Suppose having medicaid is worth $300/month to a person making $17,000/year. $300/month is $3,600/year, if the person earns $1,000/year more he is $2,600 worse off.
So why not offer all Americans health insurance with a deductible based on their last years income as outlined here. That would eliminate the this big problem and perhaps push people to better control medical expenses.
One argument against such a system is that it would leave people with too little money in years with high medical expenses but Here is a story about a guy lives a middle class life on $7,000/year.