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Medicaid Basics - 5 Key Questions

1.  What is Medicaid?

Established in 1965, Medicaid is the largest public health insurance program in the United States, covering over 60 million people (1 in 5 Americans).  Medicaid provides health insurance coverage to multiple low-income populations, assistance to low-income Medicare beneficiaries, long-term services and supports (LTSS) to seniors and people with disabilities and support to safety net hospitals and health centers.  In 2009, Medicaid provided:

  • Health insurance to multiple low-income populations
    • Children (31 million)    
    • Adults (non-elderly) in low-income families (16 million)    
    • Persons with disabilities (9.5 million including 4 million children)    
    • Seniors (6 million)    
    • Communities of color.  Medicaid is especially important to communities of color.  In 2009, 27 percent of African-American and 27 percent of Hispanic Americans received Medicaid benefits, compared to 11 percent of non-Hispanic White Americans.
  • Assistance to low-income Medicare beneficiaries
    • Dual eligibles. Medicaid helps pay some low-income Medicare beneficiaries’ premiums, deductibles and/or co-insurance.  There are 9.4 million individuals who receive Medicare and Medicaid benefits, known as dual eligibles, who are poorer and sicker than the general Medicare population.  Almost 40 percent of Medicaid spending goes to individuals who are dually eligible for Medicare and Medicaid.
    • Medically needy. The majority of states offer Medicaid benefits for “medically needy” individuals who have high medical costs and income above the Medicaid limit. 
  • Long-term services and supports and funding to safety net providers
    • Nursing homes and community services. Medicaid is the largest source of coverage for nursing home and community-based LTSS.  It supports 1.6 million residents living in institutions and 2.8 million living in the community.                  
    • Safety net providers. Medicaid provides funding to safety net hospitals and health centers that provide care to underserved communities and some uninsured people. 

2.  Who is Eligible for Medicaid?

To qualify for Medicaid, a person must meet financial criteria and belong to one of Medicaid’s categorically eligible groups: children, pregnant women, adults with dependent children and people with disabilities and seniors.  States must cover these groups up to a federal minimum level and cannot limit enrollment or establish waiting lists for services.  States also have the option to expand coverage.  Beginning in 2014, states will be required to determine Medicaid eligibility based on income (not categories) for the “newly eligible” non-elderly individuals as part of the Medicaid expansion established under the Affordable Care Act (ACA).  Federal mandatory eligibility rules for current Medicaid eligibles (seniors, people with disabilities and children) are not affected by the ACA.

3.  What is Medicaid Expansion?

Beginning in 2014, states can voluntarily expand Medicaid coverage to adults under age 65 with incomes up to 133% of the federal level (about $15,000 per year).  The federal government will cover 100 percent of the costs for “newly eligible” Medicaid beneficiaries from 2014-2016 and then phase down to 90 percent in 2020 and afterward. 

4.  How Much Does Medicaid Spend?

In 2010, total Medicaid spending was almost $390 billion, of which the two-thirds covered acute care services (64%) and one-third LTSS (31.5%). Older adults and people with disabilities account for two-thirds of all Medicaid spending and Medicaid pays for about 62 percent of all LTSS. 

5.  How is Medicaid Financed?

The federal and state governments jointly fund Medicaid.  States administer the program within federal rules.  A formula determines the federal share, known as the Federal Medical Assistance Percentage or FMAP.  States receive at least a 50 percent match from the federal government while poorer states receive a higher match.  In 2012, the federal government paid, on average, about 57 percent of overall Medicaid costs.


Foundation for Health Coverage Education. (2012). Federal Poverty Level.

National Health Policy Forum. (February 2012). National Spending for Long-Term Services and Supports (LTSS).

The Henry J. Kaiser Family Foundation: Medicaid Program at a Glance (September 2012);;Medicaid’s Role for Black Americans (May 2011);; and Medicaid’s Role for Hispanic Americans (May 2011)

Government Relations and Policy, February 2013

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