Comparing Medicaid and Exchanges: Benefits and Costs for Individuals and Families
Released: 2013-06-26T00:00:00

Summary:
The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) expands health insurance coverage primarily through two mechanisms: by expanding the existing Medicaid program and by establishing new health insurance exchanges where certain individuals and businesses can purchase private health insurance. Under ACA, Medicaid and exchanges are envisioned to work in tandem, with the potential to provide a continuous source of subsidized coverage for lower-income individuals and families, beginning in 2014.
On June 28, 2012, the U.S. Supreme Court issued a decision in National Federation of Independent Business v. Sebelius. The Court held that the federal government cannot terminate current Medicaid program federal matching funds if a state does not expand its Medicaid program, effectively making the ACA expansion "optional." As a result, some states may choose not to expand their Medicaid program. Individuals who are eligible for Medicaid are not eligible for subsidies in exchange plans. Thus, some individuals in these states would not be eligible for Medicaid and could become eligible for subsidized exchange coverage, while others may remain uninsured.
Individuals who receive coverage through exchange plans will likely not receive the same benefits offered by the Medicaid program, and vice versa. For example, traditional Medicaid provides a wide range of benefits to certain beneficiaries that are not typically covered in major medical plans in the private market, such as non-emergency transportation services or Early Periodic Screening, Diagnosis, and Treatment (EPSDT). Exchange plans will reflect a "typical" private health insurance plan offered by employers, which generally includes a wide range of benefits, but not necessarily all, that are offered to various Medicaid groups of individuals. Exchange plans will be required to offer essential health benefits, which include preventive services with no cost-sharing, a benefit available to many, but not all, Medicaid beneficiaries. Thus there will likely be differences in available benefits for some individuals, depending on whether they are covered by Medicaid or exchange plans.
In lieu of traditional Medicaid benefits, states can choose to offer an alternative set of benefits (benchmark and benchmark-equivalent coverage) that will include the essential health benefits, but only to certain groups of Medicaid beneficiaries. This alternative set of benefits has the potential to more closely align the benefits under Medicaid and the exchange for certain individuals.
In addition to differences in benefits, there may also be differences with regard to the costs required of individuals. Currently, states may require certain Medicaid beneficiaries to share in the cost of services, but because of their lower income, such obligations are generally limited. Nonetheless, variation exists across the different categories of Medicaid eligibility groups with respect to costs. Similarly, ACA provides for premium and cost-sharing assistance for the purchase of exchange plans for certain lower-income individuals. However the only permissible variation across qualified individuals (or families) for these exchange subsidies is based on income.
Another group for whom the alignment between Medicaid and exchanges is important is composed of individuals who are covered by Medicaid today, but who may lose Medicaid coverage when states are allowed to scale back their Medicaid program. This state "maintenance of effort" requirement for covering certain adults will be lifted beginning in 2014 (and in 2019 for the coverage of children). Some of these individuals will qualify for subsidies through exchange plans, while others may become uninsured. Additionally, some individuals may "churn"; that is, they may go back and forth between Medicaid and exchange coverage, depending on their financial or other situation at the time. While some "churning" may be unavoidable, minimizing its effects may be critical to the health coverage of affected individuals and families.
The 113th and future Congresses will likely continue to play a significant role in shaping U.S. health care policy. This report provides an analysis of some of the key similarities and differences between Medicaid and insurance plan structure in plans offered through exchanges. Because Medicaid services vary by population covered and by state, and exchanges' plans can also vary by state, this report provides insight into the complexities and issues when comparing beneficiary benefits and costs to individuals for Medicaid and the exchanges. The inherent variations in Medicaid and the uncertainty about exactly how the exchanges will operate are just two of the factors that complicate a comparison.

subsections: section_title: Introduction
paragraphs: The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 , as amended) expands health insurance coverage primarily through two mechanisms: by expanding the existing Medicaid program and by establishing new health insurance exchanges where certain individuals and businesses can purchase private health insurance. Under ACA, Medicaid and exchanges are envisioned to work in tandem, with the potential to provide a continuous source of subsidized coverage for lower-income individuals and families, beginning in 2014.
However, a significant legal development has the potential to impact the connection and possibly coordination between Medicaid and the exchanges, as well as the overall rate of uninsurance. On June 28, 2012, the U.S. Supreme Court issued a decision in National Federation of Independent Business v. Sebelius . The Court held that the federal government cannot terminate current Medicaid program federal matching funds if a state does not expand its Medicaid program, effectively making the ACA expansion "optional." As a result, some states may choose not to expand their Medicaid program. Thus, some individuals in these states would not be eligible for Medicaid and could become eligible for subsidized exchange coverage, while others may remain uninsured.
The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) issued the original cost estimate of ACA's coverage provisions on March 20, 2010. Their latest estimate (February 2013 Baseline) incorporates the potential impact of the Court's decision. According to the 2013 Baseline, by 2022, ACA's coverage provisions will result in 12 million individuals being covered under Medicaid and the State Children's Health Insurance Program (CHIP), and 26 million individuals obtaining health insurance through the newly established exchanges, leaving 29 million nonelderly individuals uninsured. 
The potential impact of the Court's decision on coverage may be seen in the comparison of the baseline estimate issued prior to the Court's decision (March 2012 Baseline) with the most recent estimate. Post the Court's decision, 5 million fewer individuals would be covered under Medicaid and CHIP, and 3 million more individuals would be enrolled in the exchanges in 2022. The Court's decision on the Medicaid expansion and the subsequent estimates by CBO and JCT highlight the underlying relationship between Medicaid and the exchanges. With participation in the ACA Medicaid expansion now a choice for states, this report analyzes the implications for those who may become eligible for subsidized exchange coverage because their state chose not expand its Medicaid program, or as a result of other small shifts in coverage. 
Specifically, the differences between Medicaid and exchange coverage may have critical implications for the estimated 3 million individuals who may become eligible for subsidized coverage through the exchanges. In addition to this population, this report also considers the impact on current Medicaid beneficiaries who could lose access to Medicaid if they live in a state that scales back on currently required program eligibility policies when the ACA maintenance of effort (MOE) provisions no longer apply in 2014 for adults or 2019 for children (referred to as the "scale back population"). A third group of potentially affected individuals are those who may "churn", that is, they may go back and forth between Medicaid and exchange coverage, depending on their financial or other situation at the time. While some "churning" may be unavoidable, minimizing its effects may be critical to the health coverage of affected individuals and families. 
This report provides broad comparisons between federal statutorily required beneficiary benefits and costs associated with Medicaid and the exchanges. The analysis is focused on the beneficiary's perspective, and does not address costs to the federal government or the states associated with the ACA expansion provisions. The analysis of the potential implications on populations less than 65 years of age is divided into four groups: (1) non-disabled children, (2) pregnant women, (3) non-disabled adults, and (4) individuals with chronic disabling conditions (i.e., individuals whose chronic condition leads to a disability). Medicaid's different statutory eligibility classifications determine the benefits that the individual is entitled to as well as cost sharing obligations they must meet. This report does not include an analysis of the impacts on Medicaid's age 65+ populations (those populations who are dually eligible for Medicare and Medicaid), as these individuals, by virtue of their eligibility for Medicare, are not permitted to receive federal subsidies through the exchanges. This report does not attempt to capture state-specific details on program design, but rather provides a comparison of the federal requirements that will structure the choices available to states in designing their programs. This analysis is by no means exhaustive; rather it is illustrative of the complexities that are inherent in the interactions between Medicaid and the exchanges. While the analysis is current, the overall coverage and regulatory landscape is evolving. This report reflects information about how the Administration will likely implement certain aspects of the coverage provisions of the ACA based on regulations and other administrative guidance and announcements that were publicly available at the time of the publication of this report. For a discussion of the fundamental differences between Medicaid and ACA exchanges that shape the interactions between these programs, see Appendix A .
section_title: Benefits Under Medicaid and Exchange Plans
paragraphs: This section provides a description of benefits under Medicaid and the exchanges. It provides a framework for the comparison of benefits, which follows.
subsections: section_title: Benefits Under Medicaid
paragraphs: For many beneficiaries, states cover a comprehensive package of mandatory and optional benefits, often referred to as "traditional" Medicaid state plan coverage. These benefits are identified in federal statute and regulations, and include a wide range of primary, preventive, and acute medical services as well as long-term services and supports (LTSS). Some benefits are items, such as eyeglasses and prosthetic devices. Other benefits are defined by the provider of the service (e.g., physicians, hospitals). Still others are a type of service (e.g., pregnancy-related services). Additional benefits include premium payments for coverage provided through managed care arrangements, for example. Finally, in certain circumstances the Medicaid program includes coverage for non-medical benefits such as habilitation services which are designed to assist individuals with disabilities in acquiring, retaining, and improving self-help, socialization, and adaptive skills necessary to reside successfully in home and community-based settings. 
States define the specific features of each covered benefit within broad federal guidelines. For example, states may place different limits on the amount of inpatient hospital services a beneficiary can receive in a year (e.g., up to 15 inpatient days per year in one state versus unlimited inpatient days in another state). For these reasons, there is great variability across states in terms of their Medicaid benefit coverage. Thus, it is difficult to make benefit comparisons across the state Medicaid programs (which also varies by individuals and/or groups). 
As an alternative to providing all of the mandatory and selected optional benefits under "traditional" Medicaid, the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) gave states the option to enroll state-specified groups in "alternative" plans, that is, benchmark and benchmark-equivalent benefit packages. In general, these benefit packages may cover fewer benefits than traditional Medicaid. The alternative plans include the same benefits offered under one or more of the following:
the Blue Cross/Blue Shield preferred provider plan under the Federal Employees Health Benefits Program (FEHBP), a plan offered to state employees, the largest commercial health maintenance organization (HMO) in the state, other Secretary-approved coverage appropriate for the targeted population, or an additional option under which (benchmark-equivalent) coverage must have the same actuarial value (AV) as one of the benchmark plans.
Beginning in 2014, these alternative packages must cover at least the essential health benefits (EHBs) that will also apply to plans offered in the exchanges. In addition, these packages must cover family planning and mental health services. 
section_title: Benefits in Exchange Plans
paragraphs: All health plans offered through the exchanges must provide a comprehensive set of covered benefits (with the exception of stand-alone dental plans), and comply with all applicable ACA private market reforms (e.g., extend dependent coverage to children under age 26). In general, exchange plans must provide coverage for EHBs. ACA does not explicitly list the benefits included in EHBs, rather the law identifies 10 broad categories of benefits that, at a minimum, must be included as part of EHBs:
ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness and chronic disease management; and pediatric services, including oral and vision care. 
ACA provides the Secretary of HHS with the authority to define and periodically update EHBs. The law requires the Secretary of HHS to ensure that the scope of EHBs is equal to the scope of benefits under a typical employer-sponsored health plan. In addition, the HHS Secretary must consider the diverse needs of different consumer groups, as well as other factors, in defining EHBs. 
HHS published a bulletin on December 16, 2011, which required that "EHB be defined by a benchmark plan selected by each State." HHS identified four benchmark plan types that a state could use for the purpose of defining EHBs in the state (see Table 1 for a comparison between Medicaid and exchange benchmark plans):
One of the three largest plans in the state's small group health insurance market; One of the three largest health plans offered to state employees; One of the three largest national plans offered through the Federal Employees Health Benefits Program (FEHBP); or The largest commercial non-Medicaid health maintenance organization in the state. 
On February 25, 2013, HHS issued final regulations on standards related to EHBs. In the Appendix of that rule, the EHB benchmark plan for each state is listed. (For states that did not voluntarily select a benchmark plan, the default benchmark option—the largest plan by enrollment in the state's small group market—will apply.) The number of states for which each benchmark plan type applies are: 
Small group plans: 45 states, D.C. and Puerto Rico; State employee plans: 2 states; FEHBP plans: American Samoa, Guam, Northern Mariana Islands, and Virgin Islands; and Commercial HMOs: 4 states. 
Each state's benchmark plan will apply to their respective exchanges for plan years 2014 and 2015. HHS will then revisit this issue for the 2016 plan year. 
section_title: Comparing Medicaid and Exchange Plans: Potential Implications for Benefits
paragraphs: Medicaid's alternative set of benefits (benchmark and benchmark-equivalent coverage) will include the essential health benefits, and has the potential to align with the benefits available under the exchange for certain individuals. While the term "benchmark" is used both in the Medicaid program and in the ACA exchanges to define specific benefit packages and/or identify certain types of health insurance plans, the definition of "benchmark" is not the same in each of these programs. Table 1 shows the potential overlap between the alternative plans under Medicaid and the EHB benchmark plan types in the exchanges.
Table 2 summarizes key differences in benefits provided under Medicaid (whether under traditional state plan coverage or alternative benefit coverage) and exchanges for various Medicaid-eligible populations. The benefits differences and similarities identified in Table 2 are discussed in greater detail in the following section, by four Medicaid eligibility subcategories.
subsections: section_title: Non-disabled Children
paragraphs: For children, Medicaid services exceed those typically available under private health insurance that will be offered through exchanges, because of the benefit protections provided under EPSDT. The EPSDT program—which is a required benefit for nearly all Medicaid beneficiaries under 21 years of age —covers health screenings and services, including assessments of each child's physical and mental health development; laboratory tests (including lead blood level assessment); appropriate immunizations; health education; and vision, dental, and hearing services. States are required to provide all federally allowed treatment to correct problems identified through screenings, even if the specific treatment needed is not otherwise covered under a given state's Medicaid plan and regardless of any state-defined limits on the amount, duration, and scope of the benefit. States that opt for alternative Medicaid coverage must also extend EPSDT to populations under age 21. While no information is available as to whether or not exchange plans would include EPSDT, this benefit is not typically included in private health insurance plans.
section_title: Pregnant Women
paragraphs: Within federal guidelines, states can choose to provide full Medicaid coverage for all pregnant women, to limit services to only those related to pregnancy or complications, and/or to cover certain enhanced pregnancy-related services. In addition, Medicaid eligibility for the pregnant women only extends for 60 days after childbirth. Unless a woman can meet the eligibility requirements of another of Medicaid's eligibility pathways (e.g., Section 1931 family coverage, or the ACA expansion group beginning in 2014), after 60 days of post-partum care she is no longer eligible for Medicaid. Exchange plans will cover maternity and newborn care, along with many other acute care services, as part of the health insurance plan, and cannot limit services to only provide coverage of a specific condition or illness. Thus while pregnancy-related services will likely be comparable between Medicaid and exchange plans, not all services to this group of women may be comparable in states that limit services. 
Pregnant women who are unauthorized immigrants are eligible for emergency Medicaid services only. Emergency Medicaid services include coverage of labor and delivery, and may include limited medical care after delivery. Individuals who are not lawfully residing in the United States are not permitted to purchase insurance through the exchanges, even if they could pay the entire premium and all cost-sharing for services. 
section_title: Non-disabled Adults
paragraphs: States that offer alternative Medicaid benefit coverage (to specified groups including ACA expansion eligibles) will be required to cover the same EHBs provided in exchange plans. This alignment of benefits will likely result in a closer matchup of benefits available under Medicaid and those available through the private market than what existed prior to 2014. However, the actual scope of benefits provided in the exchanges may vary across states. As discussed previously, each state is allowed to decide which existing health plan will be the model for EHBs for each state exchange for 2014-2015. Any differences that currently exist across state benchmark plans will also exist across state exchanges, further complicating comparisons with Medicaid benefits.
ACA contains other benefit-related provisions that may also facilitate a crosswalk between services available under Medicaid and the exchanges. For example, with regard to preventive health services, the ACA expanded the previously existing Medicaid state plan option to provide "other diagnostic, screening, preventive, and rehabilitation services" for adults to include immunizations recommended by the Advisory Committee on Immunization Practices (ACIP) and their administration. While coverage of preventive services for adults under traditional Medicaid is generally an optional benefit, Medicaid alternative plan coverage must offer preventive health services. Potentially, not all Medicaid beneficiaries will receive these preventive services.
In another example, the ACA contained provisions that address both the coverage of mental health and substance use disorder services and the terms under which these services are covered. While the ACA did not change the federal mental health requirements, it did extend the applicability of these requirements to Medicaid's alternative benefit plans (as well as two types of private health plans). Consequently, only certain Medicaid beneficiaries will be guaranteed access to federal mental health parity protections. 
By contrast, there are certain provisions in ACA that preclude coordination of services available under Medicaid and the exchanges. For example, while the Medicaid program has historically provided "wrap-around coverage" to supplement coverage available through the private health insurance market, such coverage does not appear to be an available option for individuals who are eligible for exchange subsidies, because individuals may only be eligible for one low-income subsidy program (i.e., Medicaid, CHIP, subsidies to purchase coverage through the exchanges) at any given time. 
For individuals with chronic conditions such as mental health concerns or multiple chronic conditions as in the case of an individual with cardiovascular disease and diabetes, Medicaid (whether under traditional or alternative benefit coverage) generally provides access to services to manage chronic conditions. Whether Medicaid beneficiaries with chronic conditions are able to obtain the types and amount of services that treat their specific conditions depends upon the particular state and its list of Medicaid covered benefits. Exchange plans must cover "chronic disease management." As under Medicaid, whether individuals enrolled in exchanges receive health services that treat their chronic conditions will depend on each individual's specific needs and the breadth of the benefits covered in the specific plan in which they enroll. 
Regardless of the potential matchup between many services available under the private market with those available through Medicaid, under Medicaid states must also cover additional services such as non-emergency transportation for medical care, and the cost of an attendant if necessary. Such benefits are not required under the exchanges, as part of EHBs. In another example, Medicaid covers family planning services. While family planning is not specifically required to be covered in exchanges, such plans are required to cover, for example, "prescription drugs" and "ambulatory patient services" which potentially could include services and supplies for family planning purposes. Moreover, exchange coverage must cover a wide range of preventive services, including FDA-approved contraceptives.
section_title: Non-elderly Individuals with Chronic Disabling Conditions
paragraphs: Medicaid covers certain individuals with chronic disabling conditions (i.e., individuals whose chronic condition leads to a disability), such as individuals with physical disabilities, including blindness or spinal cord injury; and/or intellectual, or cognitive impairments as in the case of individuals born with intellectual disabilities or individuals with Alzheimer's disease or other forms of dementia. Some recipients enroll in Medicaid as children after being born with disabling conditions; others enroll as working-age adults with inherited or acquired disabling conditions; and still others enroll much later after they have lost the ability to care for themselves. 
For individuals with chronic disabling conditions who are eligible for LTSS, traditional Medicaid offers care in both institutional and home and community-based settings. State Medicaid programs are required to cover nursing facility services for certain Medicaid beneficiaries, while states have the option to cover services in other institutional settings (e.g., Intermediate Care Facilities for the Mentally Retarded (ICFs/MR)). States also have the option of offering home and community-based services. This flexibility under Medicaid law has led to widespread variation in state Medicaid LTSS benefits. Coverage available to individuals eligible through the ACA expansion and exchange plans may not cover comprehensive LTSS. 
States may continue to provide coverage to medically needy individuals after 2014, and are required to offer such coverage with respect to children until the MOE requirements expire in 2019. In states that continue to cover medically needy adults groups, eligible adults will have the ability to spend down to the medically needy income standard and receive the benefits covered for medically needy individuals in the state, or enroll in the ACA expansion group if they meet the eligibility requirements for that group. Then benefits may vary depending on whether or not they access Medicaid through the medically needy pathway or through the ACA expansion pathway. 
Some individuals with chronic disabling conditions who are not currently eligible for a state's Medicaid program may qualify for Medicaid under the ACA expansion group. ACA expansion individuals are entitled to Medicaid alternative coverage. Generally speaking, individuals with disabilities are exempted from mandatory enrollment in Medicaid alternative coverage. However, because individuals in the ACA expansion group are not eligible for any other existing mandatory or optional Medicaid eligibility pathway there appears to be no associated state plan services (including LTSS) available to these enrollees. To date, CMS has indicated that they "intend to propose that states may select more than one benchmark plan to define EHBs for different segments of the Medicaid population in keeping with states' flexibility to design benefit plans appropriate to meet the needs of targeted populations."
Without access to LTSS, some individuals may seek long-term care insurance policies outside of such coverage; pay for formal services up to an individual's ability to pay; or receive assistance from informal caregivers, such as a relative or neighbor. Without these options, many people with disabilities may forgo care altogether.
section_title: Costs for Individuals Under Medicaid and Exchange Plans
subsections: section_title: Beneficiary Costs Under Medicaid
paragraphs: Under Medicaid, states may require certain beneficiaries to share in the cost of Medicaid services, although limitations generally exist on (1) the dollar or percentage amount, (2) the beneficiary groups to whom these requirements apply, and (3) the services on which cost-sharing can be charged. In addition, the DRA provided states with other options for beneficiary obligations for some populations. In general, these rules vary by beneficiary income level and some types of service (as described below). ,
subsections: section_title: Enrollment Fees Associated with Medicaid Enrollment
paragraphs: Following is a summary of Medicaid program rules that generally apply for enrollment-related costs by population group. Enrollment-related costs are applied regardless of whether services are utilized. 
subsections: section_title: Children, Pregnant Women, and Non-disabled Adults
paragraphs: Income less than 150% FPL: Those with annual income less than 150% FPL are exempt from enrollment-related costs under Medicaid. Income above 150% FPL: Under "traditional" Medicaid, enrollment fees are prohibited under Medicaid for many eligibility groups. Other groups (e.g., medically needy) may be charged "nominal" amounts. These nominal amounts, which are set in regulations, range from $1 to $19 per month, depending on monthly family income and size, and can be collected from (1) certain families moving from welfare to work who qualify for transitional assistance under Medicaid, and (2) pregnant women and infants. Enrollment fees can exceed these nominal amounts for other specific groups under Medicaid. For example, under the DRA alternative plans, there is no limit on the cost of enrollment; however, the cumulative maximum cost-sharing (i.e., enrollment-related costs plus cost-sharing for services) is subject to an annual cap. Enrollment fees can also be charged to individuals enrolled in certain Medicaid waiver programs.
section_title: Non-aged Individuals with Chronic Disabling Conditions
paragraphs: Generally speaking, non-aged individuals with chronic disabling conditions are exempt from enrollment-related costs with the exception of the buy-in groups that are available at state option. 
section_title: Medicaid Cost-Sharing for Services
paragraphs: Under traditional Medicaid, regulations specify nominal cost-sharing for services in amounts by type of service, regardless of income. In general, cost-sharing is prohibited for children under age 18 (or at state option individuals not older than 21), pregnant women for pregnancy-related services, institutionalized individuals (e.g., individuals who are inpatients in a hospital, long-term care facility, or other medical institution), emergency services, and family planning services and supplies. 
For non-institutional services (1) deductibles may not exceed $2.65 per month per family, (2) coinsurance may not exceed 5% of the payment for the service, and (3) copayments may range from $0.65 to $3.90 depending on the payment for the item or service. Other cost-sharing rules apply for non-emergency services provided in an emergency room and institutional services. Beneficiary costs for services for certain institutional services may not exceed 50% of payment for first day of care per admission. Finally, states may specify a cumulative maximum for cost-sharing for certain services and populations.
Different rules apply to cost-sharing for services under the DRA alternative plans. As under traditional Medicaid, certain groups and services are exempt from the DRA service-related cost-sharing rules. These rules vary by beneficiary income level:
Individuals with incomes below 100% FPL : For non-institutional services (1) deductibles may not exceed $2.65 per month per family, (2) coinsurance may not exceed 5% of the payment the Medicaid agency makes for the service, and (3) copayments may range from $0.65 to $3.90 depending on the payment for the item or service. Individuals with income from 100% through 150% FPL : Cost-sharing for services for non-institutional and certain institutional services cannot exceed 10% of the cost of the item or service. Individuals with income exceeding 150% FPL : Cost-sharing for services for non-institutional and institutional services cannot exceed 20% of the cost of the item or service. 
As under traditional Medicaid, certain groups and services are exempt from the DRA service-related cost-sharing rules. Under DRA state plan option, pregnant women are exempt from cost-sharing for pregnancy-related services. Children under age 18 in mandatory coverage groups and certain foster care children, regardless of age, are also exempt. Under the DRA option, groups generally designated as exempt may be subject to cost-sharing for non-emergency care provided in an emergency room and for non-preferred prescription drugs.
Other cost-sharing rules apply for non-emergency services provided in an emergency room (maximum allowable copayments range from $3.90 to "no limit"), prescription drugs (maximum allowable copayments range from $3.90 to 20% of the cost of the drug (for non-preferred drugs only)) and institutional services regardless of an individual's annual income. Cost-sharing for institutional services may not exceed 50% of payment for first day of care per admission. Finally, a cumulative maximum for all costs (enrollment-related costs plus cost-sharing for services) cannot exceed 5% of monthly or quarterly income.
Still other rules apply regarding service-related costs for persons residing in nursing homes or receiving LTSS under HCBS waivers. Certain individuals are required to apply some of their income toward the cost of their care. The amounts they may retain vary by setting and by state rules. Medicaid beneficiaries in nursing homes may retain a personal needs allowance (PNA). Federal law sets a minimum PNA amount of $30, but states may elect higher amounts. Persons receiving services through HCBS waivers may retain a monthly maintenance needs allowance (MMNA), which varies by state. 
section_title: Costs in Exchange Plans
paragraphs: There are two broad categories of enrollee costs related to exchanges: premiums to purchase insurance and cost-sharing related to the use of health care services. Certain individuals enrolled in exchange plans will receive federal tax credits to cover all or part of exchange premiums. In addition, all exchange plans are subject to certain cost-sharing limits, and certain exchange enrollees may receive subsidies towards cost-sharing expenses. 
subsections: section_title: Premium Tax Credits
paragraphs: To be eligible for a premium credit in an exchange, an individual must: 
have household income between 100% and 400% FPL, with exceptions; not be eligible for Medicaid or Medicare or other types of "minimum essential coverage" (other than through the individual health insurance market); be enrolled in an exchange plan; and be part of a tax-filing unit. 
The amount of the premium credit depends on the income of the tax filer (and dependents), the premium for the exchange plan in which the tax filer (and dependents) is/are enrolled, and the cost of exchange plans in the tax filer's local area. Depending on the circumstances, the credit amount (1) may cover the entire premium and the tax filer will pay nothing towards the premium; or (2) may not cover the entire premium and the tax filer may be required to pay part (or all) of the premium. If the tax filer is required to pay any portion of the premium, the amount is capped as a percentage of income, as specified in the law. 
section_title: Cost-Sharing Limits and Subsidies
paragraphs: ACA includes several cost-sharing provisions applicable to exchange coverage. In general, exchange plans must comply with the following cost-sharing requirements:
Prohibit any deductible applicable to preventive health services; Limit deductibles, in small group health plans, to no more than $2,000 for self-only coverage, or $4,000 for any other coverage in 2014 (annually adjusted thereafter); and Prohibit annual cost-sharing limits that exceed existing limits specified in the federal tax code.
In addition, ACA requires most exchange plans, to cover certain preventive health services and impose no cost-sharing on such services.
Finally, certain individuals who are eligible for premium credits in the exchanges will also be eligible for subsidies towards cost-sharing for services. An individual who qualifies for a premium credit and is enrolled in a silver plan (actuarial value of 70%) offered in an exchange will also be eligible for a cost-sharing subsidy. The size of the subsidy will be based on the taxfiler's (or family's) income.
section_title: Comparing Medicaid and Exchange Plans: Potential Implications for Costs for Individuals
paragraphs: When the premium credits become available in 2014, some non-elderly individuals with income at or below 133% FPL (effectively 138% FPL with the MAGI 5% FPL income disregard) may be eligible for Medicaid, and therefore ineligible for premium credits in the exchanges. For individuals in states that do not expand their Medicaid program up to 138% FPL, eligibility for subsides will depend on their income. Those with incomes of at least 100% FPL could qualify for subsidies, but not most of those with incomes below 100% FPL due to statutory requirements. The lack of Medicaid eligibility or private insurance subsidies could result in individuals in this group continuing to not have health insurance. (This group is discussed briefly in Appendix B .) This disconnect will occur because the law envisions that all states would expand their programs, while the U.S. Supreme Court effectively makes the expansion optional for states. Several states have publically indicated that they will not expand their Medicaid programs.
Additionally, if a state were to scale back its eligibility criteria after expiration of the MOE, and some individuals lost eligibility for Medicaid, they could also become eligible for premium credits in the exchanges, again depending in part on their income. 
Table 3 summarizes key differences and similarities in costs for individuals depending on whether they are covered by Medicaid or enrolled in an exchange plan. Detailed explanation and examples follow in the text of this section.
subsections: section_title: Non-disabled Children, Pregnant Women, and Adults
subsections: section_title: Enrollment Costs
paragraphs: As stated above, under traditional Medicaid, children, pregnant women, and non-disabled adults either are exempt from enrollment-related costs or are charged nominal amounts. In exchanges, whether or not enrollees are eligible for tax credits to cover all/some of the premiums depends, to a great extent, on their income relative to the federal poverty level. 
Individuals with income at or above 100% FPL , in states in which they would not have access to Medicaid (if a state were to scale back eligibility or choose not to participate in the Medicaid expansion), may qualify for premium credits, as long as they meet the other required eligibility criteria. However, if the premium credits only covered part of the premium, the enrollee would be responsible for covering the remaining amount.
For example, an individual with income at 200% FPL may be required to spend up to 6.3% of household income towards the cost of exchange coverage. For illustrative purposes only, if premium credits were available in 2013 , 6.3% of income at 200% FPL would be approximately $121 per month. In other words, an individual with income at that level with a premium credit (based on 2013 data) could be required to contribute $121 towards the monthly premium. This contrasts with the Medicaid program where an individual with the same income could be charged between zero and approximately $96 a month (for details, see Table 4 ). This example underscores how a given eligibility pathway under Medicaid may affect possible enrollment-related costs (as well as benefits) for individuals and families, and contrasts Medicaid's beneficiary-specific approach with eligibility for the premium tax credit primarily relying on income. 
section_title: Cost-Sharing for Services
paragraphs: Under Medicaid, cost-sharing for services is generally prohibited for children under age 18 and for pregnancy-related services delivered to pregnant women. For those for whom cost-sharing may be imposed, the requirements are generally nominal amounts. 
Cumulative Maximum Cost-Sharing
Similar to the analysis regarding benefits, if a state were to scale back eligibility for adult populations beginning in 2014, many of its former Medicaid beneficiaries may have higher costs under exchange plans compared with Medicaid. Absent any state specific assistance, this may adversely impact their ability to afford health care, even with insurance.
For illustrative purposes only, compare the maximum allowable costs (i.e., enrollment-related costs plus cost-sharing for services) for a non-disabled family of four enrolled in Medicaid with annual income at the ACA expansion income eligibility threshold to that same family enrolled in an exchange plan, assuming availability in 2013. (Note: the following is just one example to illustrate the potential difference in maximum allowable costs. The example is not meant to be fully representative of the breadth of possible experiences of Medicaid beneficiaries who enroll in exchange plans.) Under Medicaid's alternative rules for costs for individuals, for example, the maximum allowable costs for a non-disabled family of four with annual income equal to 138% FPL (based on 2013 poverty guidelines) is equal to approximately $1,625 per year. Should that same family lose access to Medicaid and enroll in an exchange plan, they potentially could face a required premium contribution of $1,069, and a maximum cost-sharing limit of $4,167, resulting in a potential maximum of $5,236 for covered services. This example represents the extreme in terms of total out of pocket costs. While the typical family enrolled in an exchange plan may not actually have health care expenses that reach this limit, in those cases when a family uses a great deal of health care, such a family potentially could face an additional $3,611 in costs per year under an exchange plan compared with Medicaid. This spending difference represents approximately 11% of that family's 2013 income.
Another approach for comparing individual/family spending under Medicaid and exchanges is to compare actuarial value (AV) estimates for public and private coverage. (Actuarial value is a measure of a health plan's generosity, expressed as the percentage of medical expenses estimated to be paid by the health plan for a standard population and a set of allowed charges. Generally, the higher the actuarial value, the lower the service-related cost-sharing for enrollees, on average.) According to analysis prepared by Actuarial Research Corporation (ARC) for CRS, the average AV for a non-disabled adult enrolled in a 2011 Medicaid plan, assuming the highest potential cost-sharing scenario based on statutory requirements, was 97%. In contrast, ARC estimates that the average AV for an employer plan was 86% in 2011. Moreover, all the plans that will be offered through the exchanges will have actuarial values below the average Medicaid AV. Generally, exchange plans must meet one of four AV levels: 60%, 70%, 80% or 90%. Lower-income individuals, who are enrolled in a silver plan (70% AV) and meet other eligibility criteria, may receive cost-sharing subsidies that will effectively increase the AVs of the silver plans in which they are enrolled to 73%, 87%, or 94%, depending on income. 
section_title: Non-elderly Individuals with Chronic Disabling Conditions
paragraphs: The following describes potential implications for individuals with income at 100% FPL or above regarding enrollment-related costs and cost-sharing for services.
Enrollment-related costs . For individuals with income above 100% FPL, Medicaid costs vary by individual . Generally speaking, non-aged individuals with chronic disabling conditions are exempt from enrollment-related costs with the exception of the buy-in groups that are available at state option. If an individual who no longer has access to Medicaid purchases insurance through the exchange, s/he will most likely qualify for premium credits. Whether someone will pay more or less under Medicaid compared to an exchange plan depends upon his/her specific enrollment-related cost requirements under Medicaid, as compared to such amounts under a subsidized exchange plan. As explained earlier, premium credit amounts vary by income and other factors. Even with a credit, individuals may still have to pay some portion of the premium. Cost-sharing for services. Individuals with chronic disabling conditions who have no or limited cost-sharing for Medicaid services might see an increase in the amount they have to pay when receiving services covered under exchange plans. Yet, these individuals may also qualify for federal cost-sharing subsidies. If they do, their cost-sharing for services will vary depending upon the amount of subsidy they receive. However, even with the most generous cost-sharing subsidies, an exchange enrollee could still be responsible for up to $2,000 ($4,000 for a family) in annual cost-sharing expenses (using 2012 information for illustrative purposes only). Individuals who would otherwise have paid significant cost-sharing for services in a nursing home (i.e., income amounts above the PNA) or under a home and community-based waiver (i.e., income amounts above the MMNA), may see a drop in their costs for service-related cost-sharing. However, if their cost-sharing was relatively low in a nursing home or under a home and community-based waiver, they could see an increase in cost-sharing in an exchange. As an illustration of the potential variation in cost-sharing for services among non-institutional Medicaid adult enrollees with chronic disabling conditions, a 2010 Health Affairs study found the median annual beneficiary spending (on prescription drugs, ambulatory care, home health care, dental, durable medical supplies and equipment, and inpatient and emergency hospital care), to be $87 in 2004 dollars. Cost-sharing for services rose to $406 in 2004 dollars for individuals with costs at the 75 th percentile of the spending distribution, and exceeded $1,200 in 2004 dollars for individuals with service related costs at the 90 th percentile of the spending distribution. This study did not take into account the amount of a beneficiary's income above the MMNA that may have been applied to the cost of the beneficiary's care in addition to their costs for services.
subsections: section_title: Medicaid Asset Protections
paragraphs: Finally, certain Medicaid beneficiaries can retain assets, such as a primary home or automobile, and remain eligible for care. By contrast, private health insurance plans typically do not cover LTSS. Individuals must instead turn to private long-term care insurance policies or pay out-of-pocket to cover the cost of their care. Over time, such individuals may deplete their assets and may even become eligible for Medicaid. 
Appendix A. Fundamental Differences Between Medicaid and Exchanges
The challenges for expanding coverage through Medicaid and the ACA exchanges, and understanding the implications for individuals and families who move between these two programs are underscored by the fundamental differences between these two sources of coverage. Medicaid is a long-standing individual entitlement program that finances the delivery of primary, preventive, and acute medical services as well as long-term services and supports (LTSS) for a diverse low-income population, including non-disabled children, pregnant women, adults, individuals with chronic disabling conditions, and people age 65 and older. Medicaid was designed to provide coverage to groups with a wide range of health care needs that were historically unaddressed in the private health insurance market (e.g., individuals with chronic disabling conditions who require LTSS, or care for indigent populations in geographic locations where access to providers is limited). Because of the diversity of the populations that Medicaid serves and their unique health care needs, Medicaid offers benefits that are not typically covered in major insurance plans offered in the private market. Further, with regard to benefit design states define the specific features of each covered benefit within four broad federal guidelines:
Within a state, each covered service must be sufficient in "amount, duration and scope" to reasonably achieve its purpose. However, states may place appropriate limits on a service based in criteria such as medical necessity. Within a state, services available to the various categorically needy groups must be equal in amount, duration, and scope. These requirements are called the "comparability" rule. Benefits must be the same throughout the state, referred to as the "statewideness" rule. With certain exceptions, beneficiaries must have "freedom of choice" among health care providers or managed care entities participating in Medicaid. These same coverage guidelines do not exist in the private market. 
The Medicaid program is also unique in that it includes special classes of providers, such as Federally-qualified health centers (FQHCs) and rural health clinics (RHCs), which provide health care services to populations in areas where access to traditional physician care has been limited and for which the federal statute specifies preferential reimbursement methods. In addition, under Medicaid states use federal funds to make Disproportionate Share Hospital (DSH) payments to hospitals that treat large numbers of low-income and Medicaid patients. The main purpose of these payments is to compensate hospitals for otherwise low Medicaid payment rates and uncompensated care. 
Because of these unique coverage and financing requirements, the Medicaid program finances care through the nation's safety net for low-income populations. Health insurance exchanges, on the other hand, are fundamentally marketplaces to facilitate economic transactions: the offer and purchase of private health plans. While the exchanges established under ACA do include regulatory components, the plans offered through these exchanges are supposed to reflect a "typical" health plan offered by employers, which generally do not have different benefit packages tailored to the specific health care needs of each individual seeking coverage. 
At state option, ACA allows for a bridge program between Medicaid and exchanges. ACA requires the HHS Secretary to establish a basic health program (BHP) that meets certain statutorily specified requirements, which states may choose to implement. The purpose of the program is to provide federal funding to states to finance coverage for individuals with income between 133% and 200% FPL who are not eligible for Medicaid. BHP coverage would be offered in lieu of obtaining coverage through a health insurance exchange for this population. (Individuals with income above 200% FPL may still be able to access subsidies through exchanges.) Given that implementation of a BHP would be at state option, an exchange will only interact with a BHP in a state that deliberately chooses to implement a BHP. (Implementation of a BHP does not affect exchange establishment; exchanges must still be established in every state by 2014.) Given the focus of this report, the analysis does not consider the potential impact of BHP implementation by states. 
Appendix B. Individuals with Annual Income Less Than 100% FPL
As previously discussed, ACA established a mandatory expansion of the Medicaid program to include all non-elderly individuals with income up to 133% of the federal poverty level (FPL). (This income standard effectively would be 138% FPL, as a result of the 5% income disregard.) The effective date for this mandatory expansion was January 1, 2014 (or earlier at state option), to dovetail with the establishment of health insurance exchanges. However, a significant development has the potential to impact the connection between Medicaid and the exchanges, as well as the overall rate of uninsurance. On June 28, 2012, the U.S. Supreme Court issued a decision in National Federation of Independent Business v. Sebelius . The Court held that the federal government cannot terminate current Medicaid program federal matching funds if a state does not expand its Medicaid program, effectively making the ACA expansion "optional." As a result, some states may choose not to expand their Medicaid program.
Under the ACA, premium tax credits and cost-sharing subsidies that will be provided to individuals eligible through the exchanges are only available to individuals and families with income between 100% and 400% FPL. Therefore, individuals and families with incomes below 100% FPL are not eligible for either the credits or subsidies. 
Given that the ACA Medicaid expansion is at state option, it leaves open the possibility that, beginning in 2014, certain individuals with incomes less than 100% FPL will not be eligible for either Medicaid or premium credits. To provide some context, Table B-1 lists the current Medicaid income eligibility thresholds for non-disabled adults, by state; income is measured as a percent of the federal poverty level. The cells in which the thresholds are under 100% FPL (i.e., the minimum income requirement for eligibility for premium credits) indicate where low-income residents may not have access to subsidized coverage, under the status quo. While Medicaid eligibility rules consider factors beyond just income, these thresholds provide a starting point for identifying where low-income adults may lack access to both Medicaid and premium credits, if a state decides not to do the ACA Medicaid expansion. 
Individuals with annual income less than 100% FPL could still enroll in an exchange plan if they wish, but they would be responsible for covering the entire premium and associated cost-sharing (with one exception described below). It is likely that individuals and families in this income group would consider the premiums and cost-sharing requirements unaffordable. Such a possibility may lead to a situation where some of the poorest residents may be without insurance, but other low to middle income individuals can get subsidized coverage. 
An exception to this rule is made for lawfully present immigrants with income below 100% FPL who are ineligible for Medicaid for the first five years that they are lawfully present. These taxpayers will be treated as though their income is exactly 100% FPL for purposes of qualifying for a premium credit. After five years, they will be eligible for Medicaid if their income is still less than 100% FPL and they otherwise meet the income eligibility requirements applicable in their state.