Medicaid is a joint federal-state program that provides medical care for certain poor and low-income people, and the Children’s Health Insurance Program (CHIP) provides coverage mostly for children in low-income families that do not qualify for Medicaid. Combined, these programs provide health benefits to over 80 million people at an annual cost of $880 billion.

 

In general, states use two types of payment systems to provide Medicaid benefits: fee for service (where states reimburse health care providers for the services that they deliver to beneficiaries) and managed care (where states pay a fixed per capita fee to private health insurance plans or to provider groups, known as Managed Care Organizations (MCOs), that provide services to enrollees).

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The Affordable Care Act (ACA) extended Medicaid eligibility to almost all people with incomes at or below 138 percent of the poverty line as the mechanism to cover low-income individuals. In 2012, the Supreme Court ruled that states could individually decide whether they wanted to take advantage of this provision.

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The Supreme Court’s decision created a huge coverage gap because Medicaid expansion is the only assistance that provided for people who have incomes above their state’s Medicaid eligibility threshold but below the poverty level (making them ineligible for marketplace subsidies). In the ten states that have not yet adopted Medicaid expansion – Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin and Wyoming – an estimated 1.4 million Americans remain in the coverage gap.