Medicaid plays an important role by providing health insurance to nearly one-in-five individuals and families across the country who do not have access to other affordable coverage options. During economic downturns, Medicaid enrollment increases as individuals lose jobs, income and employer-sponsored insurance. Medicaid also provides coverage for medical and long-term care services for millions of low-income people of all ages with disabilities who cannot obtain private health insurance or for whom such coverage is inadequate. In addition, Medicaid helps pay Medicare premiums and fills in gaps in coverage for millions of low-income Medicare beneficiaries.

Based on current state decisions regarding Medicaid expansion, Medicaid/CHIP enrollment is anticipated to rise by 12.8 million people by 2016, when the ACA’s coverage provisions are expected to be in full effect. Of these 12.8 million, 9.9 million live in states expanding Medicaid and 2.9 million live in states not expanding Medicaid, as of November 2014.

Under federal Medicaid rules, states must cover certain services (such as physician and hospital services) and certain groups of individuals up to defined poverty levels (such as low-income children, parents, pregnant women, individuals with disabilities, and elderly adults) as a condition for receiving federal Medicaid funds. In 2012, the federal share of total national Medicaid spending was 57%. However, states also have significant flexibility to determine coverage for optional benefits and groups and how they deliver and pay for care. As a result, Medicaid programs vary from state to state with respect to both the income level of people covered and the range and payment of services covered for each group of individuals.

States that have expanded their Medicaid programs under the ACA now cover nearly all individuals up through 138% FPL; coverage for those newly eligible includes at least the 10 essential health benefits. The federal government is paying for 100% of the cost of coverage of these individuals for the first three years, scaling down to 90% in 2020 and beyond.

In federal fiscal year 2010, just under 50 percent (49%) of all Medicaid enrollees, or about 32 million, were children. Together, Medicaid and the Children’s Health Insurance Program (CHIP) cover over one-third of children in the United States, providing them access to needed health care services, including preventive and primary care. Eligibility levels for children in Medicaid and CHIP have expanded over time. Today, all but 2 states cover children at or above 200% of the federal poverty level ($39,580 per year for a family of three in 2014). Medicaid eligibility levels are much lower for parents while adults without dependent children in the states that have not expanded Medicaid are generally excluded from coverage.

Although elderly and disabled adults only make up one-quarter of Medicaid beneficiaries, they account for 66% of total costs. This is because these individuals are more likely to have complex healthcare needs that require costly acute and long-term care services. Medicaid provides coverage for individuals with a range of health conditions and disabilities, including children with intellectual or developmental disabilities, young adults with spinal cord or traumatic brain injuries, and older individuals with Alzheimer’s disease, Parkinson’s disease, or diabetes. Medicaid pays for the range of services needed by these individuals to both assist them in managing their conditions and in performing daily living activities.

From 2007 to 2011, Medicaid spending per person grew more slowly than private health insurance premiums per person. While spending across the entire health care sector has been increasing, Medicaid spending per person has been increasing more gradually over recent years than it has for other payers. The recent increase in overall Medicaid spending is largely due to an increase in the number of people enrolling in the program. During times of economic downturn, like the recent recession, when unemployment rises and incomes fall, an increasing number of low-income people become eligible for Medicaid. After accounting for enrollment growth, analyses show that Medicaid has been able to keep cost increases below that of other sectors of the health care system and in 2012, spending growth slowed to near record lows, reflecting the slow-down in enrollment growth.

Medicaid is the primary payer for long-term care services and supports for low-income individuals across the age spectrum. Medicaid covers a continuum of long-term care services in a variety of settings, including home and community-based care and institutional care, like nursing homes. To qualify for Medicaid long-term care services and supports, individuals must be low-income or must have incurred health expenses that have caused them to “spend down” their incomes to Medicaid eligibility levels. Medicare does not cover long-term care services and only pays for post-acute services in long-term care settings. Private long-term care insurance is typically not available or affordable for people who need long-term services and supports. Because paying for long-term services is expensive, many people who need long-term services and supports have exhausted lifetime savings.

Medicaid plays an important role for over 9 million low-income Medicare beneficiaries, known as “dual eligible” beneficiaries, by filling in the gaps in Medicare’s benefit package. Medicaid’s assistance ranges from paying for Medicare premiums and copays to coverage of benefits not offered under Medicare, such as long-term care services and supports in nursing homes and in the community, and, in some states, vision, dental, and case management services. Dual eligible beneficiaries represent 14% of enrollees, but 36% of all Medicaid spending.

Though Medicaid is publicly financed, it is not a government-run health care delivery system like the VA. Instead, state and federal dollars are used to pay for health care services provided to Medicaid patients, whether those services are provided at a public safety-net hospital or at a private facility. State Medicaid programs purchase services on a fee-for-service basis or through risk-based contracts with managed care plans, or by using a combination of these as a well as other payment approaches.

As of 2014, the Affordable Care Act’s Medicaid expansion provides a new coverage pathway for millions of currently and formerly uninsured low income adults, including childless adults who have been historically excluded from Medicaid coverage. The Supreme Court ruling on the ACA maintains the Medicaid expansion, but limits the Secretary’s authority to enforce it, which has affected state decisions to implement the expansion. The states that have expanded Medicaid coverage are receiving substantially enhanced federal support to cover newly eligible low-income adults up to 138% of the federal poverty level ($16,104 for an individual, $27,310 for a family of three in 2014).

Lawfully residing immigrants will be eligible for the Medicaid expansion (with the exception of those who have been residing in the United States for less than five years), while undocumented immigrants will remain ineligible for Medicaid under health reform. Low-income children will continue to be eligible for Medicaid and CHIP.

In order to qualify for premium tax credits in the new marketplaces, people need to be at or above 100% of the federal poverty level because prior to the 2012 Supreme Court decision that effectively made the Medicaid expansion optional for states, it was assumed that all individuals up to 138% of the federal poverty level would be covered by Medicaid in all states. Very few non-elderly adults qualify for Medicare and there is a ban against purchasing health insurance across state lines. Therefore, non-elderly adults living below 100% of the federal poverty level will likely remain uninsured and continue to to face access and financial barriers.