The coverage gap: What it is & who it affects, part 1

Photo by Dominik Lange, Unsplash

The expansion of Medicaid brought about by the Affordable Care Act has had a titanic impact on health care, access to help with daily living, and even the general wellbeing of American seniors. 

However, 10 years after the Affordable Care Act brought Medicaid expansion to the first U.S. states—and with a handful of U.S. states still refusing to adopt full expansion—it is still poorly understood by many people. That misunderstanding—and the differences between both states that offer Medicaid expansion and those that don’t, and between states that offer expansion programs in different ways—is part of what makes our work at Evolve so helpful for so many people.

During the 10 years that the ACA has been in effect, researchers have gathered a host of good data to track outcomes and determine whether folks in the 40 states that have adopted full Medicaid expansion as of this writing are actually any better off than people in the states that continue to hold out against expansion. We’ll take a look today at what’s commonly called the “coverage gap”: the difference in access to services for poor people in states that have expanded Medicaid versus those in states that don’t.

But let’s back up for a moment: there are actually several coverage gaps that apply when it comes to talking about Medicaid. The most longstanding gap is the one between people who qualify for Medicaid coverage (based on its stringent income and asset limits) and people who are unable to afford private health insurance but whose incomes are higher than Medicaid allows. That original coverage gap meant that tens of millions of people nationwide lived their lives on a financial and health precipice, without the security of health insurance. 

That’s where the Affordable Care Act came in. “Obamacare” (the act’s nickname) did several things, one of which was to establish a federally subsidized Health Insurance Marketplace. The insurance “exchanges,” as they have come to be called, provide consumers with subsidies—premium tax credits—that lower costs for households with incomes between 100% and 400% of the federal poverty level. 

To get an idea of how many Americans this helps, consider that, this year, the poverty level is $15,060 for one person, $20,440 for a family of two, and $31,200 for a family of four. That means that individual people making up to $60,240, two-person families making up to $81,760, or families of four making up to $124,800, qualify to buy subsidized insurance coverage through the ACA exchanges. Of course, larger families can make progressively more money; for example, a family of eight people can make up to $210,880 and still qualify to buy insurance on the exchanges.

The impact of these exchanges has been profound. A report released earlier this year by the U.S. Department of Health and Human Services revealed that, between 2013 and the third quarter of 2023, the “uninsured” rate for all Americans fell from 14.4 percent to 7.7 percent, and the uninsured rate for children fell from nearly 7 percent to 3.4 percent. In addition, the ACA introduced important consumer protections, most notably the rule that people can’t be denied coverage or charged more due to preexisting conditions. 

This change alone was huge for not just people who have various chronic health conditions, but also women, who could be denied coverage for things like maternity care or made to pay more for such care, and elderly people, who often could not get good health care coverage or, again, had to pay a great deal more than younger people. In a similar vein, ACA has caused insurers who participate in the exchanges—210 companies nationwide as of this year—to put fewer limits on the coverage they provide, which means that services like maternity care, care for people struggling with substance abuse, and mental health care are more widely available than ever before.

Another thing the ACA did—and the crux of the matter for our purposes today—is to expand the Medicaid program. States choosing to implement this expansion have mostly followed the federal standard, in which all adults with incomes below 138% of the federal poverty line qualify for expanded coverage under Medicaid. A few, like Utah, have altered the program slightly, but the general contours of it are the same as the federally suggested version. In addition, the ACA pledged to “support innovative medical care delivery methods designed to lower the costs of health care generally.” 

This provision is of particular interest to us at Evolve, as it gives official federal encouragement (and money!) to home- and community-based services as an alternative to institutional care. Those services include (among many other possibilities) home and vehicle modifications that help seniors and disabled people continue to live independently. And these provisions apply to a lot of people: the HHS report mentioned above notes that 18.6 million people now have coverage for health services and home care thanks to Medicaid expansion. 

However, a couple of coverage gaps still exist. A small one, applying to a small number of people with low incomes, is a sort of negative loophole for residents of the 10 states that have not yet accepted Medicaid expansion. Unfortunately for those folks, if their income is below the federal poverty level but they don’t qualify for Medicaid, they also don’t qualify for health insurance savings through the Medicaid program OR to buy a private health plan on the exchanges.

This was not the original intent of the law; the ACA initially required all states “to provide coverage for adults 18 to 65 with incomes up to 138% of the federal poverty level, regardless of age, family status, or health.” However, the U.S. Supreme Court later ruled that Medicaid expansion was voluntary, not required, for states, causing some states to refuse to expand their Medicaid programs. So, some people in those states now have incomes that are too high to qualify for Medicaid under the old rules, but too low to qualify for a health insurance marketplace plan. It’s a sort of rehash of the first coverage gap discussed above.

The only current help for these folks is trying to qualify for a Special Enrollment Period outside the healthcare marketplace’s annual Open Enrollment Period. Special Enrollment Periods are open to people who’ve experienced certain major life events: losing health coverage, moving, getting married, having a baby or adopting a child, or seeing their household income fall to the point where it is at or below the federal poverty level for the size of the household. 

A larger coverage gap, one affecting millions of people, exists between states that have adopted Medicaid expansion and the 10 states—Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming—that, as of this writing, have not. A study published in late 2023 by the Urban Institute determined that 5 million more people in all 10 states would be eligible for Medicaid coverage if those states accepted Medicaid expansion. In addition, 2.3 million people would be eligible to buy insurance on the exchanges.

The idea of more coverage for more people is popular among a large majority of Americans. The nonpartisan, nonprofit Kaiser Family Foundation found last year that most Americans have some connection to Medicaid, that majorities of Democrats, independents, and Republicans have positive views of Medicaid, and that Medicaid expansion is popular even in states that have not yet approved it: two-thirds of people living in those states want Medicaid expansion. In other words, most provisions of the ACA sound good to most Americans.

But is Medicaid expansion making a difference? Is it having a positive impact on people’s lives and health? And do its benefits outweigh its costs? We’ll discuss that in part two.