Consumer Price Index. The national Medicaid minimum eligibility level of 133 

percent of FPL was $29,700 for a family of four in 2011.

3

Under the Medicaid program, a failure by a state to comply with federal requirements 

may result in a termination of federal Medicaid funds by the Secretary of Health and 

Human Services. 42 U.S.C. § 1396c. The U.S. Supreme Court recently ruled that any 

state that chooses not to expand Medicaid coverage to the newly eligible will not be 

subject to this penalty. Instead, the state will forego the enhanced federal matching funds 

associated with covering this population. See National Federation of Independent 

Business, et al., vs. Sebelius, Sec. of Health and Human Services, et al., 567 U.S._, 2012 

WL 2427810 (U.S. June 28, 2012). 

 
 

Page 2 GAO-12-821 Medicaid Expansion 

private health insurance in each state.4 The Centers for Medicare & 

Medicaid Services’ (CMS) Office of the Actuary has estimated that, as a 

result of the expansion, the number of Medicaid enrollees will increase by 

14.9 million in 2014 and by 25.9 million in 2020.5

State governments will play a key role in implementing many aspects of 

this reform, which must be in place by the beginning of 2014. Specifically, 

states will need to make major changes to the way they conduct Medicaid 

eligibility determinations for individuals and families. States also will need 

to develop streamlined eligibility and enrollment systems that allow for the 

coordination of enrollment across Medicaid, the Children’s Health 

Insurance Program (CHIP),6

You asked us to report on the actions states are taking to implement the 

Medicaid expansion. This report addresses the following questions:

and exchanges. At the same time, states will 

need to address the financial implications of implementing this Medicaid 

expansion and accompanying enrollment systems. The federal 

government will initially provide states with full funding to cover the cost of 

adults who are newly eligible for Medicaid due to the expansion.

1. What are states’ responsibilities for implementing the Medicaid 

expansion provisions under PPACA? 

 

4

PPACA requires the establishment of exchanges in each state by January 1, 2014. 

PPACA § 1311(b), 124 Stat. 173. Through each state’s exchange, individuals can 

compare and select insurance coverage from among participating health insurance plans. 

PPACA § 1312, 124 Stat. 182-183. Premium tax credits and cost sharing reductions for 

these plans will be available for eligible individuals or families with income from 100 to 400 

percent of the FPL. PPACA §§ 1401(a),1402 124 Stat. 213-24, as amended by HCERA 

§ 1001, 124 Stat. 1030-32. In addition, if a state does not elect to operate an exchange, 

the Secretary of the Department of Health and Human Services, either directly or through 

an agreement with a nonprofit entity, will establish and operate an exchange within that 

state. PPACA § 1321(c), 124 Stat. 186-7. 

5

Office of the Actuary, Centers for Medicare & Medicaid Services, United States 

Department of Health & Human Services: 2011 Actuarial Report on the Financial Outlook 

for Medicaid (Mar. 16, 2012).

6

CHIP is a federal-state program and provides health care coverage to children 18 years 

of age and younger living in low-income families whose incomes exceed the eligibility 

requirements for Medicaid.
 

Page 3 GAO-12-821 Medicaid Expansion 

2. What actions have selected states taken to prepare for the Medicaid 

expansion provisions of PPACA and what challenges have they 

encountered?

3. What are states’ views on the fiscal implications of the Medicaid 

expansion on state budget planning?

To identify states’ responsibilities for implementing the Medicaid 

expansion, we reviewed selected PPACA provisions (see table 1).

Table 1: Description of Selected Provisions of PPACA Included in Our Review

PPACA provision Description

Medicaid eligibility expansion States must expand Medicaid eligibility to non-elderly 

individuals with incomes at or below 133 percent of 

the federal poverty level. Through this expansion, 

states will provide Medicaid coverage to newly 

eligible low-income parents and childless adults.

Transition to modified adjusted 

gross income (MAGI)

States must begin determining income eligibility for 

Medicaid beneficiaries using a uniform 

methodology—modified adjusted gross income. 

Medicaid early expansion 

option

States may choose to expand coverage to those 

newly eligible prior to January 1, 2014.

Maintenance of effort 

requirement

States must maintain its Medicaid eligibility standards 

until an exchange in the state is fully operational. 

Increased federal matching 

rates for newly eligible adults

States will receive an increased federal match for 

newly eligible adults at 100 percent for 2014 through 

2016 and gradually decreasing to 90 percent by 

2020.

Streamlined eligibility and 

enrollment systems

States must provide a process for individuals to apply 

for or renew their Medicaid eligibility through a 

website that enrolls individuals in the appropriate 

program (Medicaid, CHIP, or exchanges) no matter 

to which program they originally apply.

Source: GAO review of PPACA.

We also reviewed the implementing regulations and guidance from CMS, 

the agency within the Department of Health and Human Services (HHS) 

that oversees states’ Medicaid programs at the federal level. During 

interviews with CMS officials, we obtained status updates on the 

development of additional regulations and guidance and discussed the 

ways CMS provided implementation information to states. We also 

discussed the implementation of these provisions with selected states.
 

Page 4 GAO-12-821 Medicaid Expansion 

To identify the actions selected states have taken to prepare for the 

implementation of the Medicaid expansion and the challenges they 

encountered, we conducted semi-structured interviews with state 

Medicaid officials in six states: Colorado, Georgia, Iowa, Minnesota, New 

York, and Virginia. We selected these states on the basis of: (1) the 

relative size of expected enrollment expansion within Medicaid, (2) the 

state’s Medicaid enrollment rates, (3) geographic dispersion, and (4) 

whether a state expanded insurance coverage to childless adults in the 

past. The findings from these interviews cannot be generalized to all state 

Medicaid offices. We obtained additional information from interviews with 

officials from state associations, including the National Association of 

Medicaid Directors, the National Association of State Budget Officers, and 

the National Conference of State Legislatures.

To identify states’ views on the fiscal implications of the Medicaid 

expansion on state budget planning, we administered a web-based 

survey of state budget directors from all 50 states, the District of 

Columbia, and 4 U.S. territories. Our survey response rate was 76 

percent. The survey document and counts of responses received for each 

question are reproduced in an e-supplement we are issuing concurrent 

with this report—GAO-12-944SP.

7

We conducted our work from June 2011 to July 2012 in accordance with 

generally accepted government audit standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained, 

and the analysis conducted, provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

To obtain additional narrative and 

supporting context, survey respondents were given multiple opportunities 

to provide additional open-ended comments throughout our survey. To 

limit possible data processing errors, survey response data were checked 

for inconsistencies and ineligible responses. We also obtained additional 

information from interviews with federal and state officials and relevant 

state associations. For more details on our scope and methodology, see 

appendix IV.

 

7

GAO, E: supplement: Medicaid Expansion: States’ Implementation of the Patient 

Protection and Affordable Care Act, GAO-12-944SP (Washington, D.C.: Aug.1, 2012).
 

Page 5 GAO-12-821 Medicaid Expansion 

We completed our field work prior to the U.S. Supreme Court’s June 28, 

2012, decision on the constitutionality of certain PPACA provisions, 

including the Medicaid expansion provision discussed in this analysis.8

Given the timing of the court’s decision, and the completion of our field 

work, we do not include an analysis of the impact of this decision.

Medicaid is a joint federal-state program that provides health care coverage 

for certain low-income individuals. At the federal level, CMS is responsible 

for overseeing the design and operation of states’ Medicaid programs. 

States administer their respective Medicaid programs’ day-to-day 

operations within federal requirements. To receive federal matching dollars 

for services provided to Medicaid beneficiaries each state must submit a 

state Medicaid plan for consideration, review, and approval by CMS.9

Medicaid is funded jointly by the federal government and states. The 

amount of federal funds states receive is determined by a statutory 

formula—the Federal Medical Assistance Percentage (FMAP). Under the 

FMAP, the federal government pays a share of Medicaid expenditures 

based on each state’s per capita income relative to the national average. 

The FMAP for federal fiscal year 2012 for states ranged from about 50 

percent to 74 percent. According to the National Governors Association 

and the National Association of State Budget Officers spring 2012 survey, 

Medicaid represents the largest portion of total state spending, 

accounting for an estimated 23 percent of state spending in fiscal year 

2011.10

Under federal Medicaid law, states generally must meet certain minimum 

requirements for establishing eligibility for individuals. Eligibility for 

Medicaid is based on a variety of categorical and financial requirements.

For example, Medicaid eligibility focuses on parents and children, 

individuals who are aged, and individuals with disabilities. Additionally, 

individuals who are eligible for Medicaid must have limited income and 

 

8

National Federation of Independent Business, et al., vs. Sebelius, Sec. of Health and 

Human Services, et al., No. 11-393.

9

A Medicaid state plan describes the scope of a state’s Medicaid program, including a list 

of eligibility categories and standards and the services covered. 

10National Governors Association and the National Association of State Budget Officers, 

The Fiscal Survey of States (Washington, D.C.: Spring 2012).

Background
 

Page 6 GAO-12-821 Medicaid Expansion 

resources, and must meet immigration and residency requirements. 

State-to-state variation in Medicaid eligibility levels exists, particularly for 

low-income adults. According to the Kaiser Family Foundation, as of 

January 1, 2012, the median Medicaid eligibility threshold for working 

parents is 63 percent of FPL and 17 states limit Medicaid coverage to 

parents earning less than 50 percent of FPL. Rules for counting income to 

determine eligibility vary from state to state, and can also vary by 

population within a state.

In summary, we found:

• Under PPACA, states are responsible for making a number of 

changes to their Medicaid programs by January 1, 2014, including 

expanding eligibility levels and streamlining their enrollment 

processes. Specifically, states must expand Medicaid eligibility to nonelderly individuals with incomes at or below 133 percent of FPL.11,12

Under the newly eligible category, states will provide Medicaid 

coverage to eligible low-income parents and childless adults. States 

must also begin determining income eligibility for Medicaid 

beneficiaries, including newly eligible adults, using a uniform 

methodology—MAGI, which is a tax-based definition of income.13

 

11States must expand Medicaid coverage to non-pregnant individuals who are under 65, 

who have household incomes at or below 133 percent of the federal poverty level for the 

applicable family size who are not entitled to or enrolled in Medicare, and who are not 

already required to be covered under Medicaid.

To 

implement these requirements, eligibility categories have been 

consolidated into four groups—adults, children, parents, and pregnant 

women. States may choose to expand Medicaid coverage to the 

newly eligible prior to January 1, 2014 (referred to as the early 

expansion option), but must cover lower income individuals before 

higher income individuals. These more uniform eligibility requirements 

will replace the current system where Medicaid eligibility and income 

rules may vary from state to state. Further, states must adopt a 

12PPACA also specifies that an income disregard in the amount of 5 percent FPL be 

deducted from an individual’s income when determining Medicaid eligibility. This income 

counting rule effectively raises the upper income eligibility threshold for new eligibly 

Medicaid recipients to 138 percent FPL.

13Certain groups of individuals are exempt from this requirement, such as individuals who 

qualify for Medicaid on the basis of being aged, blind, or disabled, and their eligibility will 

continue to be determined based on existing criteria.

Summary of Findings
 

Page 7 GAO-12-821 Medicaid Expansion 

methodology for identifying the newly eligible in order to obtain the 

increased federal match. States will receive the enhanced federal 

match for newly eligible adults starting in 2014.14

• The six selected states included in our study (Colorado, Georgia, 

Iowa, Minnesota, New York, and Virginia) are taking some steps to 

prepare for the Medicaid expansion, including assessing changes that 

need to be made to their existing eligibility levels and eligibility 

determination policies. In an effort to streamline their eligibility and 

enrollment processes, the six states also are taking steps to upgrade 

or replace their Medicaid information technology systems and have 

submitted applications to CMS for enhanced federal funding for this 

purpose.

States must also 

provide a simplified and streamlined eligibility process whereby 

individuals, through a website, may apply for and, if eligible, be 

enrolled in Medicaid. In addition, state eligibility determination 

systems will interface with a Federal Data Services Hub—an 

electronic service states will use to verify certain information with 

other federal agencies, such as an applicant’s citizenship, immigration 

status, and income data. For additional information on our findings, 

see appendix I.

15 In our interviews with selected states, officials noted that 

the enhanced funding provides the states with an opportunity to 

update outdated eligibility and enrollment systems. At the same time, 

state officials reported challenges to implementing PPACA’s Medicaid 

expansion requirements, including the need for additional federal 

regulations and guidance in a number of areas. For example, state 

officials indicated that they need additional guidance on using MAGI16

 

14The federal government will pay 100 percent of the cost of covering new eligible 

individuals in fiscal years 2014, 2015, and 2016, with the federal match gradually reduced 

to 90 percent by 2020.

to determine an applicant’s eligibility under different scenarios 

15The Secretary of Health and Human Services is authorized to provide enhanced 

administrative funding at a rate of 90 percent of the cost for the design, development, or 

installation of information technology enrollment systems that are likely to provide more 

efficient, economical, and effective administration, and 75 percent for the operation of 

those systems. CMS issued a final rule on April 19, 2011, providing for enhanced funding 

through December 31, 2015, for states to upgrade their information technology systems to 

implement the improvements and changes to Medicaid enrollment under PPACA provided 

that the systems meet a number of standards and conditions. 

16As stated earlier, MAGI is the new methodology that states will use beginning in 2014 to 

calculate an applicant’s income to determine whether or not they are eligible for Medicaid.
 

Page 8 GAO-12-821 Medicaid Expansion 

involving household income levels, sources of income, and household 

composition. CMS has issued a final Medicaid rule17

• In terms of states’ views on the fiscal implications of the Medicaid 

expansion on states’ budget planning, our survey found that across 

fiscal years 2012 to 2020, the majority of state budget directors 

believe that three aspects of Medicaid expansion will contribute to 

costs: (1) the administration for managing Medicaid enrollment, (2) the 

acquisition or modification of information technology systems to 

support Medicaid, and (3) enrolling previously eligible but not enrolled 

individuals in Medicaid. At the same time, state budget directors 

expressed uncertainty about how other aspects of expansion will 

affect their budgets, such as the impact of shifting existing Medicaid 

enrollees into health benefit exchanges. Further, most state budget 

directors reported that their fiscal capacity and the state’s share of 

Medicaid expenditures create challenges for implementing the 

Medicaid expansion. A few state budget directors reported that CMS 

guidance was useful, while most commented that more guidance was 

needed to develop budget estimates in the following areas: Medicaid 

benefits packages (including essential and benchmark benefits), 

Medicaid eligibility determination, and the FMAP match for newly 

eligible adults. CMS officials indicated that the agency is planning to 

issue additional guidance or regulations at a later date in a number of 

areas, including clarification on eligibility groups, MAGI, and the 

FMAP methodology for the newly eligible population. For additional 

detail on our findings, see appendix III.

and hosted 

webinars on this and other issues, and said that additional guidance is 

forthcoming. States also reported operational challenges that could 

affect their ability to meet Medicaid expansion and system 

development deadlines, such as lengthy state procurement 

processes, the complexities of developing new systems, coordination 

of multiple programs and systems, and resource limitations. For 

additional information on our findings, see appendix II.

 

17CMS, Medicaid Program; Eligibility Changes Under the Affordable Care Act of 2010,

Final Rule and Interim Final Rule, 77 Fed. Reg. 17,144 (Washington, D.C.: Mar. 23, 

2012).
 

Page 9 GAO-12-821 Medicaid Expansion 

It has been a little over 2 years since the enactment of PPACA, which 

included significant changes to the Medicaid program. The ultimate 

success of the implementation of these changes will depend heavily on 

both federal and state actions. States reported needing additional federal 

regulations or guidance in three areas: application of MAGI methodology, 

conversion of Medicaid eligibility standards, and eligibility data available 

to states through the Federal Data Services Hub. According to state 

officials, the release of regulations or guidance could affect their state’s 

ability to meet implementation deadlines. CMS issued regulations and 

guidance on a range of topics regarding Medicaid expansion and has 

indicated that additional guidance will be forthcoming. Concerted and 

cooperative efforts on the part of CMS and the states will be critical to 

meeting the implementation deadlines for the Medicaid expansion.

We provided the draft for review and comment to HHS. HHS provided us 

with written comments and agreed with our conclusion that additional 

regulations or guidance is needed in various areas, such as MAGI 

conversion and the computation of FMAP. HHS said it plans to issue such 

guidance later this year. It also noted that our report was a helpful 

resource for purposes of targeting its ongoing technical assistance 

implementation efforts with states and outlined several areas in which 

additional guidance or technical assistance will be forthcoming. 

Regarding the Supreme Court’s June 28, 2012, decision that states can 

make their own decisions about whether to expand Medicaid, HHS 

reiterated that (1) there is no deadline for a state to decide to undertake 

the expansion; (2) a state can receive enhanced administrative federal 

match for information technology costs, even if it has not yet decided 

whether to expand Medicaid, as long as it is modernizing its eligibility 

systems; and (3) a state will not have to pay back the extra funding if it 

ultimately decides not to expand Medicaid. HHS’s written comments are 

reproduced in appendix V. Additionally, we provided excerpts of the draft 

report to officials in the six states we interviewed for this study and 

incorporated their technical comments as appropriate. 

Concluding 

Observations

Agency Comments 

and Our Evaluation
 

Page 10 GAO-12-821 Medicaid Expansion 

We are sending copies of this report to the appropriate congressional 

committees and other interested parties. The report is also available at no 

charge on the GAO website at http://www.gao.gov. 

If you have any questions concerning this report, please contact Stanley 

J. Czerwinski at (202) 512-6806 or czerwinskis@gao.gov or Carolyn L. 

Yocom at (202) 512-7114 or yocomc@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Key contributors to this report are listed in 

appendix VI.

Sincerely yours,

Stanley J. Czerwinski

Director

Strategic Issues

Carolyn L. Yocom

Director, Health Care
Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process 

Page 11 GAO-12-821 Medicaid Expansion 

As of January 1, 2014, states must (1) expand Medicaid eligibility to nonelderly individuals with incomes at or below 133 percent of the federal 

poverty level (FPL)1,2

 and (2) begin determining income eligibility for 

Medicaid beneficiaries, including those newly eligible, using a uniform 

methodology—modified adjusted gross income (MAGI),3

 a tax-based 

definition of income. Prior to January 1, 2014, states may choose to 

expand eligibility to those newly eligible (referred to as the early 

expansion option),4

 but must cover lower income individuals before higher 

income individuals. 

Under the newly eligible category, states will provide Medicaid coverage 

to eligible low-income parents and childless adults. In addition, these 

more uniform national requirements will replace the current system where 

Medicaid eligibility and income rules may vary from state to state. 

Currently under Medicaid, eligibility is based on a variety of categorical 

and financial requirements. For example, states must cover certain 

population groups, such as low-income children and pregnant women, but 

have flexibility to cover other groups, such as those same groups at 

higher income levels. Subject to federal minimum standards for income, 

states also have some flexibility in determining how to calculate income, 

such as by excluding certain types of income (e.g., child support 

payments) or applying asset tests (e.g., value of an automobile). Under 

 

1

PPACA § 2001(a)(1), 124 Stat. 271. States must expand Medicaid coverage to nonpregnant individuals who are under 65, who have household incomes at or below 133 

percent of FPL for the applicable family size, who are not entitled to or enrolled in 

Medicare, and who are not already required to be covered under Medicaid. In this section, 

we refer to this group as the “newly eligible.” 

2

Under the Medicaid program, a failure by a state to comply with federal requirements 

may result in a termination of federal Medicaid funds by the Secretary of Health and 

Human Services. 42 U.S.C. § 1396c. The U.S. Supreme Court recently ruled that any 

state that chooses not to expand Medicaid coverage to the newly eligible will not be 

subject to this penalty. Instead, the state will forego the enhanced federal matching funds 

associated with covering this population. See National Federation of Independent 

Business, et al., vs. Sebelius, Sec. of Health and Human Services, et al., 567 U.S._, 2012 

WL 2427810 (U.S. June 28, 2012). 

3

PPACA § 2002, 124 Stat. 279-82, as amended by the HCERA §§ 1004(b),(e), 124 Stat. 

1034, 1036. MAGI, is adjusted gross income, plus certain excluded foreign income and 

tax-exempt interest. See 26 U.S.C. § 36B(d)(2)(B). Certain groups of individuals are 

exempt from this requirement, such as individuals who qualify for Medicaid on the basis of 

being aged, blind, or disabled. 

4

PPACA § 2001(a)(4), 124 Stat. 274, as amended by PPACA § 10201(b), 124 Stat. 918. 

Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process 

Under the Patient 

Protection and 

Affordable Care Act, 

States Must Expand 

Medicaid Eligibility 

Levels and Streamline 

the Enrollment 

Process 
Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process

Page 12 GAO-12-821 Medicaid Expansion 

the Patient Protection and Affordable Care Act (PPACA), however, states 

must uniformly cover all eligible individuals at or below 133 percent of the 

FPL and apply one income methodology using MAGI. To implement 

these provisions, the Centers for Medicare & Medicaid (CMS) has 

consolidated these individuals into four groups—adults, children, parents, 

and pregnant women.5

To make their current policies and processes consistent with these new 

coverage and income eligibility rules, state officials stated they will need 

to take legislative or regulatory action, and will need to receive federal 

approval for these changes from CMS. In addition, states’ continued 

receipt of federal matching funds is contingent upon meeting PPACA’s 

maintenance of effort requirement. In particular, states may not make any 

changes to their Medicaid eligibility levels, methodologies, and 

procedures for adults that are more restrictive than those in place at the 

time of PPACA’s enactment (Mar. 23, 2010) until the Secretary of the 

Department of Health and Human Services (HHS) determines that an 

exchange in the state6 is fully operational.7

In order to determine which beneficiaries are newly eligible and which are 

not, states must evaluate Medicaid applicants against the state’s prePPACA eligibility rules. States will receive an increased federal match for 

newly eligible adults at 100 percent for 2014 through 2016, 95 percent in 

2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and 

beyond.8

 

5

CMS, Medicaid Program; Eligibility Changes Under the Affordable Care Act of 2010, 

Final Rule and Interim Final Rule, 77 Fed. Reg. 17,144, 17,204-5 (Mar. 23, 2012).

In general, states that had already covered parents and 

6

PPACA requires the establishment of a system of American Health Benefit Exchanges—

marketplaces where eligible individuals can purchase private health insurance. PPACA § 

1311(b),124 Stat. 173. Through each state’s exchange, individuals can compare and 

select insurance coverage from amongst participating health insurance plans. PPACA § 

1312, 124 Stat. 182-3. 

7

PPACA § 2001(b)(1)-(3), 124 Stat. 275-76. PPACA also requires states to maintain 

Medicaid eligibility levels for children from March 23, 2010, through September 30, 2019. 

Exceptions to maintenance of effort requirements may be granted for Medicaid eligibility 

restrictions for non-pregnant, non-disabled adults with income above 133 percent of the 

federal poverty level for states experiencing or projecting a budget deficit.

8

PPACA §§ 2001(a)(3),124 Stat. 272-3, as amended by PPACA §10201(c)(3)(B),124 Stat. 

918-19 and HCERA § 1201(1)(B),124 Stat. 1051-52. 

States Must Adopt a 

Methodology to Claim the 

Increased Federal Match 

for the Newly Eligible
Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process

Page 13 GAO-12-821 Medicaid Expansion 

childless adults with incomes of at least 100 percent FPL prior to PPACA 

may receive an increased federal match starting in 2014 for covering 

these individuals.9

By January 1, 2014, states must provide a process whereby individuals, 

through a website, may apply for or renew their eligibility for Medicaid.10

States must also participate in a coordinated eligibility and enrollment 

process for Medicaid and other health insurance programs, including the 

Children’s Health Insurance Program (CHIP) and the health insurance 

exchanges.11

In addition, state eligibility determination systems will interface with a 

Federal Data Services Hub (referred to as the federal hub). The federal 

hub is an electronic service under development by HHS that states will 

use to verify certain information with other federal agencies, such as an 

applicant’s citizenship through the Social Security Administration, 

immigration status through the Department of Homeland Security, and 

income data through the Internal Revenue Service. States may receive

an enhanced administrative federal match—90 percent—for the design, 

The systems for these programs are required to work 

together to ensure that eligible applicants are enrolled in the appropriate 

program no matter to which program they originally apply—referred to as 

the “no wrong door” policy. For each individual not eligible for Medicaid 

based on MAGI, the eligibility system will collect additional information to 

determine eligibility based on other factors.

 

9

PPACA § 10201(c), 124 Stat. 918-19, as amended by HCERA § 1201, 124 Stat. 1051-2. 

These states are eligible for an increased federal matching rate for this population based 

on a formula that will vary based on their regular Federal Medical Assistance Percentage 

until calendar year 2019, at which point they will receive the newly eligible federal 

matching rate described earlier. 

10PPACA makes this requirement a condition for the receipt of federal funding for states’ 

Medicaid programs.

11PPACA § 2201, 124 Stat. 289-91. For example, PPACA requires that individuals who 

are determined ineligible for Medicaid or CHIP be screened for eligibility for the health 

insurance exchanges. Those that are uninsured with incomes from 100 to 400 percent of 

the FPL may qualify for premium tax credits and cost sharing reductions for insurance 

purchased through an exchange. 

States Must Simplify and 

Streamline Medicaid 

Enrollment Processes
Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process

Page 14 GAO-12-821 Medicaid Expansion 

development, and installation or enhancement of eligibility determination 

systems until December 31, 2015.12

CMS published a final Medicaid eligibility rule on March 23, 2012, to 

implement certain PPACA requirements.13

 

12In order to qualify for this enhanced funding, CMS must determine that a state’s system 

meets a number of standards and conditions, including seamless coordination with the 

exchanges. The 90 percent match is available only for these costs that are incurred from 

April 19, 2011, through December 31, 2015. 

In finalizing the Medicaid 

eligibility rule, CMS considered public comments on the proposed 

Medicaid eligibility rule issued in August 17, 2011. The final Medicaid 

eligibility rule addresses the following: (1) expanding eligibility to adults 

with incomes at or below 133 percent FPL, (2) applying MAGI for income 

determination and clarifying MAGI exclusions such as individuals with 

disabilities and those needing long-term care, and (3) streamlining 

eligibility screening and enrollment. CMS held conference calls and 

webinars after issuing the proposed regulation and final rule to provide 

further clarification to states. See figure 1 for a timeline of the Medicaid 

provisions and milestones under PPACA described in this appendix.

13CMS, Medicaid Program; Eligibility Changes Under the Affordable Care Act of 2010, 

Final Rule and Interim Final Rule, 77 Fed. Reg. 17,144 (Mar. 23, 2012).

CMS Has Published 

Implementing Regulations 

and Guidance
Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process

Page 15 GAO-12-821 Medicaid Expansion 

Figure 1: Timeline for Selected PPACA Provisions
Appendix I: States Must Expand Medicaid 

Eligibility Levels and Streamline the 

Enrollment Process

Page 16 GAO-12-821 Medicaid Expansion 

CMS acknowledged that the final rule does not fully address certain 

aspects of the states’ implementation of Medicaid expansion 

requirements. For example, the final rule does not address the process by 

which states should claim the federal match for those newly eligible 

individuals or how states should implement income conversion to 

determine whether individuals are truly newly eligible or would have been 

eligible for Medicaid under the state’s pre-PPACA criteria. CMS is 

continuing to solicit comments on certain aspects of this rule and may 

publish further regulatory changes at a later date. For example, in June 

2012, CMS released a solicitation for public input on potential 

methodologies for converting current eligibility standards to MAGIequivalent standards.14

 

14CMS, Center for Medicaid and CHIP Services, Solicitation of Public Input on Conversion 

of Net Income Standards to Equivalent Modified Adjusted Gross Income Standards, 

(Washington, D.C., June 21, 2012). 
Appendix II: States Have Taken Some Steps to 

Prepare for Medicaid Expansion 

Page 17 GAO-12-821 Medicaid Expansion 

The six selected states in our study (Colorado, Georgia, Iowa, Minnesota, 

New York, and Virginia) are identifying and assessing changes that need 

to be made to their existing Medicaid eligibility levels and categories, and 

eligibility determination policies, to comply with new requirements and 

options for Medicaid expansion addressed in the Patient Protection and 

Affordable Care Act (PPACA). For example:

• Minnesota is identifying changes to eligibility levels to meet PPACA 

Medicaid expansion requirements. The state currently offers Medicaid 

to childless adults with incomes up to 75 percent of federal poverty 

level (FPL), but the state will need to extend coverage to those with 

incomes up to 133 percent of FPL. This expansion will require 

changes in state policies.

• Iowa is determining if it will maintain or eliminate some of its current 

coverage, such as the coverage it offers for individuals who are 

medically needy.1

• New York has identified changes to its eligibility determination 

processes, which currently allow a number of income exclusions that 

will no longer be allowed under PPACA.

State officials are developing “Policy Option 

Papers” to outline necessary policy decisions and provide a list of 

options and recommendations for state decision makers.

2

After states have determined how they need to modify their policies and 

processes, officials stated that various changes to eligibility policies will 

To inform its decision 

making on the consolidation of eligibility categories, the state has also 

hired an outside research organization to compare the state’s existing 

categories with the new consolidated categories for adults, parents, 

children, and pregnant women, and to outline options for ensuring 

alignment.

 

1

In general, states have the option of extending Medicaid coverage to the medically 

needy. The medically needy are individuals who fall under a Medicaid category but whose 

income or resources exceed applicable levels. This coverage group includes individuals 

who are aged, blind or disabled, members of families with children, pregnant women, and 

children under 21 years of age. 

2

Specifically, for the purposes of determining Medicaid eligibility, New York currently 

allows exclusions for certain types of income, such as child support received, room and 

board income, and cash assistance based on need. PPACA prohibits the use of any 

income exclusions for individuals whose financial eligibility will be based on modified 

adjusted gross income (MAGI), other than the income disregard of 5 percent of the FPL to 

be applied to every such individual.

Appendix II: States Have Taken Some Steps 

to Prepare for Medicaid Expansion

States Have Taken 

Some Steps to 

Prepare for Medicaid 

Eligibility Expansion, 

but Face 

Implementation 

Challenges
Appendix II: States Have Taken Some Steps to 

Prepare for Medicaid Expansion 

Page 18 GAO-12-821 Medicaid Expansion 

require state legislative or regulatory action. State officials also said that 

they will need to submit amendments to their state Medicaid plans to 

CMS for review and approval.3

In an effort to streamline their eligibility and enrollment processes, all six 

states are taking steps to replace or upgrade their Medicaid information 

technology systems. These states have submitted applications to CMS 

for enhanced federal funding, known as advanced planning documents, 

to develop or upgrade their eligibility systems. State officials told us that 

they appreciate the enhanced funding in that it affords them an 

opportunity to modernize outdated eligibility and enrollment systems. 

Under this funding arrangement, CMS will pay the state a 90 percent 

match rate for the design, development and installation of Medicaid 

eligibility systems and a 75 percent match rate for maintenance and 

operations costs.4

Further, to facilitate communication and coordination between the state 

agencies that are developing the new eligibility systems, and direct efforts 

to develop new systems, the six states have formed interagency work 

groups. According to state officials, coordination is necessary because 

 The six states are also issuing new requests for 

proposals or modifying existing contracts to secure the services of 

vendors with the necessary technical expertise to develop these eligibility 

systems.

 

3

Some states—including Colorado, Iowa, Minnesota, New York, and Virginia—have 

Medicaid waivers, authorized under Section 1115 of the Social Security Act, that allow 

states to expand eligibility to adults who are not otherwise eligible for Medicaid. If the 

waiver allows a state to cover those with income above 133 percent of FPL, states also 

will need to decide whether to maintain the waiver or allow it to expire. For example, New 

York already covers childless adults up to 100 percent of FPL and parents up to 150 

percent of FPL under a Section 1115 waiver. The state will need to decide whether to 

allow the waiver to expire, or to renew the waiver and continue coverage for parents 

above 133 percent of FPL.

4

In order to qualify for the 90 percent match, states must submit an advanced planning 

document to CMS for approval. In approving the advanced planning document, CMS must 

determine that the design, development, installation, or enhancement of a state’s eligibility 

system meets a number of standards and conditions, including seamless coordination with 

the health insurance exchanges. The 90 percent match is available only for costs incurred 

after April 19, 2011, and before December 31, 2015. Beginning April 19, 2011, states may 

also qualify for a 75 percent match for the operation of eligibility systems that continue to 

meet applicable standards and conditions. This enhanced match is not available for 

systems that do not meet these requirements by December 31, 2015. See, CMS, Federal 

Funding for Medicaid Eligibility Determination and Enrollment Activities, Final Rule, 76 

Fed. Reg. 21950 (Apr. 19, 2011).
Appendix II: States Have Taken Some Steps to 

Prepare for Medicaid Expansion 

Page 19 GAO-12-821 Medicaid Expansion 

these systems are often used for multiple state programs, and must 

interface with state exchanges. These work groups often include 

representatives from the state Medicaid agency, state agencies 

responsible for other public assistance programs that use the same 

eligibility system, the state’s office of information technology, and the 

entity responsible for developing the state’s health benefit exchange.

State officials we interviewed said they need additional federal guidance 

in several areas to address certain requirements under PPACA, including 

using MAGI to determine an applicant’s Medicaid eligibility,5 converting 

current net-income levels to MAGI-equivalent levels,6 and integrating with 

the federal data hub.7

Eligibility determination. Most state officials indicated that they need 

additional guidance on using MAGI to determine an applicant’s eligibility, 

under different scenarios involving household income levels, sources of 

income, and household composition. In March 2012, CMS issued a final 

rule on Medicaid eligibility and subsequently hosted a webinar that 

provided states with guidance for determining household income and

composition under various scenarios. For example, the final rule provided 

a scenario for how states would determine household composition and 

income in the event that a taxpayer claims an adult as a dependent who 

is not expected to file a tax return. In addition, the webinar provided 

examples for determining eligibility under scenarios that involved 

variations in income for one-parent, two-parent, and multi-generational 

households. State officials said that while this guidance has been helpful, 

they need additional guidance to capture the range of possible scenarios 

that can arise in determining eligibility. For example, officials we 

CMS is taking action to issue regulations, 

guidance, and other types of assistance to states to support the 

implementation of these new requirements.

 

5

MAGI is adjusted gross income, increased by certain tax-exempt interest and excluded 

foreign income. 26 U.S.C. § 36B(d)(2)(B).

6

For those individuals whose eligibility will be determined using MAGI, states will need to 

convert their current net income standards to the new income standards under the MAGI 

calculation.

7

As noted earlier, the Federal Data Services Hub is an electronic service that states will 

use to verify information with other federal agencies, such as an applicant’s citizenship 

(through the Social Security Administration), immigration status (through the Department 

of Homeland Security), and income data (through the Internal Revenue Service).

States Reported That the 

Need for Additional 

Guidance and Other 

Challenges Could Affect 

Their Ability to Meet 

Implementation Deadlines
Appendix II: States Have Taken Some Steps to 

Prepare for Medicaid Expansion 

Page 20 GAO-12-821 Medicaid Expansion 

interviewed from Colorado and Iowa noted that questions still remain 

about how to determine the eligibility of children who divide their time 

between two households with two different parents. State officials 

reported that until they receive sufficient guidance, moving forward with 

designing and implementing new eligibility determination systems will be 

a challenge. CMS officials told us that they are aware of the states’ need 

for this information and plan to release additional guidance for 

determining eligibility in the summer of 2012.

Income conversion and submitting claims for different Federal 

Medical Assistance Percentage (FMAP) rates. Most state officials 

reported that they need additional guidance on how to convert current net 

income eligibility levels to MAGI-equivalent levels, to be able to 

distinguish applicants who will be newly eligible following the expansion 

from those who were previously eligible under the state’s Medicaid 

program prior to the expansion. This is important because states will 

receive different matching rates for newly eligible and previously eligible 

adults, and need to know how to assign the appropriate FMAP rate. Since 

2011, CMS has been working on a pilot effort with the RAND Corporation, 

the State Health Access Data Assistance Center, and 10 states8 to 

identify MAGI income conversion option methodologies for claiming the 

appropriate FMAP rate. CMS officials indicated that this effort is ongoing 

and that additional publications—including regulations and technical 

assistance—will be forthcoming in 2012. For example, in June 2012, 

CMS released a solicitation for public input on potential methodologies for 

converting current eligibility standards to MAGI-equivalent standards.9

System integration with the federal data hub. State officials said they 

need additional guidance to determine how their systems will interface 

with the federal hub, the types of information they will be able to access, 

and whether they will be able to retain this information for quality 

assurance purposes. For example, some state officials we interviewed 

told us there is still uncertainty about the kind of information that the 

Internal Revenue Service will provide for verifying applicant income. This 

 

8

The 10 states included in the pilot project are: Arizona, California, Indiana, Nebraska, 

New Hampshire, New York, Oregon, Tennessee, Virginia, and West Virginia.

9

Center for Medicaid and CHIP Services Informational Bulletin, Solicitation of Public Input 

on Conversion of Net Income Standards to Equivalent Modified Adjusted Gross Income 

Standards (Baltimore, MD, June 21, 2012). 
Appendix II: States Have Taken Some Steps to 

Prepare for Medicaid Expansion 

Page 21 GAO-12-821 Medicaid Expansion 

information is important because the federal data hub will serve as a 

primary data source for verifying applicant information related to income 

and citizenship. States need to know what data will be available through 

the hub in order to design and implement eligibility verification. In 

response to questions about the status of this guidance, CMS officials 

said they have been working with the other federal agencies involved in 

providing data through the federal hub, and that the agency is close to 

releasing additional guidance.

In addition to federal guidance, states reported that several state-level 

operational issues may also challenge their ability to meet Medicaid 

expansion and system development deadlines. These issues include:

Lengthy procurement processes. Some state officials we interviewed 

said that states must follow procurement processes to secure contractors 

to manage the development of new eligibility systems, which can take 

months to complete. The length of time can be exacerbated by delays in 

the approval of necessary documentation, such as advanced planning 

documents and requests for proposals, at the federal or state level. For 

example, officials from Virginia reported that once all necessary 

documentation has been approved at the federal and state level, a 

request for proposal is released, and a contract is awarded, the state will 

likely have less than 12 months remaining to work with a vendor to 

implement a new system.

Complexity of developing new systems. Some state officials also 

reported that they must manage the complexity of developing and 

transitioning to a new eligibility system, which may take years to fully 

complete. For example, officials from New York reported that they must 

ultimately replace two outdated eligibility systems that are used for 

different parts of the state. In attempting to create a seamless operation, 

officials said that continuing to operate the existing program while 

simultaneously trying to develop and migrate to a new system will be 

challenging.

Coordination of multiple programs and systems. Some state officials 

said that their eligibility systems can be used to manage eligibility and 

enrollment for multiple public assistance programs, in addition to 

Medicaid. In these situations, developing and implementing a new 

eligibility system becomes significantly more complicated because states 

must manage the transition of multiple programs to a new system. For 

example, officials from Colorado reported that they share an eligibility 

system among multiple departments—including the state’s Department of 
Appendix II: States Have Taken Some Steps to 

Prepare for Medicaid Expansion 

Page 22 GAO-12-821 Medicaid Expansion 

Health Care Policy and Financing and the Department of Human 

Services. The state must determine how the new systems will 

accommodate the needs of these departments, and which components of 

the broader system modernization effort will take priority.

Resource limitations. Understanding and implementing eligibility and 

system changes required by PPACA have placed new demands on state 

agencies that face limitations on staff resources. For example, officials 

from Georgia reported that due to a recent decline in the number of 

available staff, the state Medicaid agency has a limited pool of staff to 

plan and manage large projects. At the same time that staff are preparing 

to comply with the Medicaid eligibility policy and system changes required 

by PPACA, they are also managing several other major procurements 

and a large Medicaid program redesign project.

To ensure key system changes are in place before 2014, state officials 

told us that they plan to use a phased approach to implementation. For 

example, in some states, this approach will focus first on ensuring that 

new systems are capable of determining Medicaid eligibility for applicants 

using MAGI beginning in 2014, while the integration of other public 

assistance programs is planned for later stages. Further, state officials 

told us that to help supplement existing staff resources, states are using 

vendors, consultants, and external organizations to access additional 

assistance and expertise.
Appendix III: States Expect Some Budgetary 

Impacts from Expanding Medicaid, and 

Expressed a Need for Additional Guidance

Page 23 GAO-12-821 Medicaid Expansion 

Our survey found that across fiscal years 2012 to 2020, the majority of 

state budget directors believe that three aspects of Medicaid expansion 

will contribute to costs: (1) the administration for managing Medicaid 

enrollment, (2) the acquisition or modification of information technology 

systems to support Medicaid, and (3) enrolling previously eligible but not 

enrolled individuals in Medicaid (as shown in fig. 2).

Figure 2: State Budget Director Views on Fiscal Implications of Medicaid Expansion Aspects

Note: The “N” in the graphic above refers to the total number of survey respondents. 

a

While 42 state budget officers responded to the survey question of whether shifting individuals from 

state coverage to Medicaid contributed a cost or savings in fiscal years 2012 through 2014, 41 budget 

officers responded to the question for fiscal years 2015 through 2017 and for fiscal years 2018 

through 2020. 

Appendix III: States Expect Some Budgetary 

Impacts from Expanding Medicaid, and 

Expressed a Need for Additional Guidance

States Expect Some 

Budgetary Impacts 

from Expanding 

Medicaid, and 

Expressed a Need for 

Additional Guidance
Appendix III: States Expect Some Budgetary 

Impacts from Expanding Medicaid, and 

Expressed a Need for Additional Guidance

Page 24 GAO-12-821 Medicaid Expansion 

Written comments provided in response to our survey, while not 

representative of all state budget directors, provide some insights about 

their views on these costs. For example, one state budget director said 

that in addition to the administrative costs for enrolling individuals and 

acquiring new information technology,1 the state will experience other 

increased administrative costs for processing claims and authorizing prior 

claims as a result of higher Medicaid enrollment. A number of state 

budget directors expressed concern about costs associated with insuring 

individuals who are currently eligible for Medicaid but are not enrolled. A 

number of state budget directors said currently eligible but unenrolled 

individuals may now apply for Medicaid benefits due to increased 

outreach and penalties for those who do not purchase insurance.2

Furthermore, our survey found that many states are uncertain about how 

certain aspects of the Medicaid expansion will affect their budgets.3

Figure 2 also shows that for some aspects of the expansion, several state 

budget directors perceived a budget savings. For example, some 

reported that reductions in uncompensated care and enrolling the newly 

eligible population would result in budget savings across all fiscal years. 

For 

example, across fiscal years 2012 to 2020, more than half of the state 

budget directors reported they did not know the impact of shifting existing 

Medicaid enrollees into health benefit exchanges—more so than any 

other expansion aspect we asked about. In addition, at least half of the 

state budget directors indicated they did not know if shifting individuals 

from state coverage into Medicaid would result in a cost or savings to 

their budgets across fiscal years 2012 to 2020 (see fig. 2).

 

1

As we noted earlier in this report, states may receive an enhanced administrative federal 

match—90 percent—for the design, development, and installation or enhancement of 

eligibility determination systems until December 31, 2015. States may also receive a 75 

percent federal match for the maintenance and operations costs associated with these 

systems. 

2

Beginning in 2014, all United States citizens and legal residents and their dependents will 

be required to maintain minimum essential insurance coverage unless exempted, and will 

have to pay a financial penalty if they fail to maintain such coverage. PPACA § 1501(b), 124 

stat. 244-49.

3

For the purposes of this report, to characterize the 42 responses provided by state 

budget directors, we defined modifiers (e.g., “many”) to quantify their responses as 

follows: “a few” or “a number of” refers to 8 or fewer responses, “several” or “some” refers 

to 9 to 20 responses, “many” or “more than half” refers to 21 to 31 responses, and “nearly 

all” refers to 32 or more responses.
Appendix III: States Expect Some Budgetary 

Impacts from Expanding Medicaid, and 

Expressed a Need for Additional Guidance

Page 25 GAO-12-821 Medicaid Expansion 

Several state budget directors reported also that shifting individuals from 

state funded coverage to Medicaid would result in budget savings for all 

fiscal years. However, as noted in figure 2, over half as many reported 

that they did not know whether this aspect would contribute costs or 

savings to their budgets.

Our survey asked state budget directors about their views on challenges 

that may affect their implementation of Medicaid expansion. Nearly all of 

the state budget directors reported that fiscal capacity and the state’s 

share of Medicaid expenditures will be very or moderately challenging to 

implementing Medicaid expansion. Regarding other budget factors we 

asked about, nearly all states reported that federal funding for Medicaid 

expansion will be very or moderately challenging within the time period, of 

fiscal years 2017 to 2020, when the federal matching rate for the newly 

eligible enrollees will gradually decline from 95 percent to 90 percent.4

Further, as shown in table 2, many states reported they did not know the 

impact of the local or county share of the states’ Medicaid expenditures 

on their budgets.5

Table 2: State Budget Director Views on Challenges Affecting Medicaid Expansion

Degree of challenge

Challenge Very Moderately Slightly Not at all

Do not know/not 

applicable Total

State fiscal capacity 28 4 4 2 4 42

State share of Medicaid expenditures 27 5 3 3 4 42

Local or county share of state Medicaid expenditures 3 3 5 6 24 41

Federal funding for Medicaid expansion 

implementation (fiscal years 2017 to 2020)

16 10 5 5 6 42

Source: GAO analysis of survey responses from state budget directors.

 

4

As explained earlier, states will receive an increased federal match for newly eligible 

adults at 100 percent for 2014-2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 

2019, and 90 percent in 2020 and beyond.

5

Some states require local or county governments to contribute to the state share of 

Medicaid expenditures. Of the states that require a local or county government 

contribution, the required contribution percentage varies and may include administrative, 

mental health, long term care, nursing home, and acute care costs.

States Reported That Their 

Fiscal Capacity and Share 

of Medicaid Expenditures 

Challenge Their 

Implementation of the 

Medicaid Expansion
Appendix III: States Expect Some Budgetary 

Impacts from Expanding Medicaid, and 

Expressed a Need for Additional Guidance

Page 26 GAO-12-821 Medicaid Expansion 

Recognizing that the purpose of federal guidance is to help states 

implement Medicaid, we asked states how useful federal guidance was 

for developing budget estimates. As shown in table 3, a few state budget 

directors reported that the guidance was very or moderately useful, while 

most reported that the guidance was slightly or not at all useful.

Table 3: State Budget Director Views on Usefulness of CMS Guidance 

Usefulness Number of respondents

Very useful 2 

Moderately useful 4 

Slightly useful 20

Not at all useful 10

Don’t know/not applicable 6 

Source: GAO analysis of survey responses from state budget directors.

As part of our survey, we asked states what additional guidance, if any, 

they needed from CMS or other agencies to assist with developing 

budget estimates for Medicaid expansion. In response, 31 state budget 

directors provided written comments about what additional guidance they 

needed, which we have summarized:

• Medicaid benefits packages. A number6 of state budget directors 

indicated they need additional guidance on definitions for essential 

and benchmark benefits for the newly eligible population.7

• Medicaid eligibility determination. Some state budget directors 

indicated they need additional guidance on Medicaid eligibility, 

This 

guidance would help clarify the types and parameters of coverage 

required for ambulatory, emergency, and laboratory services.

 

6

For the purposes of this report, to characterize the 31 written responses provided by 

state budget directors, we defined modifiers (e.g., “a number of”) to quantify their 

responses as follows: “a few” or “a number of” refers to 6 or fewer responses, “several” or 

“some” refers to 7 to 15 responses, “many” or “more than half” refers to 16 to 21 

responses, and “nearly all” refers to 21 or more responses.

7

Under PPACA, states are required to provide most people who become newly eligible 

under the Medicaid expansion with “benchmark” benefits. These benchmark benefits are 

the same level of benefits that must be provided to individuals signing up for exchange 

plans or who have coverage under individual or small group health plans, beginning in 

2014. 

A Few State Budget 

Directors Reported CMS 

Guidance Was Useful 

While Many Reported 

Additional Guidance is 

Needed
Appendix III: States Expect Some Budgetary 

Impacts from Expanding Medicaid, and 

Expressed a Need for Additional Guidance

Page 27 GAO-12-821 Medicaid Expansion 

including methodologies for calculating Modified Adjusted Gross 

Income (MAGI) for the newly eligible, definitions for household 

composition and income for caretakers and persons with disabilities. 

CMS’s final rule made some changes to selected eligibility 

determination provisions; however, a few state budget officers 

indicated that clarification is needed to refine state budget estimates.

• Federal Medical Assistance Percentage (FMAP). Several state budget 

directors indicated they need guidance from CMS on submitting 

claims for the federal match for newly eligible adults and that such 

guidance is necessary for developing accurate budget estimates.

CMS officials indicated that the agency is planning to issue additional 

regulations or guidance such as operational bulletins at a later date in a 

number of areas, including clarification on eligibility groups, MAGI and the 

FMAP methodology for the newly eligible populations.
Appendix IV: Objectives, Scope, and 

Methodology

Page 28 GAO-12-821 Medicaid Expansion 

This appendix describes how we did our work to identify (1) states’ 

responsibilities for implementing certain provisions under the Patient 

Protection and Affordable Care Act (PPACA),1,2 (2) actions selected 

states have taken to prepare for the Medicaid expansion provisions of 

PPACA and the challenges they have encountered, and (3) states’ views 

on the fiscal implications of the Medicaid expansion on state budget 

planning. To address these objectives, we reviewed relevant PPACA 

provisions; regulations and guidance issued by the Department of Health 

and Human Services (HHS), the Centers for Medicare & Medicaid 

Services (CMS), and information regarding Medicaid expansion published 

by state associations; we conducted semi-structured interviews with 

Medicaid officials in six states regarding the details of their current plans 

for implementing the expansion and we administered a web-based survey 

of state and U.S. territory budget directors. We also interviewed CMS 

officials responsible for developing and issuing regulations and guidance 

to states on the expansion.

To identify state responsibilities for implementing the Medicaid expansion 

provisions of PPACA, we identified relevant provisions of PPACA that 

impose new requirements related to Medicaid eligibility levels, 

modifications to eligibility determination systems, federal funding provided 

to support the expanded population, and changes to Medicaid enrollment 

processes to facilitate expansion. Specifically, we reviewed the following 

PPACA provisions:

1. eligibility for Medicaid coverage expanded to individuals with income 

at or below 133 percent of the federal poverty level;

3

2. increased federal matching rates for costs associated with the newly 

eligible;4

 

1

Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as amended by HCERA, Pub. L. No. 

111-152, 124 Stat. 1029 (Mar. 30, 2010).

2

For purposes of this section, we refer to these provisions as the “Medicaid expansion 

provisions.”

3

PPACA § 2001(a)(1), 124 Stat. 271. 

4

PPACA § 2001(a)(3), 124 Stat. 272-3, as amended by PPACA §10201(c)(3)(B), 124 Stat. 

918-19 and HCERA § 1201(1)(B), 124 Stat. 1051-52.

Appendix IV: Objectives, Scope, and 

Methodology 

Medicaid Expansion 

Provisions and 

Implementing Regulations 

and Guidance
Appendix IV: Objectives, Scope, and 

Methodology

Page 29 GAO-12-821 Medicaid Expansion 

3. state options to offer Medicaid coverage to the newly eligible earlier 

than January 1, 2014;5

4. requirement that a state maintain its Medicaid eligibility standards until 

an exchange in the state is fully operational;6

5. the transition to using Modified Adjusted Gross Income—a tax-based 

definition of income—to determine income eligibility for medical 

assistance for non-elderly individuals;7

6. the creation of streamlined eligibility and enrollment systems.

and

8

Further, we reviewed certain implementing federal regulations and 

guidance, including rules, informational bulletins, State Medicaid Director 

and State Health Official letters, and questions and answers. Examples 

include the following:

• CMS, Medicaid Program; Eligibility Changes Under the Affordable 

Care Act of 2010, Final Rule and Interim Final Rule, 77 Fed. Reg. 

17,144 (Mar. 23, 2012); 

• HHS/USDA/CMS Letter to State Medicaid and CHIP Directors, State 

Exchange Grantees and Health & Human Service Directors providing 

additional guidance on cost allocation for state eligibility determination 

systems (Jan. 23, 2012); 

• HHS/USDA/CMS Letter to State Medicaid & CHIP Directors, State 

Exchange Grantees and Health & Human Services Directors on cost 

allocation for state eligibility determination systems (Aug. 10, 2011); 

• CMS Letter to State Medicaid Directors on maintenance of effort 

provisions (Aug. 5, 2011); 

 

5

PPACA § 2001(a)(4), 124 Stat. 274, as amended by PPACA § 10201(b), 124 Stat. 918.

6

PPACA § 2001(b)(1)-(3), 124 Stat. 275-76.

7

PPACA § 2002, 124 Stat. 279-82, as amended by HCERA §§ 1004(b), (e), 124 Stat. 

1034, 1036. 

8

PPACA § 2201, 124 Stat. 289-91. 
Appendix IV: Objectives, Scope, and 

Methodology

Page 30 GAO-12-821 Medicaid Expansion 

• CMS, Medicaid Program; Federal Funding for Medicaid Eligibility 

Determination and Enrollment Activities, Final Rule, 76 Fed. Reg. 

21,950 (Apr. 19, 2011); 

• Informational Bulletin on recent developments in Medicaid, including 

developing and upgrading Medicaid IT systems (Apr. 14, 2011); 

• CMS Letter to State Medicaid Directors on maintenance of effort 

provisions (Feb. 25, 2011); and

• CMS Letter to State Health Officials/State Medicaid Directors on new 

option for coverage of individuals under Medicaid (Apr. 9, 2010). 

In addition, we reviewed reports that summarized state responsibilities 

with regard to the Medicaid expansion required under PPACA from the 

Congressional Budget Office, Congressional Research Service, and 

relevant state associations, including: the Council of State Governments, 

National Association of Insurance Commissioners, National Association 

of Medicaid Directors, National Association of State Chief Information 

Officers, National Association of State Budget Officers, National 

Conference of State Legislatures, and National Governors Association.

To identify what actions states have taken to prepare for the 

implementation of the Medicaid expansion and what challenges they 

encountered, we administered semi-structured interviews with officials in 

state Medicaid offices in six states: Colorado, Georgia, Iowa, Minnesota, 

New York, and Virginia. We selected these states on the basis of:

1. the relative size of expected enrollment expansion within Medicaid,9

2. the state’s Medicaid enrollment rates,

 

9

This refers to the Medicaid Expansion Index, a measure of the relative size of a state’s 

potential expansion made up of the number of uninsured adults who will be eligible for 

Medicaid in each state in 2014 and an estimate of the potential number of newly eligible 

Medicaid enrollees in each state. Values greater than 100 are higher than the national 

average and those less than 100 are lower than the national average. For additional 

information, see Leighton Ku, Ph.D., M.P.H.; Karen Jones, M.S.; Peter Shin, Ph.D., 

M.P.H.: Brian Bruen, M.S.; and Katherine Hayes, J.D. “The States’ Next Challenge—

Securing Primary Care for Expanded Medicaid Populations,” The New England Journal of 

Medicine, vol. 364, no. 6 (Feb. 10, 2011).

Selected State Studies
Appendix IV: Objectives, Scope, and 

Methodology

Page 31 GAO-12-821 Medicaid Expansion 

3. geographic dispersion, and

4. whether a state expanded insurance coverage to childless adults in 

the past.

Table 4 provides information on the characteristics of the states we 

selected.

Table 4: Characteristics of the Six Selected States Included in Our Review

State 

Relative size of expected 

enrollment expansion 

Whether the state expanded 

insurance coverage to childless 

adults in the past

Number of Medicaid enrollees

(as of June 2010)

Colorado 109.5 No 526,200

Georgia 126.1 No 1,457,400

Iowa 82.8 Yes 407,300

Minnesota 90.4 Yes 712,700 

New York 57.6 Yes 4,722,200

Virginia 108.7 No 785,700

Source: GAO analysis of information provided by the Kaiser Family Foundation Commission on Medicaid and the Uninsured and the 

work of Leighton Ku, Ph.D., M.P.H.; Karen Jones, M.S.; Peter Shin, Ph.D., M.P.H.: Brian Bruen, M.S.; and Katherine Hayes, J.D. “The 

States’ Next Challenge—Securing Primary Care for Expanded Medicaid Populations,” The New England Journal of Medicine, vol. 364, 

no. 6 (Feb. 10, 2011).

We conducted initial interviews in-person and by telephone between 

January and March 2012, and follow-up interviews between April and 

May 2012. The interview questions focused on: the states’ policies and 

procedures in implementing the Medicaid expansion, guidance and 

technical assistance provided and needed for the implementation, 

interagency efforts with state governments and other agencies to prepare 

for the implementation, and communication between state officials. The 

responses to the interviews are not intended to be representative of all 

Medicaid offices.

In addition, we conducted interviews with officials from CMS and relevant 

state associations, including the National Conference of State 

Legislatures, National Association of State Budget Officers, and National 

Association of Medicaid Directors.
Appendix IV: Objectives, Scope, and 

Methodology

Page 32 GAO-12-821 Medicaid Expansion 

To identify states’ views on the fiscal implications of the Medicaid 

expansion on state budget planning, we developed and administered a 

web-based survey to state budget directors in the 50 states, the District of 

Columbia, and 4 U.S. territories (American Samoa, Guam, Puerto Rico,

and the U.S. Virgin Islands). Using e-mail addresses provided by the 

National Association of State Budget Officers, we e-mailed each state 

budget director a link to a secure survey website, along with a unique 

identifier and password to control access to each state’s questionnaire. 

Most survey questions were closed-ended, in which budget directors 

selected from a list of possible responses. To obtain additional narrative 

and supporting context, survey respondents were given multiple 

opportunities to provide additional open-ended comments throughout the 

survey.

We received completed questionnaires from 42 of the 55 entities, for an 

overall response rate of 76 percent. We conducted the survey from 

February 29, 2012, to April 10, 2012. Several days before the survey 

period began, we notified recipients that they would be receiving it. We 

also followed up via e-mail and telephone with nonrespondents several 

times before the survey period ended.

Estimates from our survey may be subject to errors from nonresponse,

measurement, and data processing. We took steps in the design, data 

collection, and analysis of our survey to limit such errors.

While our survey sample included all states and territories in our target 

population, and is therefore not subject to errors from population 

coverage or sampling, 13 states and territories did not respond to the 

survey. In addition, not all those responding to the survey answered all 

survey questions. To minimize errors from nonresponse, we made 

multiple followup contacts with complete or partial nonrespondents 

throughout the survey. However, to the extent nonrespondents would 

have answered a particular question differently from those who did 

answer, our survey estimate for that question would differ from the true 

value that would have resulted had all states responded.

To limit the risk of measurement errors arising from deficiencies in 

questionnaire structure, question and answer wording, or respondent 

errors in reporting, our survey research specialists and staff with subject 

matter expertise designed the format and content of the questionnaire.

We pretested the survey with officials from one state to ensure that 

questions were clear, comprehensive, and unbiased, and to minimize the 

Web Survey of State 

Budget Directors
Appendix IV: Objectives, Scope, and 

Methodology

Page 33 GAO-12-821 Medicaid Expansion 

burden the questionnaire placed on respondents. We also reviewed the 

survey with officials from the National Association of State Budget 

Officers. On the basis of these pretest results and comments, we revised 

the questionnaire for clarity and content.

To limit possible data processing errors, survey response data were 

checked for inconsistencies and ineligible responses. An independent 

analyst checked all programs used to make edits to and analyze the 

survey results.

In addition to the data from the survey provided in this report and its 

appendixes, each survey question along with responses to it is presented 

in GAO-12-944SP, an e-supplement to this report.

We conducted our work from June 2011 to July 2012 in accordance with 

generally accepted government audit standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained, 

and the analysis conducted, provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 
Appendix V: Comments from the Department 

of Health and Human Services

Page 34 GAO-12-821 Medicaid Expansion 

Appendix V: Comments from the Department 

of Health and Human Services
Appendix V: Comments from the Department 

of Health and Human Services

Page 35 GAO-12-821 Medicaid Expansion 
Appendix V: Comments from the Department 

of Health and Human Services

Page 36 GAO-12-821 Medicaid Expansion 
Appendix V: Comments from the Department 

of Health and Human Services

Page 37 GAO-12-821 Medicaid Expansion 
Appendix VI: GAO Contacts and Staff 

Acknowledgments

Page 38 GAO-12-821 Medicaid Expansion 

Stanley J. Czerwinski, Director, Strategic Issues, (202) 512-6806 or 

czerwinskis@gao.gov

Carolyn L. Yocom, Director, Health Care, (202) 512-7114 or 

yocomc@gao.gov

In addition to the contacts named above, Michelle Sager, Acting Director; 

Brenda Rabinowitz, Assistant Director; Walter Ochinko, Assistant 

Director; Carl Ramirez, Assistant Director; Sandra Beattie, Analyst-inCharge; Amy Bowser; Kisha Clark; Robert Gebhart; Catherine Hurley; 

Adam Miles; Cynthia Saunders; Hemi Tewarson; and Ann Tynan made 

key contributions to this report.

Appendix VI: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Staff 

Acknowledgments

(450904)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (www.gao.gov). Each weekday afternoon, 

GAO posts on its website newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, 

go to www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. 

Visit GAO on the web at www.gao.gov. 

Contact:

Website: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations

Public Affairs

Please Print on Recycled Paper.