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Medicaid is a U.S. government assistance program that provides health care benefits to certain categories of low-income individuals, including children, expectant mothers, senior citizens, and people with certain types of disabilities, primarily those with no health insurance or substandard coverage. Medicaid was first enacted on July 30, 1965, through Title XIX of the Social Security Act. By structure, each individual state presides over its own Medicaid program, while the federal Centers for Medicare and Medicaid Services (CMS) provide oversight of the state-run programs, as well as certain mandates for service, quality control, funding expenditures, and eligibility standards.

Medicaid is very different from Medicare, a social insurance program aimed to benefit the elderly and individuals with certain disabilities, with which it is often associated. Unlike Medicare, which is fully funded by the government, Medicaid is jointly funded by federal and state governments and has significantly more eligibility criteria than Medicare, criteria which vary from state to state. As a result, many individuals whose income and financial assets appear to entitle them to Medicaid may not qualify; equally, those who have higher income and greater assets may qualify.

Despite its limitations, Medicaid has significantly improved the health care opportunities for many. Before Medicaid, many individuals saw health care providers only rarely, if at all, and were unable to cover medical costs, whereas those with greater resources or health insurance were able to receive medical attention. Thus, while imperfect, Medicaid has contributed to the development of American society toward a situation of care for all, regardless of their financial situation.


Medicaid is the United States health care program for individuals and families with low incomes and resources. It is jointly funded by the states and federal government, and is managed by the states.[1] Among the groups of people served by Medicaid are eligible low-income parents, children, seniors, and people with disabilities.[2]

History and participation

Medicaid was created on July 30, 1965, through Title XIX of the Social Security Act to help individuals who have no medical insurance or poor health insurance. Federal funding does not cover all the costs but rather matches costs incurred by states in paying health care providers. State participation in Medicaid is voluntary; however, all states have participated since 1982, when the last state to join, Arizona, formed the Arizona Health Care Cost Containment System (AHCCCS) program.

States administer their own Medicaid programs, while the federal Centers for Medicare and Medicaid Services (CMS) monitors the state-run programs and establishes requirements for service delivery, quality, funding, and eligibility standards. States set their own standards for eligibility.

Each state may have its own name for the program. Examples include "Medi-Cal" in California, "MassHealth" in Massachusetts, and "TennCare" in Tennessee. States may bundle together the administration of Medicaid with other programs such as the State Children's Health Insurance Program (SCHIP), so the same organization that handles Medicaid in a state may also manage those additional programs.

Medicaid does not pay benefits to individuals directly; it sends benefit payments to health care providers. In some states Medicaid is subcontracted to private health insurance companies, while other states pay providers (such as doctors, clinics, and hospitals) directly.

During the 1990s, many states received waivers from the federal government to create Medicaid managed care programs. Under managed care, Medicaid recipients are enrolled in a private health plan, which receives a fixed monthly premium from the state. The health plan is then responsible for providing for all or most of the recipient's health care needs. All but a few states use managed care to provide coverage to a significant proportion of Medicaid enrolees.[3] Core eligibility groups of poor children and parents are most likely to be enrolled in managed care, while the aged and disabled eligibility groups more often remain in traditional "fee for service" Medicaid.

Some states operate a program known as Health Insurance Premium Payment (HIPP). This program allows a Medicaid recipient to have private health insurance paid for by Medicaid. Often this allows the recipient to have better coverage, and have more doctors available to them. [4]

Both the federal government and state governments have made changes to the eligibility requirements and restrictions over the years. In 1997, the Children's Health Insurance Program (CHIP) provided federal matching funds to states to provide health coverage to children in families with incomes too high to qualify for Medicaid. Nearly every state providing coverage for children up to at least 200 percent of the Federal Poverty Level (FPL).[5]

In 2014, the Affordable Care Act provided states the authority to expand Medicaid eligibility to individuals under age 65 in families with incomes below 133 percent of the Federal Poverty Level (FPL) and standardized the rules for determining eligibility and providing benefits through Medicaid, CHIP, and the health insurance Marketplace.[5]


Medicaid has grown since its founding in 1965 to become a central part of the American health care system. It is the largest source of funding for medical and health-related services for people with limited income. Medicaid finances health needs throughout the life cycle: From births to nursing home care. It is the "safety net" for low-income and underinsured individuals.

Basic health care services are covered for eligible individuals, with nominal, if any, costs to the beneficiary. Minimally, the following services are covered:

  • Inpatient and outpatient hospital care
  • Physician, midwife, and certified nurse practitioner services
  • Laboratory and X-ray services
  • Nursing home care and home health care
  • Early and periodic screening, diagnosis, and treatment (EPSDT) for children under twenty-one years of age
  • Family planning
  • Rural health clinic/federally qualified health center services

In addition, states have options to cover other services, with matching federal funds, including prescription drugs, clinic services, hearing aids, among others.[6]

Parents and children

Early and Periodic Screening, Diagnostic and Treatment (EPSDT) is a mandatory Medicaid program for children that focuses on prevention and early diagnosis and treatment of medical conditions.


Medicaid covers nursing home and long-term adult care for qualified seniors.


The blind and disabled receive Medicaid coverage.

Dental services

Dental services are included in Medicaid. These dental services are an optional service for adults above the age of 21; however, this service is a requirement for those eligible for Medicaid and below the age of 21. Dental services must meet standards of dental practice, which are determined by the state. Minimum services should include pain relief, restoration of teeth and maintenance for dental health.

Prescription drugs

The Medicaid Drug Rebate Program was created by the Omnibus Reconciliation Act of 1990. This act helped to add Section 1927 to the Social Security Act of 1935 which became effective on January 1, 1991. This program was formed due to the costs that Medicaid programs were paying for outpatient drugs at their discounted prices.[7]

The Veteran's Health Care Act of 1992 (VHCA) became active on November 4, 1992 as it amended Section 1927(a) of the Omnibus Reconciliation Act. This act includes amendments that relate to the coverage of manufacturers' drugs, duplicate payments, and rebate calculations.[8]

Comparisons with Medicare

Although their names are similar, Medicaid and Medicare are very different programs. Medicaid is a means-tested program that is not solely funded at the federal level. Eligibility is determined by income. States provide up to half of the funding for the Medicaid program. In some states, counties also contribute funds. The main criterion for Medicaid eligibility is limited income and financial resources, a criterion which plays no role in determining Medicare coverage. Medicaid covers a wider range of health care services than Medicare.

Medicare is an entitlement program, primarily for the senior population, funded entirely at the federal level. It is a health insurance program for people age 65 or older, people under age 65 with certain disabilities, and people of all ages with end stage renal disease. The Medicare program provides a Medicare Part A which covers hospital bills, Medicare Part B which covers medical insurance coverage, and Medicare Part D which covers prescription drugs.[9]

Some individuals are eligible for both Medicaid and Medicare (also known as Medicare dual eligibles).[10] Over 10 million Americans are enrolled in both Medicare and Medicaid.

Eligibility and social issues

Medicaid is a program intended for those with low income, but a low income is not the only requirement to enroll in the program. The complexities surrounding the availability and eligibility of Medicaid to those in need have caused numerous social concerns, especially regarding individuals who “fall through the cracks.”

All Medicaid recipients must have income and resources that fall below specified levels. While Congress and the Centers for Medicare and Medicaid Services (CMS) set out the general rules under which Medicaid operates, each state runs its own program. As a result, the eligibility levels and rules differ significantly from state to state, although all states must follow the same basic framework.

Eligibility is categorical—that is, to enroll one must be a member of a category defined by statute; some of these categories include low-income children below a certain wage, pregnant women, parents of Medicaid-eligible children who meet certain income requirements, low-income disabled people who receive Supplemental Security Income (SSI) and/or Social Security Disability (SSD), and low-income seniors 65 and older. The details of how each category is defined vary from state to state.

Although Medicaid is largely perceived as a safety net for the poor and uninsured, specific conditions may qualify or disqualify certain individuals regardless of income level. Certain limitations prevent the program from helping all who view themselves as qualifying for benefits. Budgetary constraints, for example, limit the distribution of benefits to those who fit certain guidelines relating to three distinct qualifiers: category (age and/or disability), income level, and real assets (home value, bank accounts, stocks, and such).[11] There are a number of different Medicaid eligibility categories; within each category there are requirements other than income that must be met. As a result, many individuals may be denied benefits if their income, assets, age, or even the type of illness or disability suffered do not fit state or federal guidelines.

When Medicaid was expanded under the Affordable Care Act of 2010, eligibility was determined by an income test using Modified Adjusted Gross Income, with no state-specific variations and a prohibition on asset or resource tests.[2] However, individuals must still meet certain non-financial eligibility criteria. Medicaid beneficiaries must be residents of the state in which they are receiving Medicaid. They must be either citizens of the United States or certain qualified non-citizens, such as lawful permanent residents. In addition, some eligibility groups are limited by age, or by pregnancy or parenting status.[2]

Medicaid planners typically advise retirees and other individuals facing high nursing home costs to adopt strategies that will protect their financial assets in the event of nursing home admission. State Medicaid programs do not consider the value of one's home in calculating eligibility, therefore it is often recommended that retirees pursue home ownership. By adopting such strategies, many seniors hope they will quickly qualify for Medicaid benefits if the need for long-term care arises. In other words, these individuals may seek Medicaid coverage in order to protect their assets and life savings from being used up by medical bills, including nursing home costs.[12] In an attempt to limit this practice, some states have a “spend down” policy in which higher-income individuals must spend down or decrease their real assets in order to qualify for Medicaid benefits.

Special rules also exist for children. A child may be eligible for Medicaid regardless of the eligibility status of his or her parents or guardians. Thus, a child may be covered under Medicaid if she or he is a U.S. citizen or a legal immigrant of the U.S. even if his or her parents are not. Child welfare agencies ensure that foster children, as well as those in adoption placement, are eligible for Medicaid benefits.[13]

Another area of social concern in regards to Medicaid eligibility is that of the underinsured, or people with declining employee sponsored insurance (ESI) whose private coverage, however ineffective, may disqualify them from Medicaid. For this reason, Medicaid initiated the State Children’s Health Insurance Program (SCHIP) to ease the health care burden for parents of uninsured or underinsured children.[14] SCHIP may also extend to children of middle to higher-income parents under certain conditions.

Medicaid provides the largest portion of federal money spent for health care on people living with HIV/AIDS. However, people who are HIV positive typically must progress to AIDS before they can qualify under the "disabled" category. This means that they must either pay for the expensive prescribed drugs themselves, depleting their financial resources, or, if they cannot afford the drugs, wait until they experience AIDS symptoms before being eligible for Medicaid. More than half of people living with AIDS are estimated to receive Medicaid payments. Two other programs that provide financial assistance to people living with HIV/AIDS are the Social Security Disability Insurance (SSDI) and the Supplemental Security Income (SSI).


Unlike Medicare, which is solely a federal program, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive matching funds and grants. The federal matching formula is different from state to state, depending on each state's poverty level. The wealthiest states receive a federal match of 50 percent while poorer states receive a larger match.[15]

At the beginning of the twenty-first century, Medicaid funding became a major budgetary issue for many states.

A major factor contributing to the high, and increasing, costs of Medicaid, has been the increasing cost of long-term care for the elderly. Expenditures in this category have risen for several reasons:

  • As the lifespan of most Americans has increased, the number of elderly individuals eligible for Medicaid has likewise risen.
  • Advances in medical technology, including expensive diagnostic imaging tests, have caused these costs of medical and long-term care to rise.
  • State coverage has been expanded from the minimum benefits package to include optional groups and optional services.

Limits and future of Medicaid

Medicaid is an entitlement program that provides medical coverage to those individuals who meet certain eligibility criteria. Unfortunately, Medicaid does not benefit all individuals in need of it, due to strict qualifications regarding age/disability category, income, and assets. Thus, although Medicaid is an entitlement program, it is only a limited one since many applicants do not meet the eligibility criteria.

Another serious limitation is that eligibility criteria vary from state to state. The health care needs of individuals do not vary depending upon which state they live in, nor does their ability to pay for such care. Yet, geographical disparities in eligibility are inevitable due to the structure of Medicaid.

There are groups of recipients for whom Medicaid is an entitlement, such as recipients of Supplemental Security Income, recipients of the former Aid to Families with Dependent Children (AFDC), pregnant women and poor children. Medicaid also benefits most wards of the state, such as children in group homes, children pending adoption, and foster children. Significantly, Medicaid has reshaped the provision of medical care for many of those who previously saw health care providers less often, if at all, due to lack of health insurance and personal funds.

Thus, despite its limitations, Medicaid has helped millions of uninsured, underinsured, and disabled individuals obtain health care coverage otherwise unaffordable to them. The problem is that there are still many in such a situation who are not eligible for Medicaid. The solution to this, however, lies not just in reforming Medicaid but in the wider issues of health insurance and entitlement programs in general.


  1. Centers for Medicare & Medicaid Services Medicaid Retrieved September 3, 2020.
  2. 2.0 2.1 2.2 Centers for Medicare and Medicaid Services, Eligibility Retrieved September 3, 2020.
  3. Centers for Medicare and Medicaid Services, Medicaid Managed Care Retrieved September 3, 2020.
  4. Health Insurance Premium Payment (HIPP) Program Pennsylvania Department of Human Services.
  5. 5.0 5.1 Centers for Medicare and Medicaid Services, Program History Retrieved September 3, 2020.
  6. What services does Medicaid cover? Retrieved September 3, 2020.
  7. Centers for Medicare and Medicaid Services, Medicaid Drug Rebate Program Retrieved September 3, 2020.
  8. Health Resources & Services Administration, Veterans Health Care Act of 1992, Public Law 102-585 Retrieved September 3, 2020.
  9. Centers for Medicare and Medicaid Services, Medicare Program - General Information Retrieved September 3, 2020.
  10. What is Medicare Dual Eligible and How Do I Qualify? Retrieved September 3, 2020.
  11. Alexander A. Bove, Jr., The Medicaid Planning Handbook: A Guide to Protecting Your Family's Assets from Catastrophic Nursing Home Costs (Little, Brown, and Company, 1996, ISBN 0316103748).
  12. K. Gabriel Heiser, How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets (Phylius Press, 2008, ISBN 0979080134).
  13. Rob Green, Anna S. Sommers, and Mindy Cohen, Medical Spending on Foster Children, Urban Institute, 2005. Retrieved September 3, 2020.
  14. Stephen Zuckerman and Allison Cook, The Role of Medicaid and SCHIP as an Insurance Safety Net, Urban Institute, 2006. Retrieved September 3, 2020.
  15. Alison Mitchell, Medicaid’s Federal Medical Assistance Percentage (FMAP) Congressional Research Service, July 29, 2020. Retrieved September 3, 2020.

ISBN links support NWE through referral fees

  • Bove, Alexander A. Jr. The Medicaid Planning Handbook: A Guide to Protecting Your Family's Assets from Catastrophic Nursing Home Costs. Little, Brown, and Company, 1996. ISBN 0316103748.
  • Green, Rob, Anna S. Sommers, and Mindy Cohen. "Medical Spending on Foster Children." Urban Institute, 2005. Retrieved April 17, 2020.
  • Heiser, K. Gabriel. How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets. Phylius Press, 2008. ISBN 0979080134.
  • Zuckerman, Stephen, and Allison Cook. "The Role of Medicaid and SCHIP as an Insurance Safety Net." Urban Institute, 2006. Retrieved April 17, 2020.

External links

All links retrieved November 8, 2022.


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