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Who Wins from Medicaid Expansion – And What They Could Soon Lose

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The Affordable Care Act expanded Medicaid’s coverage of low-income people by raising the income threshold for eligibility to 138% of the poverty line (in 2024, that income cutoff was $20,783). Many people earning more than the poverty line but less than this amount work in industries where employers do not offer health insurance benefits, or the costs for workers remain too high to afford. In other words, they struggle to afford individual insurance coverage, and their incomes are too high to qualify for regular Medicaid.
While a Supreme Court decision allowed states to decline to participate in the Medicaid expansion, today 40 states plus DC have opted to expand their Medicaid program. To make the program more attractive, the federal government reimburses those states for 90 percent of the cost of caring for the expansion population.
In 2024 a total of about 68 million people were enrolled in Medicaid in the expansion states, with about 21 million of them (31%) enrolled under the expansion program. Expansion states are evenly split between states that voted for Trump (21 states) and those that voted for Harris (19 states plus DC).
Hospitals, states, and low-income individuals have been the winners from Medicaid expansion. These advances are currently at risk; the Trump administration is focusing on cuts in Medicaid spending to finance part of its proposed tax cuts for corporations and the wealthy. These cuts will negatively affect hospital finances, state spending on health care, people’s access to health care, and health outcomes for low-income people.
One proposal already floated by Republican leaders in Congress is to reduce the federal match rate from 90 percent to the standard Medicaid match rate, which is calculated based on the per capita income in each state compared to the national per capita income. The match rate ranges from 50% to 80%; in lower income states, the federal government covers a higher share of standard Medicaid costs.
In addition, twelve states have “trigger” laws in place that would automatically end the expansion or require other changes if the federal match rate were to drop below 90%. Meanwhile, states might find it difficult to shoulder the additional costs if their share were to increase dramatically from its current 10 percent level.
In 2014, 19 states implemented the Medicaid expansion. The effects were clear: The median decline in uncompensated care cost in Medicaid expansion states in the first year of the program was $2.8 million for each hospital – a 30.3% decrease for these hospitals compared to their median costs (in 2011 to 2013) of $9.4 million. And there was a $3.2 million increase in Medicaid revenue per hospital in the expansion states, which was an 11.6% increase in revenue for these hospitals compared to the mean of $27.9 million in 2011 to 2013.
There have been other savings too. Uncompensated care costs for hospitals in 2020 were 2.7 percent of hospital operating costs in expansion states compared to 7.3% in non-expansion states – a huge difference in terms of the impact on hospital budgets.
That decline in uncompensated care – particularly important for rural hospitals – combined with the increase in Medicaid revenue strengthened the financial position of hospitals in the expansion states. And recent research finds that the financial performance of hospitals and other providers has improved due to the reduction in uncompensated care and higher Medicaid revenue.
Contrary to the claims about Medicaid expansion being a financial burden, many of the states participating in the Medicaid expansion have seen a net savings. Since the federal government pays 90% of the cost of expansion coverage, states get the benefit of offsetting savings in other areas of their budgets.
The result is that between 2014 and 2017, Medicaid expansion was associated with a 4.4% to 4.7% reduction in state spending on traditional Medicaid.
Residents of small towns and rural areas face more health care challenges than those in metropolitan areas. They face acute provider shortages, limited connectivity, and must often travel long distances to access care – often without reliable public transportation options. Rural areas also have worse health outcomes, including higher maternal and infant mortality rates, higher mortality rates from heart disease, cancer, and stroke, and higher rates of mental illness and overdose death.
Residents of rural areas and small towns also have less access to employer-sponsored health insurance, and thus rely more on Medicaid than residents of metropolitan areas.
In 15 states, one-fifth or more of working age adults living in small towns and rural areas get their health coverage from Medicaid – these include Louisiana (30.2%), Kentucky (28.5%), West Virginia (25.5), Montana (22.2%), Arkansas (22.0%), and Alaska (20.4%).
In the past ten years, 120 rural hospitals have closed or ceased offering inpatient services with closures greater in states that did not expand Medicaid than in those that did. Hospitals in rural areas in states that did not expand Medicaid have higher levels of uncompensated care which undermines their financial performance.
It is well understood that the Affordable Care Act reduced the uninsured rate. In just a few years after the law’s provisions went into effect, the US working-age adult uninsured rate fell from 20.4 percent in 2013 to 12.4 percent in 2018. During the same period, uninsured rates declined for blacks, Hispanics, and whites, and disparities in coverage between all those groups also narrowed.
However, these coverage disparities narrowed the most in states that participated in the Medicaid expansion. The black–white coverage gap in those states dropped from 8.4 percentage points to 3.7 points, while the difference between Hispanic and white uninsured rates fell from 23.2 points to 12.7 points.
Medicaid plays an important role in reducing poverty. The expansion of Medicaid eligibility to adults living in near poor households reduced out-of-pocket payments for health services. This lifted 690,000 people out of poverty as measured by the Census Bureau’s Supplemental Poverty Measure (SPM) over the period 2010 to 2016. By 2015 and 2016, Medicaid had reduced the poverty rate by 1.4 percentage points relative to what would have occurred in its absence.
In addition, Medicaid expansion has improved the health care of millions of people. It has provided care for people with chronic illnesses, improving their health outcomes. Opioid overdoses and death have decreased. Cancer is detected at earlier stages, when it can more easily be treated. Infant and maternal deaths have decreased.
Trump administration proposals to use cuts in Medicaid to finance part of the tax cuts for the wealthy will impose heavy costs on hospitals’ financial performance, state budgets, and the health of 21 million people who currently get their health coverage from the expansion of Medicaid. The cuts will be felt more severely in rural areas and small towns.