Spending growth also peaked after the implementation of the ACA and more recently due to enrollment growth tied to the pandemic-related continuous enrollment provision. In FY 2021, Medicaid spending totaled $728 billion of which 69% was federal spending. Medicaid spending growth typically accelerates during economic downturns as enrollment increases. The ACA expansion group is financed with a 90% federal match rate, so states pay 10% however, the American Rescue Plan Act included an additional temporary fiscal incentive to states that newly adopt the Medicaid expansion. States may receive a higher match rate for certain services and populations. The match rate for most Medicaid enrollees is determined by a formula in the law that provides a match of at least 50% and provides a higher federal match rate for states with lower per capita income (Figure 1, tab 2). States are guaranteed federal matching dollars without a cap for qualified services provided to eligible enrollees. Because of this flexibility, there is significant variation across state Medicaid programs, and as a result, the share of state residents covered by the program (Figure 1, tab 1).
States can obtain Section 1115 waivers to test and implement approaches that differ from what is required by federal statute if the Secretary of HHS determines the waivers would advance program objectives.
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Subject to federal standards, states administer Medicaid programs and have flexibility to determine what populations and services to cover, how to deliver care, and how much to reimburse providers. Medicaid is jointly financed by the federal government and states and administered by states within broad federal guidelines. In this broad context, we examine ten key things to know about Medicaid. However, with divided government and recent passage of a bipartisan package to address the federal budget and increase the debt limit, there is unlikely to be much legislative activity on Medicaid in the next couple years.
Congressional Republicans have put forth proposals to reduce the deficit, limit federal spending for Medicaid, and impose work requirements in Medicaid.
The Biden Administration has efforts underway to help promote continuity of coverage, expand access, and has focused on closing the coverage gap in states that have not expanded Medicaid under the Affordable Care Act (ACA). The pandemic also focused policy attention on longstanding issues including: initiatives to reduce health disparities, expand access to care through the use of telehealth, improve access to behavioral health and home and community based services, and address workforce challenges. In 2023, Medicaid programs are facing new challenges and millions of enrollees are at risk of losing coverage as states unwind the continuous enrollment provision that was put in place early in the pandemic to ensure stable coverage. The COVID-19 pandemic profoundly affected Medicaid spending and enrollment. Medicaid is the primary program providing comprehensive coverage of health care and long-term services and supports to more than 90 million low-income people in the United States.
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