Medicaid

What It Means

Medicaid is a government-assistance program in the United States that provides health-care benefits to individuals and families with low income and limited resources. Medicaid recipients include children, parents, the elderly, and people with disabilities. Medicaid does not provide health care to its clients directly; rather, it is an insurance program, which pays (or reimburses) hospitals, doctors, nursing homes, and other health-care providers who treat eligible patients.

Indeed, Medicare is the largest health insurer in the United States. In 2006 it provided health coverage to nearly 60 million low-income Americans, including 28 million children, 16 million adults (mainly low-income working parents), 10 million persons with disabilities, and 6 million senior citizens.

Medicaid is jointly funded by the federal government and state governments; it is administered at the state level and monitored at the federal level by the Centers for Medicare and Medicaid Services, a division of the Department of Health and Human Services. Medicaid should not be confused with Medicare, a federally administered health-insurance program that focuses specifically on citizens age 65 and older and persons with certain disabilities or end-stage kidney disease. Millions of low-income senior citizens are “dual eligibles,” meaning that they receive benefits from both programs.

State participation in Medicaid is voluntary, but all 50 states choose to participate. Medicaid benefits vary considerably from one state to the next, however, because each state is free to design its own benefits package as long as it meets federal minimum requirements. Also, the level of federal funding varies from state to state, according to that state’s poverty level. (The poverty level is determined by the proportion of people in that state who live at or below the poverty line, which is the level of household income beneath which an individual is determined to be living in poverty.) Thus, the wealthiest states receive only 50 percent matching funds (one federal dollar to match every state dollar) from the federal government, while the poorest states receive as much as 77 percent of their Medicaid funding from the federal government (a little more than $1.50 in federal funds for every state dollar).

When Did It Begin

Before Medicaid was established, the federal government and the states did little to ensure that the poor had access to health care. Low-income Americans typically lacked health-insurance coverage and were less likely than their more affluent counterparts to go to the doctor for treatment of illnesses (even while they experienced illness more frequently). Those who did seek out traditional medical care were often saddled with overwhelming bills, which further undermined their economic stability. Others relied upon charitable care from public and nonprofit hospitals and clinics as well as certain altruistic doctors. In general, low-income households had markedly higher infant-mortality rates and shorter life expectancies than middle- and upper-class households.

Thus, in 1964, when President Lyndon Johnson (1908–73) began to outline his plan for a “Great Society” (a series of domestic programs aimed at eradicating poverty and racial injustice in America), the need to provide health care for low-income Americans became a cornerstone of his vision.

Medicaid was established in 1965 under Title XIX of the Social Security Act Amendment. (The Social Security Act was originally passed under President Franklin D. Roosevelt in 1935.) Johnson signed the amendment into law at the Truman Presidential Library in Independence, Missouri, in the presence of Harry S. Truman (1884–1972) himself, who had championed the idea of both Medicare and Medicaid during his own presidency 20 years earlier.

By the early 1970s every state except Arizona had adopted its own Medicaid program; in 1982 Arizona became the 50th state to do so. Since that time Medicaid has been continuously available in every state in the country.

More Detailed Information

Eligibility

Medicaid is classified as an “entitlement” program, meaning that coverage is guaranteed to anyone who fulfills federal and state eligibility requirements and that states are assured of receiving enough federal funding to cover at least 50 percent of their Medicaid costs.

Federal and state eligibility requirements have been revised repeatedly over the years. As of 2006 federal requirements (upon which funding is contingent), specified that the following populations must be covered under Medicaid programs:

• Parents whose income is low enough to qualify them for Temporary Assistance for Needy Families, a cash-assistance program
• Children between the ages of 6 and 18 who live in households with an annual income below the federal poverty line (in 2006 the poverty line was $16,600 for a family of three)
• Children younger than 6 who live in households with an income below 133 percent of the federal poverty line ($22,078 in 2006)
• Pregnant women with a household income below 133 percent of the poverty line
• Most elderly persons and persons with disabilities who already qualify for Supplemental Security Income, another cash-assistance program

At its own discretion, each state may also choose to extend Medicaid coverage to certain “optional” populations, such as those whose incomes exceed the eligibility requirement but whose medical expenses are sufficiently high to drive them below the poverty line.

Significantly, many low-income Americans are not eligible for Medicaid, especially those adults who do not have children and are not pregnant, disabled, or elderly. Usually a person must be a U.S. citizen to be eligible for Medicaid; legal immigrants may qualify in some cases if they have lived in the United States for a certain length of time. Illegal aliens do not qualify for Medicaid, except for emergency care.

Covered Services

The federal government also stipulates that state Medicaid programs must cover certain mandatory services, including inpatient and outpatient hospital care; physician, midwife, and nurse-practitioner services; early and periodic screening, diagnosis, and treatment (referred to as EPSDT) for children under 21 years of age; family-planning services and supplies; laboratory and X-ray services; and nursing-home care and home health care.

States have the option to receive federal matching funds for other services, including prescription-drug coverage, hearing aids, eye care, dental care, and personal-care services (assistance with everyday activities) for elderly and other people who need long-term care. While the federal government determines which services are mandatory, however, the states retain broad flexibility in deciding the amount, length, and scope of their Medicaid services. So, for example, while every state must provide Medicaid coverage of in-patient hospital care, each state is free to decide how many hospital days are covered. Given this flexibility, Medicaid coverage varies widely from state to state. Individual hospitals, doctors, and health-care providers are not required to participate in Medicaid, and many of them choose not to participate.

Costs vs. Benefits

Medicaid is far and away the most expensive U.S. government-assistance program. Together, the federal government and the states were expected to spend about $300 billion (about 20 cents of every tax dollar) on Medicaid in 2006. And even while federal funding covers an average of 57 percent of Medicaid costs per state, each state still spends about 25 percent of its annual budget on the program.

Although such figures might seem alarmingly high, they are perhaps put in perspective when one considers the magnitude of Medicaid’s role in the American health-care system. In 2006 it was estimated that Medicaid covered health-care costs for one in every three births per year in the United States, one in every four American children, three in every five nursing-home residents, one in every five low-income adults, and more than half of the people living with HIV and AIDS in the United States.

Recent Trends

In the early 1990s the cost of Medicaid rose dramatically, at an average of 30 percent annually. These increases tapered off in the latter half of the decade, but in 2006 it was estimated that Medicaid costs would continue to grow at an annual rate of 7 percent over the next decade. There were a number of reasons for these escalating costs:

• The increased number of eligible low-income individuals
• The rise in the number of eligible senior citizens, a result of the general increase in life expectancy and also of the aging of the large generation known as the baby boomers (those Americans who were born in the decade after World War II, which ended in 1945)
• The rising price of medical care, including hospital care, diagnostic testing, prescription drugs, and long-term care
• The expansion of coverage in many states to include not just the minimum benefits package but also optional populations and services

Thus, in the first decade of the twenty-first century, the question of how to contain Medicaid costs became an increasingly urgent national issue and a subject of intensive public and political debate.