Eliminating the ACA: What Could It Mean for Medicaid Expansion?

The debate over filling the Supreme Court seat previously held by Ruth Bader Ginsburg has brought renewed attention to the possibility of the Affordable Care Act (ACA) being overturned under the court challenge in California v. Texas, currently scheduled to be heard shortly after the election this November. The expansion of Medicaid was a central component of the ACA, and 39 states have now adopted the ACA expansion into their Medicaid programs. Because Medicaid is administered by states, under federal guidelines, there may be some confusion about how overturning the federal law would affect state Medicaid programs.

Overturning the ACA would eliminate a Medicaid coverage pathway and federal Medicaid financing for millions of people. As of June 2019, 15 million people were enrolled in the ACA Medicaid expansion group and about 12 million of them were newly eligible under the ACA (the remainder were adults covered with waivers prior to the ACA and then moved to the ACA expansion group). This number could be even greater as enrollment has been increasing since February due to the pandemic and its related economic effects.  If the ACA is overturned, these individuals lose their federal entitlement to coverage and states cannot claim 90% federal matching dollars for their Medicaid costs. According to the Congressional Budget Office, the federal government is expected to pay $82 billion in FY 2020 for coverage for adults made eligible by the ACA.  It is most likely that states would not continue to finance coverage for these individuals with the regular Medicaid match or with state only funds, and most would likely become uninsured.

Can’t states continue the ACA expansion on their own?

For most adults who gained eligibility, no. Prior to the ACA, people had to both meet income standards and fit within one of the “categories” of covered groups, which generally included children, some of their parents, pregnant women, adults with disabilities, and some older (age 65 and up) adults. By extending Medicaid eligibility to nearly all adults up 138% of poverty, the ACA effectively eliminated categorical requirements. Overturning the ACA would eliminate the eligibility pathway for adults without dependent children that was created by the law as well as state access to federal matching funds for Medicaid coverage of this group. States that wished to continue to cover this group would need to either seek a waiver from the Secretary of HHS or use only state dollars to finance the coverage. Because the federal government is currently financing 90% of the cost of expansion – even more than the traditional match rate in Medicaid that ranges from 50% to 78%— transitioning the full cost to state budgets likely would not be possible within state budget constraints.

States could expand coverage to parents under pre-ACA eligibility pathways, but they would not receive enhanced matching funds for this coverage. Many parents were eligible for Medicaid prior to the ACA, but income eligibility limits for parents were very low—typically just 64% of poverty, equating to less than $14,000 a year for a family of three in current dollars. The ACA raised the federal income standard for adults—including parents—to 138% of poverty in states that adopted the expansion and also provided enhanced federal funds to cover the cost. Compared to a federal share between 50% and 78% for other groups, the federal government paid all (100% in years 2014-2016) or nearly all (now 90%) of the cost for adults covered through the expansion. Without the enhanced matching funds, it is likely that states will revert to pre-ACA, lower eligibility levels for parents.

Overturning the ACA also takes away the option for states that have not expanded to do so in the future. Most (25) of the 39 states that have adopted the expansion did so in 2014 when the expansion went into effect, but some states have expanded as recently as 2020 and others continue to debate expansion. If states that have not adopted the expansion do so, nearly 10 million uninsured adults—including those uninsured prior to the pandemic and those whose coverage is at risk due to the economic crisis—could become eligible for Medicaid. However, it would be surprising if states that didn’t expand when enhanced federal matching funds were available under the ACA opted to do so without enhanced matching funds through expanded parent coverage or a waiver.

What happens to people covered by the expansion if the law is overturned or repealed?

Most would likely become uninsured. Though most adults without disabilities who are covered by Medicaid are working, offer rates of employer-based insurance are very low for workers with incomes below Medicaid eligibility levels. Repealing or overturning the ACA would further eliminate other provisions that could help lower-income people access private coverage, such as protections for people with pre-existing conditions and premium subsidies in the ACA marketplace. While a limited number of states had waivers to cover adults without dependent children prior to the ACA, it is not certain that even these states would maintain ACA coverage through a waiver without enhanced federal funding, particularly given the current economic realities and revenue shortfalls states are facing related to the pandemic.

In addition to loss of coverage, other gains in access, utilization, affordability and in addressing disparities could be lost.  A review of over 400 studies showed that Medicaid expansion has improved access to care, utilization of services, the affordability of care, and financial security among the low-income population. More recent studies show improved self-reported health following expansion and an association between expansion and certain positive health outcomes. Some studies also show that Medicaid expansion is associated with decreased mortality overall and for certain specific conditions; reductions in rates of food insecurity, poverty, and home evictions; and improvements in measures of self-reported health and healthy behaviors.  Finally, some studies also show that the expansion has helped to narrow racial disparities in health coverage in health outcomes for Black and Hispanic individuals, particularly for measures of maternal and infant health.

States and providers would also lose federal funds that help them support services and health systems for residents. While the Medicaid expansion has increased federal spending, expansion studies point to positive economic outcomes in states including state budget savings, revenue gains, and overall economic growth as well as reductions in uncompensated care costs for providers. Expansion has helped providers increase operational capacity.