What Is Medicaid?

Medicaid is a public health insurance program in the United States that provides health care coverage to low-income families or individuals. It covers doctor visits, hospital stays, long-term medical care, custodial care, and other health-related costs.

Medicaid is a jointly funded program by the federal government and the states. It is operated at the state level and, therefore, coverage and administration of the program vary greatly from state to state. It is available only to individuals and families who meet specific criteria based on income. It is only available to U.S. citizens, permanent residents, or legal immigrants. As of May 2020, approximately 66.8 million people were covered by Medicaid.

Key Takeaways

  • Medicaid is a joint federal and state program that provides health care coverage to low-income individuals.
  • The federal government matches state spending on Medicaid and states are responsible for designing and administering the program.
  • According to the Centers for Medicare & Medicaid Services, 66.8 million people were enrolled in Medicaid as of May 2020.
  • In 2018, total spending on the program was $597 billion.
  • Eligibility is determined based on one's income in comparison to the federal poverty level (FPL).
  • Access to Medicaid is proven to show increased individuals with coverage and improvements in overall health.

Understanding Medicaid

Medicaid was signed into law in 1965 by President Lyndon B. Johnson and authorized by Title XIX of the Social Security Act, which also created Medicare. It is a government-sponsored insurance program for individuals of any age whose resources and income are insufficient to cover health care. In the United States, it is the largest source of funding for health-related services for low-income people.

In 2018, total Medicaid spending came to $597 billion and accounted for 16% of the nation's health care bill. The federal government paid 62.5% of the tab and the states paid 37.5%.

As states are responsible for managing Medicaid programs, they decide on who qualifies for coverage, the type of coverage, and the process of paying health care workers and hospitals. The federal government is responsible for matching state spending and the matching rate varies state by state from about a statutory minimum of 50% to a maximum of 83%. States are not required to participate in Medicaid, but currently, all states do.

Medicaid does not provide health care to individuals directly, but rather pays hospitals, doctors, managed care plans, and other providers for services they provide to covered individuals.

Determining Medicaid Eligibility

Medicaid coverage is broken down into four groups: adults under 65 years of age, seniors aged 65 years or older, children, and people with disabilities. Children account for the largest group, at 43% of enrollees, but at a smaller cost. People with disabilities account for 14% of enrollees with about 40% of total costs. 

It is possible to determine eligibility for Medicaid in one of two ways. One way is to fill out an online application through the Health Insurance Marketplace website. An alternative way to apply is directly through a state’s Medicaid agency.

Eligibility is determined on income in relation to the Federal Poverty Level (FPL). The FPL is used to determine whether a family or individual's income allows them to qualify for federal benefits. In general, if an individual's income is less than 100% to 200% of the FPL, and they are either disabled, a child, pregnant, or elderly, there will be a program available for them. If their income is less than 138% of the FPL, then there may be a program available for them.

The income taken into consideration on determining eligibility is an individual's modified adjusted gross income (MAGI). This is taxable income plus certain deductions, such as Social Security benefits and tax exempt interest.

For up-to-date information on Medicaid Eligibility visit Medicaid's website.

Trump's Changes to Eligibility

The Trump administration is allowing U.S. states to remove Medicaid coverage for individuals who do not meet certain work requirements or who are not engaged in work activities for a specific amount of hours each month. Arkansas was the first state to implement this policy and it resulted in 18,000 people losing healthcare coverage. However, this is a policy that is repeatedly blocked in federal courts and Arkansas is to suspend the requirements. The Trump administration continues to push this policy.

Medicaid & the Patient Protection and Affordable Care Act (PPACA)

Often referred to as the Affordable Care Act (ACA) and colloquially deemed “Obamacare,” President Barack Obama signed this statute into law in 2010. The law states that all legal residents and citizens of the United States with incomes of up to 138% of the poverty line qualify for coverage in Medicaid participating states. While the law has worked to expand both federal funding and eligibility for Medicaid, the U.S. Supreme Court ruled that states are not required to participate in the expansion in order to continue receiving already established levels of Medicaid funding. Many states have chosen not to expand funding levels and eligibility requirements.

Medicaid Expansion
Medicaid Expansion by State.  https://www.kff.org/medicaid/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/

Effectiveness of Medicaid

Medicaid has helped in greatly reducing the number of people who have no health insurance and the ACA has helped even further. In 2013, the year before major provisions of the ACA went into effect, an estimated 44 million people lacked health insurance. By 2017, that number had reached 27.4 million.

If Medicaid was not offered, many Americans would not have health insurance. This is so because low-income individuals often don't have access to insurance through their jobs and purchasing private health insurance in the marketplace is simply not affordable. Medicaid has provided access to health care that has statistically shown improvements in the overall well-being of individuals who otherwise would not be covered for even simple doctor visits or medication.