The Medicaid Coverage Gap and Where It Exists

The number of states with a Medicaid gap has been shrinking

The Medicaid coverage gap exists in states that have refused to expand Medicaid as called for in the Affordable Care Act (ACA). As a result, many adults in those states with income under the poverty level are essentially ineligible for any financial assistance with their health coverage: They're not eligible for Medicaid and they're also not eligible for premium subsidies to offset the cost of privately purchased health insurance. It's referred to as a coverage gap because there isn't a realistic way for these individuals to obtain coverage unless they're eligible for an affordable employer-sponsored plan.

Doctor discussing medical care with a patient
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What Caused the Medicaid Coverage Gap to Exist?

When the ACA was enacted, it called for Medicaid to be expanded in every state. Medicaid is jointly funded by state and federal governments, so states have some flexibility in terms of Medicaid eligibility and program design. But prior to 2014, in most states, Medicaid generally only provided coverage for low-income individuals who were either children (or parents/caretakers of minor children), disabled, blind, elderly, or pregnant.

The ACA called for a significant expansion of Medicaid to include all adults under age 65 with household income up to 133% of the poverty level, and there's an extra 5% income disregard that effectively brings the eligibility limit up to 138% of the poverty level. In 2020, in every state except Alaska and Hawaii, that amounts to about $17,609 for a single individual, and $36,156 for a household of four (the poverty level numbers are higher in Alaska and Hawaii, so expanded Medicaid eligibility in those states applies to people with higher incomes). Note that Medicaid eligibility is based on the current year's poverty level numbers, while premium subsidy eligibility is based on the prior year's poverty level numbers

The expansion of Medicaid was supposed to take effect nationwide on January 1, 2014, with the federal government paying 100% of the cost for the first three years and states gradually taking on a portion of the costs after that, with the funding split set at 90% federal and 10% state in 2020 and all future years. This is much more generous than the federal funding rate for populations that were already eligible for Medicaid, which varies from 50% to about 77%, depending on the state.

Under the terms of the ACA, Medicaid expansion was essentially mandatory for states, as they would have lost their existing federal Medicaid funding if they had refused to expand coverage to people earning up to 138% of the poverty level. But in National Federation of Independent Business v. Sebelius, seven of the nine Supreme Court justices agreed that it would be "unconstitutionally coercive" to require states to expand Medicaid in order to continue to receive federal funding for their existing Medicaid populations.

This effectively made Medicaid expansion optional for states: They could choose to expand Medicaid and get the enhanced federal funding for the newly-eligible population (along with their existing federal funding for their existing Medicaid population), or they could choose not to expand Medicaid and just continue to receive their existing federal funding match for their existing Medicaid population.

The Supreme Court's ruling came 18 months before Medicaid expansion was supposed to take effect. Not surprisingly, and generally on a partisan basis, states took differing approaches to Medicaid expansion when the program began in 2014. At that point, Medicaid eligibility was expanded in 26 states and DC, while 24 states had opted to keep their existing Medicaid eligibility rules in place.

In those 24 states, Medicaid continued to be available for low-income residents who were blind, disabled, pregnant, elderly, under 18, or caring for minor children, but it was not available to adults who didn't fit into one of those categories, regardless of how low their income was (for the category of parent/caretaker of minor children, the income level that makes a person eligible varies considerably from one state to another, but is generally quite low).

Compounding the problem, premium subsidies are not available in the health insurance exchanges if applicants have an income below the poverty level. The way the law was written, those applicants were supposed to have access to Medicaid instead, so premium subsidies weren't expected to be necessary for them.

In states that haven't expanded Medicaid, most non-disabled adults with a household income under the poverty are unable to access any sort of financial assistance when it comes to health insurance: They're not eligible for Medicaid, and they're also not eligible for premium subsidies.

As of early 2020, there are still 15 states that haven't expanded Medicaid, although Nebraska is in the process of doing so (discussed below). And there are still an estimated 2.3 million people caught in the coverage gap, with no realistic access to health coverage.

There is no coverage gap for lawfully-present immigrants who haven't been in the U.S. for long enough to enroll in Medicaid (in most circumstances, a legally-present resident has to be in the U.S. for at least five years before becoming eligible for Medicaid). This is because the law specifically allows these individuals to receive premium subsidies, even if their income is below the poverty level. Lawmakers knew that they wouldn't be eligible for Medicaid, so they made sure to account for this in order to avoid leaving these people without access to coverage.

Lawmakers obviously never intended for there to be a Medicaid coverage gap for U.S. citizens, but they had no way of knowing that a subsequent Supreme Court ruling would allow states to prevent large numbers of impoverished people from enrolling in Medicaid.

States Where a Medicaid Coverage Gap Still Exists

Although there were 24 states that had not expanded Medicaid as of 2014, several have done so since then.

New Hampshire, Michigan, Indiana, Pennsylvania, Alaska, Montana, Louisiana, Virginia, Maine, Idaho, and Utah have expanded their Medicaid programs since the beginning of 2014. There are a couple of points to note about the current state of the coverage gap:

  • Voters in Nebraska approved Medicaid expansion in the 2018 election. Nebraska's Medicaid expansion is scheduled to take effect on October 1, 2020, with enrollment beginning August 1, 2020. Once Medicaid expansion takes effect, Nebraska will no longer have a coverage gap (voters in Idaho and Utah also approved Medicaid expansion ballot initiatives in the 2018 election; expansion took effect in both of those states as of January 2020).
  • Wisconsin technically counts as a state that has not expanded Medicaid, although Wisconsin Medicaid covers people whose household income is below the poverty level. So there is no coverage gap in Wisconsin.

There is still a Medicaid coverage gap in the following states as of 2020:

  • Alabama
  • Florida
  • Georgia
  • Kansas
  • Mississippi
  • Missouri
  • Nebraska (coverage gap will end in October 2020)
  • North Carolina
  • Oklahoma
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Wyoming

Medicaid expansion in Maine, Utah, Idaho, and Nebraska came about because voters approved ballot initiatives to expand Medicaid; in all of those states, lawmakers and/or governors had previously blocked attempts to legislatively expand Medicaid.

Buoyed by those successes, Medicaid expansion advocates have been gathering signatures in Oklahoma and Missouri in an effort to get Medicaid expansion initiatives on the 2020 ballots in those states. In Oklahoma, enough signatures were gathered to get the measure on the ballot, but it's up to the governor to determine whether it will be the primary ballot or the general election ballot. In Missouri, proponents of the ballot initiative have until early may 2020 to turn in the necessary signatures. The COVID-19 pandemic is hampering that process, but advocates note that they believe they will still have enough signatures.

Texas has by far the largest number of people in the Medicaid coverage gap, followed by Florida, Georgia, and North Carolina. Together, those four states account for more than 1.6 million of the nearly 2.3 million people who are caught in the coverage gap. And unsurprisingly, the percentage of their residents without health coverage is higher than the national average. Consumer advocates, medical providers, hospitals, and Democratic lawmakers have been working for years to expand Medicaid in those states, but have thus far not made much headway.

Will the Remaining States Expand Medicaid?

Medicaid first became available in 1966, but only 26 states had operational Medicaid programs that first year. And it took until 1982, when Arizona began offering Medicaid coverage, for the program to be available nationwide.

So it is not surprising that there are still some states where Medicaid has not been expanded under the ACA. This is especially true given the political nature of healthcare reform in the 21st century, and it's not a coincidence that the hold-out states are mostly "red" states where leaders have tended to express opposition to "Obamacare" (i.e., the Affordable Care Act).

When Medicaid expansion first took effect, nearly half of the states refused to participate. By 2020, more than two-thirds of the states have Medicaid expansion in place. It's expected that Medicaid expansion will eventually spread to the remaining states, but we don't know how long that might take. The COVID-19 pandemic—which is resulting in millions of Americans losing their incomes—is shedding light on the urgency of the issue, but GOP leadership in some of the holdout states remains fairly strongly opposed to Medicaid expansion.

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Article Sources
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  1. U.S. Department of Health and Human Services. Office of the Assistant Secretary for Planning and Evaluation. U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Federal Programs.

  2. Kaiser Family Foundation. Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier. Fiscal Year 2020.

  3. Supreme Court of the United States. National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al. Decided June 28, 2012.

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  5. Medicaid, Children's Health Insurance Program, & Basic Health Program Eligibility Levels.

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  8. Huguelet, Austin. Springfield News Leader. Medicaid expansion advocates say they have the signatures to go to the ballot. March 23, 2020.

  9. Berchick, Edward R.; Barnett, Jessica C.; Upton, Rachel D. U.S. Census Bureau. Health Insurance Coverage in the United States: 2018 Current Population Reports. September 2019

  10. Oberg, Charles N.; Longseth Polich, Cynthia. Health Affairs. Medicaid: Entering the Third Decade. Fall 1988

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