Which states use Medicaid expansion thresholds tied to 138% of FPL and how does that interact with Marketplace eligibility?
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Executive summary
The ACA’s Medicaid “expansion” sets an effective eligibility threshold at 138% of the federal poverty level (FPL)—a statutory 133% plus a 5% income disregard—so most expansion states use the 138% cutoff to place low‑income adults on Medicaid rather than Marketplace subsidies [1] [2]. Almost all states have adopted that expansion, but a minority have not, producing a persistent “coverage gap” where people below the FPL (or below the Medicaid expansion threshold) fall between Medicaid and Marketplace subsidy rules [3] [4].
1. How the 138% rule exists in law and practice
The Affordable Care Act specified Medicaid expansion to adults at 133% of FPL, but the law also set a 5% income disregard under the MAGI rules so that the practical eligibility line is commonly described as 138% of FPL; federal guidance and technical explanations from MACPAC and HealthCare.gov make the 133% plus 5% point explicit and treat 138% as the effective threshold [1] [2]. HealthCare.gov repeats that in expansion states adults with household income at or below the effective 138% level qualify for Medicaid based on income alone, while the Marketplace subsidy rules operate on a separate income band [2] [5].
2. Which states use that 138% threshold
The federal expansion framework applies to any state that adopts the ACA Medicaid expansion, so states that have implemented expansion use the 138% effective threshold to determine eligibility; federal observers and KFF report that all but ten states had adopted expansion by recent counts, meaning the 138% effective cutoff governs eligibility in the vast majority of states [6] [3]. Reporting also documents exceptions and partial approaches—some states have sought waivers or partial expansions with different income cutoffs or program designs (for example, Georgia’s limited 100% expansion proposal and Wisconsin’s non‑full expansion status), showing that not every state program mirrors the standard 138% model even if they claim “expansion” in some form [7].
3. How the 138% cutoff interacts with Marketplace eligibility
Marketplace premium tax credits were designed to cover those with incomes above the Medicaid threshold up to 400% of FPL, and the programs therefore butt up against each other: in expansion states, people below 138% FPL are generally steered to Medicaid while those above the threshold may be eligible for Marketplace subsidies [5] [8]. In non‑expansion states, the interaction creates the “coverage gap”: adults with incomes too low to qualify for Medicaid under state rules but also below the poverty level or under the Marketplace subsidy minimum can be ineligible for both Medicaid and Marketplace tax credits, leaving them uninsured or reliant on limited safety‑net programs [4] [9].
4. Practical frictions—income definitions and timing
Medicaid eligibility under expansion is typically evaluated on MAGI and—importantly—can be determined month‑to‑month based on current income, whereas Marketplace subsidies are calculated on projected annual income and reconciled on tax returns; this difference can change who is eligible in a given month and creates administrative friction at the 138% boundary [10]. Researchers exploiting the discontinuity at the 138% FPL threshold have used it to compare coverage, spending, and access outcomes between people just below and just above the line, finding measurable differences in enrollment, out‑of‑pocket costs, and health care use tied to whether Medicaid or Marketplace coverage applies [8].
5. Politics, incentives, and why some states diverge
States that have not fully adopted the statutory expansion often cite budget, ideological, or administrative concerns, even though federal law offers an enhanced federal match (90% in many years) for expansion populations; analysts note the federal matching incentive but also document that states that expand see larger reductions in uninsured rates for low‑income adults [4] [3]. Alternative approaches—partial expansions, state waivers, or expanded Marketplace subsidies—have been proposed and sometimes deployed, reflecting competing agendas about state control, costs, and the role of private insurance versus public coverage [7] [9].
6. Bottom line for people at the 138% boundary
If a state has adopted the ACA expansion, adults with incomes at or below the effective 138% FPL are generally eligible for Medicaid rather than Marketplace subsidies; where a state has not expanded Medicaid, people below that cutoff can fall into a coverage gap and will typically not qualify for Marketplace premium tax credits, a structural result of the way the ACA ties subsidy eligibility to the Medicaid threshold [2] [4] [3]. Exact rules and temporary policy variations (waivers, partial expansions, and administrative practices) can change local outcomes, and the literature uses the 138% discontinuity as a natural experiment to illustrate how coverage and costs shift at that line [8].