How Medicaid Works

By: Maria Trimarchi

Enrollment and Expansion

As part of health care reform, Medicaid application and enrollment became consolidated through the Health Insurance Marketplace. Enrollment information is provided by each applicant and verified against information from the Social Security Administration, Department of Homeland Security and Department of Labor, among others, before benefits are extended.

Income eligibility is determined by something called the MAGI. Beginning in 2014 under the Affordable Care Act (ACA), all states implemented a new, unified system for determining Medicaid (as well as Children's Medicaid, or CHIP) eligibility called the modified adjusted gross income (MAGI) tax rules. To understand MAGI you first need to know your adjusted gross income (AGI). AGI is your total taxable income, according to the IRS, and MAGI is calculated by adding tax-exempt interest (such as student loan interest or traditional IRA contribution deductions) to your AGI. Before the ACA went into effect, eligibility was determined using state-specific income deductions known as disregards, and in some circumstances included requirements such as in-person interviews or reliance on electronic data matches.


Medicaid expansion also changed the income eligibility threshold, allowing families with incomes that fall 138 percent below the federal poverty level (FPL) (which was just shy of $16,000 for an individual and roughly $27,000 for a family of three in 2013) to qualify for public-funded health coverage, as long as they live in a state that chose to expand its Medicaid program -- that's right, expansion is optional [source: KCMU].

The Medicaid expansion program was, under the ACA, originally intended for every state. But in 2012 the U.S. Supreme Court ruled that the Federal government couldn't withhold funding from states that didn't implement the Medicaid expansion. Medicaid expansion became voluntary under this ruling, and by the close of 2013 only about 50 percent of states had chosen to expand their programs.

Expansion programs vary from state to state. While some states opened benefits up to low-income adults without dependents, some chose not to expand their programs at all. Others chose alternative benefit programs; for example, Arkansas and Iowa's Medicaid expansion programs use federal funding to cover eligible adults with private insurance coverage purchased through the Marketplace.