What Is Medicaid?

Medicaid is a joint federal and state program that provides health coverage to individuals and families with limited income and resources. Created in 1965 under Title XIX of the Social Security Act, Medicaid serves as a safety net for millions of Americans who might otherwise go without medical care. Unlike Medicare, which is primarily age-based, Medicaid eligibility is determined by financial need and other factors such as age, disability, pregnancy, and household composition.

Medicaid covers a broad range of health services and operates under both federal guidelines and state-specific rules. As a result, benefits, eligibility standards, and administrative practices can vary significantly between states.

Eligibility

Eligibility for Medicaid is means-tested, meaning applicants must meet specific income and asset criteria. These criteria are set by each state within federal parameters. Individuals and families must generally fall below a certain percentage of the Federal Poverty Level (FPL) to qualify. For example, children, pregnant women, and individuals with disabilities often qualify at higher income thresholds than other adults.

With the passage of the Affordable Care Act (ACA) in 2010, states were given the option to expand Medicaid eligibility to include adults under age 65 with incomes up to 138% of the FPL. As of now, most states have adopted Medicaid expansion, although several states have opted not to expand the program. In states that expanded Medicaid, eligibility is primarily based on income alone, without consideration of other factors like disability status.

In addition to financial criteria, applicants must meet non-financial requirements, including U.S. citizenship or qualified immigration status and residency in the state where they are applying.

Covered Services

Federal law mandates that all states provide a core set of services under Medicaid, but states may offer additional benefits beyond the minimum. Mandatory services include:

• Hospital and physician services
• Laboratory and X-ray services
• Nursing facility care for adults
• Home health services
• Early and periodic screening, diagnostic, and treatment (EPSDT) for children

States may choose to provide optional services such as prescription drug coverage, dental care, physical therapy, and case management. Many states also provide coverage for behavioral health, substance use treatment, and long-term services and supports (LTSS), including in-home care and assisted living.

Medicaid is also a primary payer for long-term care in the U.S., covering services that Medicare and private insurance often do not.

Administration and Funding

Medicaid is jointly funded by the federal government and the states. The federal government pays a share of each state’s Medicaid expenditures, known as the Federal Medical Assistance Percentage (FMAP). The FMAP varies based on a state’s per capita income, with poorer states receiving a higher federal matching rate.

States are responsible for administering their own Medicaid programs, subject to approval by the Centers for Medicare & Medicaid Services (CMS). This means each state has flexibility in designing its program, setting eligibility criteria within federal guidelines, determining the scope of benefits, and managing provider payments. States must submit a state plan to CMS outlining how their program operates.

To encourage innovation, states can apply for waivers that allow them to test new approaches to delivering care. Section 1115 waivers, for example, permit states to implement pilot programs that differ from federal requirements, as long as they further Medicaid’s objectives.

Enrollment and Access

Enrollment in Medicaid has grown significantly over time, especially after the ACA expanded eligibility. As of recent years, Medicaid and the Children’s Health Insurance Program (CHIP) cover over 90 million Americans. Many Medicaid beneficiaries are children, low-income adults, seniors, and people with disabilities.

Applications for Medicaid can typically be submitted online, by phone, by mail, or in person at local offices. In states that have expanded Medicaid, individuals can also apply through the federal health insurance marketplace.

Medicaid plays a key role in reducing barriers to healthcare access for vulnerable populations. Still, access to providers can sometimes be limited due to lower reimbursement rates compared to Medicare or private insurance, which can lead some healthcare providers to limit or refuse Medicaid patients.

Interaction with Other Programs

Medicaid often works in conjunction with other public assistance programs. For example, people who receive Supplemental Security Income (SSI) are usually eligible for Medicaid automatically in many states. Medicaid also coordinates with Medicare for individuals who qualify for both programs — known as “dual eligibles.” In such cases, Medicare is typically the primary payer, while Medicaid helps with cost-sharing and provides coverage for services that Medicare does not, such as long-term care.

Medicaid is also important in the context of children’s health coverage. Programs like CHIP, which serves children in families that earn too much to qualify for Medicaid but cannot afford private insurance, are often closely integrated with Medicaid systems at the state level.

The Bottom Line

Medicaid is a central component of the U.S. healthcare system, providing essential coverage to low-income individuals and families, people with disabilities, and older adults. Its structure as a federal-state partnership allows flexibility, but also leads to wide variation in how services are delivered across states. With its broad scope of benefits and expanding role, especially in long-term care and behavioral health, Medicaid continues to shape access to healthcare for millions of Americans.