Under the public healthcare policy of the United States, some people have incomes too high to qualify in their state of residence for Medicaid, the public health insurance plan for those with limited resources, but too low to qualify for the premium tax credits that would subsidize the purchase of private health insurance. These people are described as falling into the Medicaid coverage gap.

The 2010 Affordable Care Act (ACA) aimed to ensure universal health care through a number of mechanisms. It expanded Medicaid by raising the income threshold for eligibility to 138 percent of the federal poverty line (FPL) among nonelderly adults. For those with income above the FPL who do not receive affordable health insurance from an employer, the ACA established premium tax credits that would subsidize the cost of buying private insurance through health insurance marketplaces.

State participation in Medicaid is theoretically voluntary, although all states have participated since 1982. The program is funded jointly by the state and Federal governments, though the Federal government pays for the vast majority of the ACA expansion; the framers of the ACA assumed that all states would continue to participate in the newly expanded Medicaid, which is why subsidies for private insurance are only available for those with incomes above the FPL. Nevertheless, opponents of the ACA asserted that the federal government's conditioning of continued funding for Medicaid on adoption of expansion was unconstitutionally coercive. The Supreme Court held in National Federation of Independent Business v. Sebelius that adoption of Medicaid expansion by states was effectively optional, and that states could continue with their preexisting Medicaid requirements without risk of defunding. In many of the states that chose to reject the expansion, only those making significantly below the FPL qualify for Medicaid; this has led to a "gap" in coverage for residents of those states with incomes that are too low to qualify for private insurance subsidies and too high to qualify for the non-expanded Medicaid.

As of March 2023^[update], 40 states and the District of Columbia have adopted Medicaid expansion, leaving 10 states that have not. An estimated 1.9 million Americans in those 10 states are within the Medicaid coverage gap according to the Kaiser Family Foundation. Approximately 97 percent of this cohort lives in the Southern U.S., with a majority living in Texas and Florida; Texas has the largest population of people in the cohort, accounting for 41 percent of people in the coverage gap.

As initially passed, the ACA was designed to provide universal health care in the U.S.: those with employer-sponsored health insurance would keep their plans, those with middle-income and lacking employer-sponsored health insurance could purchase subsidized insurance via newly established health insurance marketplaces, and those with low-income would be covered by the expansion of Medicaid. However, the U.S. Supreme Court ruling in National Federation of Independent Business v. Sebelius (2012) rendered state adoption of Medicaid expansion optional. Governors in several Republican-leaning states announced that they would not expand Medicaid in response, leading to a gap in insurance coverage. The Medicaid coverage gap includes nonelderly people with incomes that are below the federal poverty line (FPL), making them ineligible for subsidized marketplace insurance under the Affordable Care Act (ACA), but have incomes higher than their state's limit for Medicaid eligibility as their state has not adopted Medicaid expansion as prescribed by the ACA. The gap also includes childless adults who are ineligible for Medicaid regardless of income in these states (with the exception of Wisconsin, which permits Medicaid coverage via waiver).

As of March 2023^[update], an estimated 1.9 million people are in the Medicaid coverage gap, residing in Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming. Out of the cohort, 97 percent live in the Southern United States where most of the non-expansion states are located, with Texas, Florida, and Georgia accounting for nearly three-quarters of the Medicaid coverage gap. Childless adults account for 76 percent of the coverage gap, and people of color account for around 61 percent of the cohort. Within the ten states that have not opted for Medicaid expansion, the median income limit for eligibility in the traditional Medicaid program is 38 percent of the FPL. The uninsured rate within the non-expansion states was 15.4 percent in March 2023^[update] compared to 8.1 percent in expansion states.

Prior to passage of the ACA, Medicaid did not extend general eligibility to low-income adults without child dependents, though the federal government could authorize waivers for states to expand medicaid coverage; by 2012, eight states provided full Medicaid benefits to this group. The Medicaid statute also permitted states to cover some cohorts (termed "optional eligibility groups") without a permit. However, some states set stringent income eligibility thresholds well below the federal poverty level (FPL) for caretakers and parents of minors. In line with its previous efforts to curtail the expansion of the State Children’s Health Insurance Program, the Bush administration imposed additional restrictions on states attempting to raise the income cap for Medicaid eligibility in 2008. Healthcare reform was a key issue in campaigns for the 2008 United States presidential election. A poll of delegates conducted by the New York Times and CBS News found that 94 percent of Democratic delegates viewed expanding healthcare coverage to all Americans as more important than lowering taxes, compared to 7 percent for Republican delegates.

The ACA was signed into law in March 2010 by President Barack Obama after passing with narrow majorities in the House and Senate on nearly party lines. Softening the eligibility requirements for Medicaid was a central goal of the ACA, forming a two-pronged policy along with subsidized private insurance via health insurance marketplaces to expand health insurance coverage in the U.S. The Medicaid expansion provision of the ACA allowed states to lower the income requirements for Medicaid eligibility, extending eligibility to non-pregnant adults under the age of 65 and not entitled to Medicare with incomes of up to 138 percent of the federal poverty level. Within this cohort were three primary categories of adults: adults without dependent children, parents with dependent children, and adults with disabilities. The ACA sought to eliminate categorical criteria barring these groups from Medicaid eligibility and standardize requirements across states. The expansion provision also stipulated that the federal government would cover an enhanced share of the additional Medicaid expenditure incurred by states as a result of Medicaid expansion. The expansion was to be enacted 2014, with the federal government funding 100 percent of states' costs through 2016 and then gradually declining its share stepwise to 90 percent in 2020 and onwards. The ACA granted federal support to states classified as "expansion states" based on the following requirements: