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Why Medicaid is important

April 4, 2011 - Mary Ann Heath
A primary goal of the Patient Protection and Affordable Care Act is to expand insurance coverage and drastically reduce the number of Americans without health care.

To do this, the bill not only offers assistance to middle class Americans — those earning up to 400 percent of the poverty line (tax credits) — it also greatly expands eligibility for Medicaid. The bill extends coverage to the “lowest income populations.” To read more, see last week’s blog, “What's going to happen to Medicaid?” (

This week’s reading of the bill covered how income will determine eligibility for Medicaid. Sounds boring, yes, but it’s actually very important. The health care bill creates a standard in order to define the income used to determine eligibility for Medicaid. This standard is Modified Adjusted Gross Income (MAGI). While income eligibility for tax credits may be determined using an individual’s annual tax return, for Medicaid it will continue to based on current, point-in-time income.

So, why the discrepancy?

According to data provided by the Henry J. Kaiser Family Foundation (KFF) (based on U.S. Census Bureau data), for most adults, there is no difference in income eligibility based on income measured from a prior tax return and current income at application. However, adults eligible for Medicaid based on income are the most likely to have a difference between prior tax income and current income, KFF notes. So how eligibility is determined plays a large role in residents receiving the appropriate coverage.

Many tout Medicaid as a spending “fat cat.” Due to the current predicament many states have found themselves in, cuts to Medicaid have been proposed as a way to ease budget pain. But, Medicaid covers vital services and even helps stimulate the economy.

According to KFF, Medicaid covers:

• 1 in 3 children — Medicaid is the largest source of health coverage for children. Most of the 30 million children covered by Medicaid are in families at or below the poverty level.

• 1 in 3 births — Medicaid covers maternity and prenatal care for low-income women and more than 40 percent of all births.

• 8 million people with disabilities — Medicaid covers people with a wide diversity of physical and mental health conditions and limitations, and extensive and complex needs. Most of them lack access to private coverage or coverage of services they critically need.

• 1 in 4 poor non-elderly adults — Currently, Medicaid eligibility for adults is very limited in most states. In the average state, parents are not eligible unless they are below 64 percent of the poverty level.

• Almost 9 million low-income Medicare beneficiaries — “Dual eligible,” the low-income seniors and younger people with disabilities who qualify for Medicaid as well as Medicare, are among the sickest and poorest individuals covered by either program.

KFF also highlights Medicaid’s role in our system. One of the most important is that Medicaid is the largest source of funding for safety-net providers and the dominant payer for long-term care. It is the largest source of funding for health centers and public hospitals that serve the poor and uninsured, often in underserved areas, KFF notes.

Medicaid payments are a important source of revenue for many children’s hospitals. Medicaid, according to KFF, covers seven in 10 people living in nursing homes.

Although Medicaid might be a “fat cat,” it is also the largest source of federal funds to states and it fuels economic activity, KFF points out. Medicaid matching funds are the biggest source of federal funds to states — 45 percent. By covering individuals that may otherwise be uninsured, Medicaid brings revenue to hospitals.

It’s a vital part of our economy — especially in a small area like ours.

Other items in this week’s reading include:

• Requirement to offer premium assistance for employer-sponsored insurance: A state cannot require an individual to apply for enrollment in employer-sponsored coverage in order to be eligible for medical assistance.

• Medicaid coverage for former foster care children: The bill extends coverage to former foster care children who are less than 25 years of age and were in foster care for more than six months.

• Adjusts federal medical assistance percentage (FMAP) for states recovering from a disaster. For states declared by the president as a major disaster, the FMAP will be adjusted. The FMAP is used to determine the amount of matching funds for state expenditures.

• Rescinds amounts available to the Medicaid Improvement Fund (MIF): For fiscal years between 2014 and 2018, any amounts available for expenditure from the MIF are rescinded.

Mary Ann Heath has been reading and blogging about the Patient Protection and Affordable Care Act since January. Her goal is to read all 906 pages of the bill in one year.


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