About Medicaid
Enacted in 1965, Medicaid has become the backbone of this country's health care safety net. It provides health coverage for more than 58 million low-income Americans, including families, people with disabilities, and the elderly. Today, Medicaid provides coverage for almost 29 million children and pays for approximately half of all long-term care costs. Medicaid will also be significantly expanded in 2014 as a result of the Affordable Care Act.
Medicaid is an entitlement program that is jointly funded by the states and the federal government. Federal law requires state Medicaid programs to cover certain categories of individuals and services in Medicaid. Beyond that, states have wide flexibility in the design and implementation of their Medicaid programs.
Financing
Generally speaking, each state receives matching dollars from the federal government, and those matching rates vary across the states from 50 to 76 percent. This means that, for every dollar a state spends on Medicaid, the federal government contributes between $1.00 and $3.17. Federal matching rates are based on the per capita income of the states, so states with lower per capita incomes get higher matching rates.
The economic recovery bill that President Obama signed in February 2009 increases states’ Medicaid matching rates until the end of December 2010. Then, a gradual phase-down will take place between January and June 2011. The table listed below shows states’ matching rates before this bill was signed, as well as estimates of their current matching rates under the economic recovery bill. Also available is a list of frequently asked questions.
Eligibility
Federal Requirements
Federal law requires states to cover certain categories of people in Medicaid. In general, there are six categories of so-called “mandatory” individuals: 1) children, 2) pregnant women, 3) very low-income parents, 4) the elderly, and individuals who are 5) blind or 6) disabled. Eligibility levels for these groups of people varies by income:
- Children under age six with family incomes up to 133 percent of the federal poverty level ($24,352 for a family of three in 2010)
- Children ages 6-19 with family incomes up to 100 percent of poverty ($18,310 for a family of three in 2010)
- Pregnant women with family incomes up to 133 percent of poverty
- Parents whose income meets the state’s AFDC (former welfare program) criteria in place as of July 1996
- People who are elderly, blind, or who have disabilities and who receive Supplemental Security Income (SSI) may have incomes up to 74 percent of poverty ($8,014 for an individual in 2010)
- Certain people with severe disabilities who would qualify for SSI if they did not work
- Elderly individuals and people with disabilities whose Medicare premiums are paid by Medicaid through the “QMB,” ”SLMB,” and “QI” programs—generally speaking, these are individuals who have incomes below 150 percent of poverty
State Options
The Affordable Care Act will require states to cover all adults, parents and those without dependent children, with incomes up to 133 percent of poverty ($24,352 for a family of three in 2010). States have the flexibility to increase these income limits to allow more people to qualify for Medicaid for several general categories of people, as follows:
- Low-income children, parents, and pregnant women with family incomes above mandatory cutoff levels and up to whatever income limit the states decide
- People who are blind, elderly, or disabled with incomes above the SSI level but below 100 percent of poverty ($10,830 for an individual in 2010)
- Nursing home residents with incomes above SSI levels but below 300 percent of poverty ($32,490 for an individual in 2010)
- People with disabilities who work and have incomes above the SSI limit
- Medically needy individuals who require institutional care but who have incomes that are too high to qualify for SSI—these individuals can deduct the cost of their institutional care from their income in order to qualify for Medicaid
States have the option to implement this expansion sooner.
Benefits
Federal Requirements
Federal law requires states to provide a minimum benefit package in Medicaid. So-called “mandatory” benefits include physician services, hospital services, family planning, health center services, and nursing facility services. The benefit package for children is more comprehensive than the one for adults because federal law requires states to provide coverage for certain health screenings and services that are medically necessary. This requirement is called the Early and Periodic Screening Diagnostic and Treatment (EPSDT) benefit.
State Options
States are permitted to provide coverage for certain other health care services that are approved by the federal government. Such “optional” services include dental care, mental health care, eye glasses and vision care, coverage for prescription drugs, home health care, case management, and rehabilitation services. For a detailed list of what benefits state Medicaid programs cover, click here.
Waivers
States can use the Medicaid waiver process to greatly alter their programs in both positive and negative ways. Waivers allow states to use Medicaid dollars in ways that go beyond the scope of federal law. Many states have used waivers to make gains in covering more uninsured individuals, most notably non-disabled childless adults, or to help elderly and disabled adults move from institutions to receiving care in the community. Unfortunately, many states have also used waivers to take away benefits and limit coverage. For more information on waivers, see our Waiver Toolbox.
Additional Resources
Is your state considering Medicaid cuts?
Find out what effect a proposed statecut in Medicaid spending would have on your state's economy. Our Medicaid Calculator will calculate the loss in business activity, jobs, and wages.
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