Alyssa Lane
Medicaid is a federal-state insurance program that provides health coverage for low-income Americans, including children, adults, the elderly, and people with disabilities. While Medicaid is a government-funded program, the role of private insurance companies in providing Medicaid coverage varies across states. As of 2025, 41 states have expanded Medicaid under the Affordable Care Act (ACA), increasing access to healthcare for low-income populations. However, there are still ten non-expansion states, resulting in coverage gaps and higher uninsured rates. The involvement of private insurance in Medicaid varies across states, with some states outsourcing Medicaid coverage to private insurers, while others provide coverage directly.
| Characteristics | Values |
|---|---|
| Number of states that outsource Medicaid to private insurance companies | 41 |
| Percentage of people with Medicaid nationally | 21% |
| States with the highest and lowest percentage of people with Medicaid | New Mexico (34%), Utah (11%) |
| Number of people who would gain coverage if all states expanded Medicaid | 2.7 million |
| Number of people in the coverage gap in non-expansion states | 1.4 million |
| Percentage of uninsured people in non-expansion states | 14.1% |
| Percentage of uninsured people in expansion states | 7.6% |
| Percentage of total healthcare spending by government insurance programs | 45% |
| Percentage of total healthcare spending by private insurance programs | 32% |
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What You'll Learn
Medicaid expansion and eligibility
Medicaid is a federal and state-funded insurance program for certain low-income individuals and families, including children, pregnant women, the elderly, and people with disabilities. It is the primary payer for long-term care in the United States, covering 61% of total spending.
The Affordable Care Act's (ACA) Medicaid expansion in 2014 expanded coverage to nearly all adults with incomes up to 138% of the Federal Poverty Level (FPL). This threshold was $21,597 for an individual in 2025. As of 2023, 41 states have expanded Medicaid under the ACA, which has helped drive the uninsured rate among the population under 65 to record lows. The uninsured rate in states without Medicaid expansion is nearly twice as high as in states with expansion (14.1% vs. 7.6%).
Eligibility rules differ between states, but in states that have expanded Medicaid coverage, individuals can qualify based on their income alone. If a household's income is below 133% of the FPL, they qualify for Medicaid. However, a few states use a different income limit. For example, the median income limit for parents to qualify for Medicaid in non-expansion states is just 35% of the FPL, or $9,037 annually for a family of three, and childless adults do not qualify at all.
Medicaid expansion has been shown to have positive effects on health, including increased access to care, increased economic security, improved self-reported health status, and reduced avoidable hospitalizations and mortality. It has also been associated with improved long-run educational attainment and reduced maternal mortality. Additionally, Medicaid expansion provides indirect financial benefits to low-income adults by preventing medical debt and bankruptcies, leading to improved credit scores and better terms for credit cards, mortgages, and other loans.
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Medicaid and private insurance costs
The US health system is a mix of public and private, for-profit and non-profit insurers and healthcare providers. The federal government provides funding for the national Medicare program for adults aged 65+ and some people with disabilities. It also funds various programs for veterans and low-income people, including Medicaid and the Children's Health Insurance Program.
Medicaid is a government and state-run program that provides insurance to those with low incomes. The income requirements vary from state to state. It is funded by federal and state taxes. There is usually no cost-sharing for children in families below 138% of the poverty line, and no copays for any children in some states. There are also exemptions for the terminally ill and institutionalized individuals.
Private insurance is provided primarily by employers and premiums are paid to insurers. The cost varies depending on a person's location, age, and chosen type of coverage. The average cost of private health insurance for individuals is $456 per month. Private insurance usually involves paying the full cost up to a deductible, which was an average of $1,846 for a single person in 2018.
Medicaid covers 19% of all healthcare spending and 19% of hospital spending. It is the primary payer for long-term care in the US, covering 61% of total spending. It also covers non-emergency medical transportation and comprehensive benefits for children.
Since the implementation of the Affordable Care Act's (ACA) Medicaid expansion in 2014, all but ten states have adopted the expansion to cover adults with incomes up to 138% of the federal poverty level. This has helped to drive the uninsured rate among the population under 65 to record low levels. However, about 1.4 million uninsured individuals remain in the coverage gap in the ten states that have not expanded Medicaid.
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Medicaid coverage for children
In 2023, Medicaid covered nearly 4 in 10 children, over 8 in 10 children in poverty, and almost half of adults in poverty. Medicaid is a key source of coverage for certain populations, and it covers a higher share of Black, Hispanic, and American Indian or Alaska Native (AIAN) children and adults compared to White children and adults.
Medicaid and the Children's Health Insurance Program (CHIP) provide free or low-cost health coverage to millions of Americans, including low-income people, families, and children. CHIP provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid. Each state has its own rules about who qualifies for CHIP, and some states also cover pregnant women under CHIP. There are no copays for any children in some states, and generally, there is no cost-sharing for children in families below 138% of the poverty level.
Medicaid eligibility during childhood is associated with positive effects on health, including reduced avoidable hospitalizations and mortality, and impacts beyond health, such as improved long-run educational attainment. Early and updated research findings show that state Medicaid expansions to low-income adults are associated with increased access to care, increased economic security, improved self-reported health status, and other outcomes including increased early-stage cancer diagnosis rates and lower mortality rates for certain conditions.
Gaps in access to certain providers, such as psychiatrists and dentists, remain a challenge in Medicaid, potentially due to provider shortages in low-income communities, lower Medicaid physician payment rates, and lower Medicaid physician participation compared to private insurance. However, Medicaid beneficiaries have better access to care than uninsured individuals, who are also primarily low-income, and are less likely to postpone or go without necessary care due to costs.
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Medicaid coverage for low-income earners
Medicaid is a government-funded program that provides comprehensive health and long-term care coverage to low-income individuals and families in the United States. It is jointly financed by states and the federal government but administered by states within broad federal guidelines. This means that while each state's Medicaid program must adhere to certain federal standards, there is flexibility in how they are implemented, leading to variations in coverage and costs across different states.
Medicaid is designed to provide health coverage for low-income earners, including adults, children, pregnant women, the elderly, and people with disabilities. The program has been expanded in many states to cover all adults and children below a certain income level, which is typically set at 138% of the federal poverty level. This expansion has significantly reduced the number of uninsured individuals, with 41 states having adopted it as of 2025.
Medicaid plays a crucial role in ensuring access to healthcare for low-income individuals, who often work in industries such as service, retail, and construction, where employers may not offer affordable job-based insurance. By providing coverage, Medicaid helps prevent the postponement or avoidance of necessary medical treatment due to financial constraints. Additionally, Medicaid beneficiaries have improved access to specific providers, such as psychiatrists and dentists, which may be limited due to provider shortages in low-income communities and lower Medicaid physician participation.
Medicaid also offers benefits beyond standard health insurance, such as non-emergency medical transportation and comprehensive services for children, known as Early Periodic Screening Diagnosis and Treatment (EPSDT). It serves as a vital safety net for vulnerable populations, including individuals experiencing homelessness and those with special health care needs, mental illness, or HIV. Notably, Medicaid covers 41% of all births in the United States and 5 out of 8 nursing home residents.
While Medicaid primarily serves low-income individuals, it is worth noting that coverage is not solely based on income. States have different eligibility criteria, and factors such as family size, pregnancy, and disabilities are also considered. Additionally, some states allow individuals who exceed the income limit to "spend down" their income by paying non-covered medical expenses until they qualify for Medicaid.
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Medicaid coverage for people with disabilities
The US health system is a mix of public and private, for-profit and nonprofit insurers and healthcare providers. The federal government provides funding for the national Medicare program for adults aged 65 and older, as well as some people with disabilities. The government also funds various programs for veterans and low-income people, including Medicaid and the Children's Health Insurance Program.
Medicaid is a key source of coverage for certain populations, including people with disabilities. More than 10 million children and adults with disabilities rely on Medicaid for their health coverage, which is about 15% of all Medicaid beneficiaries. People with disabilities are unlikely to have access to employer-sponsored coverage, and due to their low incomes, they may not be able to afford their healthcare costs. Medicaid provides a full range of coverage for people with disabilities, including preventive services, primary and specialty care, prescription drugs, medical equipment, and long-term services and support. About 40% of Medicaid beneficiaries with disabilities are also enrolled in Medicare, with Medicaid covering many services that Medicare does not, including long-term services and support, and, depending on the state, dental, vision, and hearing services.
While the number of people who fall into the coverage gap has declined as more states implement the expansion, 1.4 million uninsured individuals remain in the coverage gap in the ten states that have not expanded Medicaid. Limited Medicaid eligibility in non-expansion states leaves many adults without children, people of color, and those with disabilities without coverage. About one in six people in the coverage gap has a functional disability, and the share of people in the coverage gap with disabilities increases with age. Over a quarter of adults aged 55 to 64 in the coverage gap have a disability, compared to one in ten adults under 25.
Options under consideration in Congress to reduce Medicaid spending by up to $2.3 trillion over ten years could have major implications for people with disabilities. People with disabilities may be particularly vulnerable if federal spending is capped due to their high levels of healthcare spending. Loss of Medicaid coverage or benefits poses unique challenges for people with disabilities, as many rely on Medicaid for coverage of long-term care and other services not available in other health coverage. More than 1 in 3 people with disabilities (15 million) have Medicaid, compared to only 19% of people without disabilities.
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Frequently asked questions
Medicaid is a joint federal-state insurance program that provides free or low-cost health coverage to approximately 21% of the US population, including children and adults from low-income families, pregnant women, the elderly, and people with disabilities.
While some Medicaid programs pay for care directly, others use private insurance companies to provide coverage. Private insurance companies are the dominant form of coverage in the US, often provided by employers.
It is unclear how many states outsource Medicaid to private insurance companies. However, five for-profit parent firms (Centene, Elevance, UnitedHealth Group, Molina, and CVS) account for 50% of all Medicaid MCO enrollment.
Outsourcing Medicaid to private insurance companies can improve access to certain services, enhance care coordination and management, and make future costs more predictable for states.
Outsourcing to private insurance companies may not always improve access to care, and outcomes are mixed. Private insurance companies also tend to have lower physician payment rates and lower physician participation compared to Medicaid.
