3 Medicaid


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Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states.[1] People served by Medicaid are U.S. citizens or legal permanent residents, including low-income adults, their children, and people with certain disabilities. Poverty alone does not necessarily qualify someone for Medicaid. Medicaid is the largest source of funding for medical and health-related services for people with limited income in the United States.


History and participation

Health care in the United States
Public health care

Private health coverage

Health care reform law

State level reform
Municipal health coverage

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Medicaid was created on July 30, 1965, through Title XIX of the Social Security Act. Each state administers its own Medicaid program 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.

A few states have their own names for Medicaid. Examples are "Medi-Cal" in California, "MassHealth" in Massachusetts, "Oregon Health Plan" in Oregon, "TennCare" in Tennessee, "Soonercare" in Oklahoma. States may bundle together the administration of Medicaid with other programs such as the Children's Health Insurance Program (CHIP), so the same organization that handles Medicaid in a state may also manage the additional programs. Separate programs may also exist in some localities that are funded by the states or their political subdivisions to provide health coverage for indigents and minors.

State participation in Medicaid is voluntary; however, all states have participated since 1982 when Arizona formed its Arizona Health Care Cost Containment System (AHCCCS) program. In some states Medicaid is subcontracted to private health insurance companies, while other states pay providers (i.e., doctors, clinics and hospitals) directly.

Some states have incorporated the use of private companies to administer portions of their Medicaid benefits. These programs, typically referred to as Medicaid managed care, allow private insurance companies or health maintenance organizations to contract directly with a state Medicaid department at a fixed price per enrollee. The health plans then enroll eligible people into their programs and become responsible for assuring Medicaid benefits are delivered to beneficiaries.

Also included in the Social Security program under Medicaid are dental services. 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.[2] Minimum services include pain relief, restoration of teeth and maintenance for dental health. Early and Periodic Screening, Diagnostic and Treatment (EPSDT) is a mandatory Medicaid program for children that aims to focus on prevention on early diagnosis and treatment of medical conditions.[2] Oral screenings are not required for EPSDT recipients and they do not suffice as a direct dental referral. If a condition requiring treatment is discovered during an oral screening, the state is responsible for taking care of this service, regardless if it is covered on that particular Medicaid plan.[3]

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.[4]

The Omnibus Reconciliation Act of 1993 (OBRA 93') amended Section 1927 of the Act as it brought changes to the Medicaid Drug Rebate Program.[4]

Loss of income and medical insurance coverage during the 2008-2009 recession resulted in a substantial increase in Medicaid enrollment in 2009. Nine U.S. states showed an increase in enrollment of 15% or more, resulting in heavy pressure on state budgets.[5]

Comparisons with Medicare

Medicare is a social insurance program funded entirely at the federal level[6] and focuses primarily on the older population. As stated in the CMS website,[7] Medicare 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.

Medicaid is a program that is not solely funded at the federal level. States provide up to half of the funding for the Medicaid program. In some states, counties also contribute funds. Unlike the Medicare entitlement program, Medicaid is a means-tested, needs-based social welfare or social protection program rather than a social insurance program. Eligibility is determined largely by income. 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. Some people are eligible for both Medicaid and Medicare and are known as Medicare dual eligibles.[8] In 2001, about 6.5 million Americans were enrolled in both Medicare and Medicaid.


Medicaid is a joint federal-state program that provides health coverage or nursing home coverage to certain categories of low-asset people, including children, pregnant women, parents of eligible children, people with disabilities and elderly needing nursing home care. Medicaid was created to help low-asset people who fall into one of these eligibility categories "pay for some or all of their medical bills."[9] There are two general types of Medicaid coverage. "Community Medicaid" helps people who have little or no medical insurance. Medicaid nursing home coverage pays all of the costs of nursing homes for those who are eligible except that the recipient pays most of his/her income toward the nursing home costs, usually keeping only $66.00 a month for expenses other than the nursing home. 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. Under certain circumstances, an applicant may be denied coverage. As a result, the eligibility rules differ significantly from state to state, although all states must follow the same basic framework.


Having limited assets is one of the primary requirements for Medicaid eligibility, but poverty alone does not qualify a person to receive Medicaid benefits unless they also fall into one of the defined eligibility categories.[10] According to the CMS website, "Medicaid does not provide medical assistance for all poor persons. Even under the broadest provisions of the Federal statute (except for emergency services for certain persons), the Medicaid program does not provide health care services, even for very poor persons, unless they are in one of the designated eligibility groups."[10]


There are a number of Medicaid eligibility categories; within each category there are requirements other than income that must be met. These other requirements include, but are not limited to, assets, age, pregnancy, disability, blindness, income and resources, and one's status as a U.S. citizen or a lawfully admitted immigrant.[11] Special rules exist for those living in a nursing home and disabled children living at home. A child may be covered under Medicaid if she or he is a U.S. citizen or a permanent resident. A child may be eligible for Medicaid regardless of the eligibility status of his or her parents or guardians. Thus, a child can be covered by Medicaid based on his or her individual status even if his or her parents are not eligible. Similarly, if a child lives with someone other than a parent, he or she may still be eligible based on his or her individual status.[12]

Coverage and Utilization

One-third of children and over half (59%) of low-income children are insured through Medicaid or SCHIP. The insurance provides them with access to preventative and primary services which are utilized at a much higher rate than for the uninsured, but still below the utilization of privately insured patients. As of February 2011, a record 90% of children have coverage. However, 8 million children remain uninsured, including 5 million who are eligible for Medicaid and SCHIP but not enrolled.[13]


Children enrolled in Medicaid are individually entitled under the law to comprehensive preventive and restorative dental services, dental care utilization for this population is low. The reasons for low utilization are many, but a lack of dental providers who participate in Medicaid is a key factor.[14][15] Group dental practices are some of the few dentists who accept children and adults insured with Medicaid.[16] Few dentists participate in Medicaid – less than as half of all active private dentists in some areas.[17] Low reimbursement rates, complex forms and burdensome administrative requirements are commonly cited by dentists as reasons for not participating in Medicaid.[18][19]


Medicaid provided the largest portion of federal money spent on health care for people living with HIV/AIDS until the implementation of Medicare Part D when the prescription drug costs for those eligible for both Medicare and Medicaid shifted to Medicare. Unless low income people who are HIV positive meet some other eligibility category, they must progress to AIDS (T-cell count drops below 200) before they can qualify under the "disabled" category to receive Medicaid assistance.[20] The Medicaid eligibility policy contrasts with the Journal of the American Medical Association (JAMA) guidelines which recommend therapy for all patients with T-cell counts of 350 or less, or in certain patients even higher. Due to the high costs associated with HIV medications, many patients are not able to begin antiretroviral treatment without Medicaid help. More than half of people living with AIDS in the US 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.

Supplemental Security Income Beneficiaries

Once someone is approved as a beneficiary in the Supplemental Security Income program they may automatically be eligible for Medicaid coverage (depending on the laws of the state they reside in).

Recent changes

Both the federal government and state governments have made changes to the eligibility requirements and restrictions over the years. The Deficit Reduction Act of 2005 (DRA) (Pub.L. No. 109-171) significantly changed the rules governing the treatment of asset transfers and homes of nursing home residents.[21] The implementation of these changes proceeded state-by-state over the next few years and has now been substantially completed.

The DRA now requires that anyone seeking Medicaid must produce documents to prove that he or she is a United States citizen or resident alien. An exception is made for Emergency Medicaid where payments are allowed for the pregnant and disabled regardless of immigration status.[22][23]

The DRA created a five-year "look-back period." That means that any transfers without fair market value (gifts of any kind) made by the Medicaid applicant during the preceding five years are penalizable, dollar for dollar. All transfers made during the five-year look-back period are totaled, and the applicant is penalized that amount after having already dropped below the Medicaid asset limit. This means that after dropping below the asset level ($2,000 limit in most states), the Medicaid applicant then has to re-pay all transfers during the preceding five years by private-paying for nursing home costs. Since the person has less than $2,000, there is no source of funds to pay the penalty. Elders who gift or transfer assets can be caught in the situation of having no money but still not being eligible for Medicaid.

There is misunderstanding about what a senior can legally gift without Medicaid penalties. There is a widespread belief that it is legal to gift $10,000 per person per year. The annual gifting exclusion is actually $13,000 a year as of 2009. But the gift exclusion is only a federal gift tax rule. If a person gifts $13,000 or less during a year, that gift is not required to be reported and does not generate gift tax liability for the donor or the recipient. But Medicaid has never honored the annual gift tax exclusion. Gifts of any size during the five years preceding a Medicaid application are totaled and penalized dollar for dollar.

A cottage industry has developed with attorneys providing "Medicaid planning" for those in a nursing home or likely to be admitted. The attorneys develop plans to convert countable assets to exempt assets, thereby making an elder with excess assets eligible. Planning techniques can also prevent the homestead from being lost to a Medicaid lien. Legal asset protection can be done at any point since it is not a transfer without fair market value and is not governed by the five-year look-back period.

Medicaid does not pay benefits to individuals directly; Medicaid sends benefit payments to health care providers. In some states Medicaid beneficiaries are required to pay a small fee (co-payment) for medical services.[11]


Medicaid spending as part of total U.S. healthcare spending (public and private). Percent of gross domestic product (GDP). Congressional Budget Office chart.[24]

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.[25] The matching rate provided to states is determined using a federal matching formula (called Federal Medical Assistance Percentages), which generates payment rates that vary from state to state, depending on each state's respective per capita income.[26] The wealthiest states only receive a federal match of 50% while poorer states receive a larger match.

Medicaid funding has become a major budgetary issue for many states over the last few years, with states, on average, spending 16.8% of state general funds on the program. If the federal match expenditure is also counted, the program, on average, takes up 22% of each state's budget.[27][28] According to CMS, the Medicaid program provided health care services to more than 46.0 million people in 2001.[29][30] In 2002, Medicaid enrollees numbered 39.9 million Americans, the largest group being children (18.4 million or 46 percent).[citation needed] Some 43 million Americans were enrolled in 2004 (19.7 million of them children) at a total cost of $295 billion. In 2008, Medicaid provided health coverage and services to approximately 49 million low-income children, pregnant women, elderly people, and disabled people. Federal Medicaid outlays were estimated to be $204 billion in 2008.[31]

Medicaid payments currently assist nearly 60 percent of all nursing home residents and about 37 percent of all childbirths in the United States. The federal government pays on average 57 percent of Medicaid expenses.

Medicaid planners typically advise retirees and other people 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 the recommended strategies, many seniors hope they will quickly qualify for Medicaid benefits if the need for long-term care arises.

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 healthcare needs. Today, all but a few states use managed care to provide coverage to a significant proportion of Medicaid enrollees. Nationwide, roughly 60% of enrollees are enrolled in managed care plans.[32] 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 the Health Insurance Premium Payment Program (HIPP). This program allows a Medicaid recipient to have private health insurance paid for by Medicaid. As of 2008 relatively few states had premium assistance programs and enrollment was relatively low. Interest in this approach remained high, however.[33]

On November 25, 2008, a new federal rule was passed that allows states to charge premiums and higher co-payments to Medicaid participants.[34] This rule will enable states to take in greater revenues, limiting financial losses associated with the program. Estimates figure that states will save $1.1 billion while the federal government will save nearly $1.4 billion. However, this means that the burden of financial responsibility will be placed on 13 million Medicaid recipients who will face a $1.3 billion increase in co-payments over 5 years.[35] The major concern is that this rule will create a disincentive for low-income people to seek healthcare. It is possible that this will force only the sickest participants to pay the increased premiums and it is unclear what long term effect this will have on the program.

On March 23, 2010, the Patient Protection and Affordable Care Act was signed into law by President Barack Obama. The law expanded Medicaid eligibility starting in 2014; people with income up to 133% of the poverty line qualify for coverage, including adults without dependent children.[36][37]

Public Health Impacts

A 2011 paper by the Massachusetts Institute of Technology and the Harvard School of Public Health, “The Oregon Health Insurance Experiment: Evidence from the First Year,” utilized Oregon’s 2008 decision to hold a randomized lottery for the provision of Medicaid insurance in order to measure the impact of health insurance on an individual’s health and well-being. The study examined the outcomes of the 10,000 lower-income people eligible for Medicare who were chosen by this randomized system, which helped eliminate potential bias in the data produced. The study's authors caution that the survey sample is relatively small and "estimates are therefore difficult to extrapolate to the likely effects of much larger health insurance expansions, in which there may well be supply side responses from the health care sector." Nevertheless, the study finds evidence that: 1) Hospital utilization increased by 30% for those with insurance, with the length of hospital stays increasing by 20% and the number of procedures increasing by 45% for the population with insurance; 2) Medicaid recipients proved more likely to seek preventative care. Women were 60% more likely to have mammograms, and recipients overall were 20% more likely to have their cholesterol checked; 3) In terms of self-reported health outcomes, having insurance was associated with an increased probability of reporting one’s health as “good,” “very good,” or “excellent” — overall, about 25% higher than the average; 4) Those with insurance were about 10% less likely to report a diagnosis of depression.[38]

Important legislation

See also

State Medicaid Program
California Medi-Cal
Minnesota MinnesotaCare
Wisconsin BadgerCare


  1. ^ Medicaid General Information from the Centers for Medicare and Medicaid Services . (CMS) website
  2. ^ a b Medicaid Dental Coverage Overview
  3. ^ CMS.hhs.gov
  4. ^ a b Overview
  5. ^ "Recession Drove Many to Medicaid Last Year" article by Kevin Sack in The New York Times September 30, 2010, accessed October 1, 2010
  6. ^ Medicare.gov - Long-Term Care
  7. ^ Overview
  8. ^ Overview
  9. ^ "Medicaid Eligibility: Overview," from the Centers for Medicare and Medicaid Services (CMS) website
  10. ^ a b Overview - What is Not Covered, U.S. Department of Health & Human Services
  11. ^ a b Overview
  12. ^ CMS.hhs.gov
  13. ^ KFF.org
  14. ^ CDHP.org
  15. ^ U.S. General Accountability Office. Factors Contributing to Low Use of Dental Services by Low-Income Populations. Washington, DC: U.S. General Accountability Office. 2000.
  16. ^ Mykoolsmiles.com
  17. ^ Gehshan S, Hauck P, and Scales J. Increasing dentists’ participation in Medicaid and SCHIP. Washington, DC: National Conference of State Legislatures. 2001. Ecom.ncsl.org
  18. ^ Edelstein B. Barriers to Medicaid Dental Care. Washington, DC: Children’s Dental Health Project. 2000. CDHP.org
  19. ^ Krol D and Wolf JC. Physicians and dentists attitudes toward Medicaid and Medicaid patients: review of the literature. Columbia University. 2009.
  20. ^ "Medicaid and HIV/AIDS," Kaiser Family Foundation, fact sheet, kkf.org
  21. ^ CMS.hhs.gov
  22. ^ "Pregnant Illegal Aliens Overwhelming Emergency Medicaid". Newsmax.com. http://archive.newsmax.com/archives/articles/2007/3/14/95414.shtml. Retrieved 5 October 2011. 
  23. ^ "Healthcare for Wisconsin Residents". Wisconsin Department of Health and Family Services. http://www.dhs.wisconsin.gov/medicaid/Publications/p-10164.pdf. Retrieved 5 October 2011. 
  24. ^ The Long-Term Outlook for Health Care Spending. Figure 2. Congressional Budget Office.
  25. ^ Puerto Rico is considered a “state” for Medicaid purposes. Id. § 1301(a)(1).
  26. ^ SSA.gov, Social Security Act. Title IX, Sec. 1101(a)(8)(B)
  27. ^ Microsoft Word - Final Text.doc
  28. ^ "Medicaid and State Budgets: Looking at the Facts", Georgetown University Center for Children and Families, May 2008.
  29. ^ CMS, Medicaid and Medicare Summaries
  30. ^ CMS, Medicaid General Information
  31. ^ "Budget of the United States Government, FY 2008", Department of Healtch and Human Services, 2008.
  32. ^ Overview
  33. ^ Joan Alker, "Choosing Premium AssistanceH: What does State experience tell us?," The Kaiser Family Foundation, 2008
  34. ^ search: 42 CFR Parts 447 and 457
  35. ^ Pear, Robert (November 27, 2008). "New Medicaid Rules Allow States to Set Premiums and Higher Co-Payments". The New York Times. http://www.nytimes.com/2008/11/27/us/27medicaid.html?_r=1&scp=2&sq=medicaid&st=cse. 
  36. ^ Galewitz, Phil (March 26, 2010). "Consumers Guide To Health Reform". Kaiser Health News. http://www.kaiserhealthnews.org/Stories/2010/March/22/consumers-guide-health-reform.aspx. 
  37. ^ "5 key things to remember about health care reform". CNN. March 25, 2010. http://www.cnn.com/2010/HEALTH/03/25/health.care.law.basics/index.html. Retrieved May 21, 2010. 
  38. ^ ""Oregon Health Insurance Experiment: Evidence from the First Year"". Journalist's Resource.org. http://journalistsresource.org/studies/society/health/oregon-health-insurance-experiment/. 
  39. ^ "Medicaid Estate Recovery", "U.S. Department of Health and Human Services", April 2005
    • 1997 PL 105-33 Balanced Budget Act (Children's Health Insurance Program)

Further reading

External links

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