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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 80 million people in 2014. 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 2014, Medicaid provided:

  • Health insurance to multiple low-income populations
    • Children (33 million)
    • Adults (non-elderly) in low-income families (19 million)    
    • Seniors and Persons with disabilities (16 million)    
    • Communities of color.  Medicaid is especially important to communities of color.  In 2014, 29.6% of African-American and 28.3% of Hispanic Americans received Medicaid benefits, compared to 13.6% 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 nearly 10 million individuals who receive Medicare and Medicaid benefits, known as dual eligibles, who are poorer and sicker than the general Medicare population. Almost 35% 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 1.5 million residents living in institutions and 2.9 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. Since 2014, states are 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?

Since 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% of the costs for “newly eligible” Medicaid beneficiaries from 2014-2016 and then phase down to 90% in 2020 and afterward.

4.How Much Does Medicaid Spend?

In 2014, total Medicaid spending was t $476 billion. Older adults and people with disabilities account for two-thirds of all Medicaid spending and Medicaid pays for about 51% 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% match from the federal government while poorer states receive a higher match. The federal government pays, on average, about 57% of overall Medicaid costs.

Government Relations and Policy, August 2016

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