Who Medicaid Covers and Why is it Important?

If you don’t have a private insurance plan from your employer or through the Affordable Care Act’s marketplace, and don’t qualify for Medicare, you may be eligible for Medicaid. This joint federal-state health insurance program is for lower-income people and covers over 70 million people in the U.S.

One provision from the 2010 Affordable Care Act (ACA) called for expanding Medicaid eligibility to more people. This expansion was introduced to help more lower-income adults get health care. Those who make above the cut-off amount may qualify for subsidized individual health insurance through the ACA Marketplace instead of Medicaid.

Qualifying for Medicaid Based on Income

To qualify for Medicaid based on your income, you have to earn less than 138% of the federal poverty level. You also have to live in a state that expanded the program, since further rules after 2010 made the expansion optional for states. For 2025, that amount comes to making under $21,597 per year for individuals. (Remember, this is the federal poverty level — not state.)

However, while the federal poverty level is the same across the country, the number of people who qualify for Medicaid often changes from year to year. That’s because the numbers depend on factors like inflation, employment rates, and state and federal rules and legislation. And then there are unique factors, like the pandemic, that temporarily changed some rules.

Medicaid History, the ACA, and Medicaid Expansion

Here’s a very brief primer on Medicaid. If you’re familiar with the program (and later, the expansion), then you know it was groundbreaking legislation when it was introduced in the 1960s. We’ve published articles in the past about why so many Americans are still locked out of the program and why it’s difficult to change laws in this country. For example, see “History of Health Insurance in the U.S.” Many years after states gained the option to expand Medicaid to more of their citizens, a handful of states still have not implemented this.

Medicare was first passed in 1965 under President Lyndon Johnson.

It was estimated that in 2019, 2.2 million uninsured adults were stuck in what’s known as the Medicaid expansion gap or coverage gap. This means that their income was above Medicaid eligibility levels but below the lower limit to qualify for Marketplace premium tax credits for individual insurance. 

Legislation on Medicaid Expansion

The ACA, including the Medicaid expansion, is a perfect example of how certain laws seem to crawl through the federal House and Senate. The same thing happens with state laws, too.

Medicaid expansion became federal law as part of the ACA in 2010. But after subsequent lawsuits, a Supreme Court decision in 2012 made the expansion to people with higher incomes optional. So states were not required to implement it. Over the years, some states that did not opt-in at first later gave their citizens the chance to vote on it. As of May 2025, 41 states (including DC) have adopted the Medicaid expansion, and 10 states, including Texas, have not adopted the expansion.

So if your state is still on the non-participation list, there may still be ways to get the expansion passed. It all depends on how your state enacts legislation and, ultimately, who is in charge.

Medicaid Awareness Month is in April

Since it’s Medicaid Awareness Month, and the program has been called a “lifeline for millions of families,” we wanted to go through some of the ways it helps many of our country’s neediest citizens.

How Medicaid Works

Here’s a quick rundown of how Medicaid works and some of the benefits it provides.

• Medicaid (including the Children’s Health Insurance Program) covers 1 in 4 Americans, providing insurance, long-term care, and crisis care.
• It’s designed as a “federal-state” partnership. While there are federal standards in place for running the program, states have a lot of say in how the program is implemented. Individual states determine who qualifies for coverage, how health care is delivered, and the ways hospitals and physicians are paid. For example, a lot of people think Medicaid is just like insurance offered to government workers and those in the armed forces. But actually, 75% of Medicaid enrollees get care through private managed care plans, according to the Kaiser Family Foundation (or KFF), because most states contract out Medicaid operations to managed care companies. 
• The ACA provides 90% federal matching funds (which is higher than normal) for the expansion population, with additional funds available through the American Rescue Plan Act to incentivize non-expansion states.
• Medicaid represents $1 out of every $6 spent on health care in the U.S.
• Medicaid covers about half of all births in the U.S.
• In most states, pregnant women and children can qualify with incomes exceeding 138% FPL.
• In some states, even higher-income families can enroll children in Medicaid. Examples would be foster children and children with significant disabilities that would be too expensive for the family to cover without assistance.
• Children on Medicaid receive more services than adults, such as vision and dental care.
• 62% of seniors living in nursing homes are covered by Medicaid.
• For the elderly and disabled, Medicaid covers long-term nursing home or at-home care (for those who qualify).

Medical Debt and Why Medicaid is Important

Medicaid is the primary health insurance program for Americans who earn too little to purchase a healthcare plan through the ACA Marketplace and don’t have other sources of insurance. One of the biggest benefits, though, is that Medicaid has helped millions of families avoid going into medical debt and losing their entire savings to care for a loved one’s medical problems. The Journal of the American Medical Association (JAMA) published a study based on the country’s largest dataset of medical debt. This study revealed medical debt as the No. 1 source of debt collections, with states that did not expand Medicaid hit the hardest.

Read Decoding Health Insurance

To better understand health insurance and the U.S. health care system, check out our book Decoding Health Insurance and the Alternatives: Options, Issues, and Tips for Saving Money. You’ll find easy-to-read information, plus tips for buying health insurance and saving money on health care. For more details about Medicaid and other government health programs, such as CHIP, Medicare, and military health programs, check out Chapter 7 of the book.