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Medicaid

MEDICAID

Millions of elderly people in the United States have extensive health care needs and expenses, but many have limited incomes or savings to help them cover the cost of care. Virtually all elderly Americans have Medicare, the federal health insurance program for elderly and disabled Americans, to help pay medical bills. However, limits in the scope of benefits, coupled with financial obligations for coverage, can impose a serious financial burden. Elderly persons with low incomes are particularly vulnerable to these burdens because they are more likely to have health problems than higher-income Medicare beneficiaries, yet are less able to afford care. In addition, they are less likely to be able to access or afford the supplemental coverage that many Medicare beneficiaries purchase to help fill in Medicare's gaps.

Medicaid, a means-tested entitlement program that provides health coverage to low-income Americans, serves as an important complement to Medicare by assisting low-income Medicare beneficiaries with Medicare premiums and cost-sharing, and by providing coverage for prescription drugs and long-term care services not available through Medicare. Medicaid's supplemental coverage helps many low-income elderly persons gain access to needed health services and provides financial security from the high cost of care.

The need for medical assistance

In general, elderly persons are less healthy and have greater health care needs than the general population. Nearly a third of people age sixty-five and over report that their health status is poor or fair, compared to 18 percent of people age 55 to 64 and just 6 percent of those age 25 to 44. A significant percent of elderly persons live with serious or disabling health problems, such as arthritis (56 percent), hypertension (53 percent), and heart disease (36 percent), and many live with multiple chronic conditions (69 percent). These are all conditions that require increased contact with the health care system and ongoing care, including frequent visits with a health care provider, prescription medications, and, at times, hospitalization or other inpatient medical services.

Medicare coverage

The Medicare program provides basic health coverage to most persons age 65 and older, regardless of income, assuring them access to the health system and protection from financial catastrophe when illness strikes. Medicare consists of two parts: Hospital Insurance (Part A), which covers inpatient hospital care, limited skilled nursing facility care, and home health and hospice services, and Supplementary Medical Insurance (Part B), which covers physician and outpatient hospital services, as well as some other screening, laboratory, and home health services. However, the program does not cover all medical services that elderly people need (most notably, prescription drugs and nursing home care) and requires beneficiaries to pay monthly premiums and some portion of the cost of services at the point of care. For example, in 2002 the deductible for Part A was $812 and beneficiaries had to pay some portion of the charge for extended hospital stays. Medicare also requires a monthly ($100 in 2002) premium for Part B coverage ($54 in 2002) and 20 percent co-insurance after the Part B deductible ($100 in 2002) is met.

While many Medicare recipients purchase supplemental insurance to help with these cost-sharing obligations, these requirements can impose a substantial financial burden on the more than eleven million elderly Medicare beneficiaries (36 percent) who are poor or near-poor (see Figure 1). Not only do many Medicare beneficiaries live on modest incomes, but most rely on Social Security benefits as their main source of income. Social Security benefits are often quite modestthe average in 2001 was about $800 per month. However, these benefits are the major source of income for nearly two-thirds of beneficiaries. Living on fixed incomes with little potential for additional earnings leaves these beneficiaries with minimal cushion to absorb additional medical costs.

The potential burden of medical costs is particularly important to low-income elderly people because they are more likely to need medical services than higher-income beneficiaries. Poor elderly Medicare beneficiaries are nearly twice as likely as higher-income beneficiaries to report their health status as fair or poor, and they are more likely to live with multiple chronic conditions and functional limitations than elderly people with higher incomes. Poor health status and chronic medical conditions translate into higher costs due to the increased need for medication and physician supervision, as well as the need for nonmedical support services such as transportation and personal care assistance with daily tasks such as bathing and cooking.

note: In 1999, the federal poverty level was $8,240 for individuals, $11,060 for couples.

To provide assistance in covering the cost of uncovered Medicare services and Medicare cost-sharing, many elderly persons have supplemental coverage in addition to Medicare. There are different types of supplemental coverage, and the cost and scope of benefits vary. Thirty-six percent of Medicare beneficiaries have employer-sponsored retiree coverage. This type of coverage is typically very generous, covering a wide range of benefits and limiting beneficiaries' out-of-pocket costs. Another source of supplemental coverage is individually purchased Medigap policies, which about a quarter of Medicare beneficiaries hold. Beneficiaries pay monthly premiums for Medigap coverageon average $100 per month, though policies range in cost from about $1,400 to $4,700 per year, depending on where a person lives, the level of coverage they obtain, and their age.

Supplemental coverage of Medicare beneficiaries varies significantly by income (see Figure 2). Higher-income beneficiaries are more likely to have worked in jobs that offer retiree coverage, and higher- and moderate-income beneficiaries are also more likely to purchase Medigap policies. Lower-income beneficiaries, in contrast, are more likely to rely solely on Medicare. This difference in coverage exists because low-income elderly people are less likely to have worked in jobs that offer private supplemental coverage after retirement. In addition, though many purchase Medigap policies, the high cost of such coverage is unaffordable for some.

Ultimately, poor Medicare beneficiaries bear a disproportionate burden in out-of-pocket health care costs, spending more than a third of their income on health care, compared to 10 percent for higher-income beneficiaries. These costs may lead some elderly people into impoverishment or force them to choose between covering their health care costs and paying for other basic necessities.

Medicaid coverage for elderly persons

Medicaid, the nation's major public financing program for providing health and long-term care coverage to low-income people, fills in Medicare's gaps for millions of low-income elderly people. Medicaid is jointly funded by federal and state governments and administered by the states. Enacted as Title XIX of the Social Security Act in 1965, the program has evolved from one that primarily covered people receiving cash assistance to being an essential provider of health and long-term care coverage for over forty million low-income Americans.

Medicaid coverage is targeted to people who have low incomes, few assets, and who fall into particular categories, such as low-income children, some poor parents, pregnant women, people with disabilities, and elderly persons. In 1998, the program covered over four million elderly people, accounting for about 10 percent of total Medicaid enrollment and about 12 percent of elderly people on Medicare.

There are several pathways through which elderly people can become eligible for Medicaid assistance, and the scope of coverage varies according to which pathway is used (see Table 1). The poorest Medicare beneficiariesthose who are receiving or eligible for cash assistance through the Supplemental Security Income (SSI) programreceive assistance with all of Medicare's financial requirements and are also covered for the full range of Medicaid benefits. These benefits wrap around and supplement Medicare coverage. People who have exhausted their personal resources paying for health and long-term care services to the point that their available incomes fall below cash assistance income standards are also eligible for the same level of benefits. States also have the option to provide this level of coverage to elderly persons with slightly higher incomes or assets.

The majority of elderly people receiving Medicaid assistance fall into one of these groups and receive full Medicaid benefits. Because Medicaid supplements Medicare benefits, these beneficiaries (known as dual eligibles ) rely on Medicaid primarily for services not covered by Medicare, such as prescription drugs and long-term care, and for coverage of Medicare's premiums and cost-sharing.

Other low-income beneficiaries are eligible to receive assistance primarily limited to Medicare financial requirements (most notably, Part B premiums and cost-sharing), through four related programs, which are often referred to as the buy-in programs or "Medicare savings programs." Since the programs' inception in 1965, states have had the option to buy-in the poor to Medicare by paying their Part B premium and cost-sharing. In the late 1980s and the 1990s, the federal government expanded the Medicaid buy-in to assist low-income Medicare beneficiaries with the growing cost of Medicare premiums and cost-sharing. The first initiative was the Qualified Medicare Beneficiary (QMB) program, through which Medicaid pays the Medicare cost-sharing requirements and the Part B premium for beneficiaries with incomes below the federal poverty level (in 2000, the poverty level was $8,350 for an individual and $11,250 for couples) and limited assets. The Specified Low-Income Medicaid Beneficiary (SLMB) program pays the Part B premium for people with incomes between 100 and 120 percent of the federal poverty level and limited assets. Finally, the Qualified Individual (QI) programs provide a set amount of money to provide some assistance to Medicare beneficiaries with higher incomes (up to 175 percent of poverty) on a first come, first served basis.

note: Columns may not sum to 100 percent; employer/retiree includes both beneficiaries who have supplemental insurance from a former employer or union and those who are still working and whose current employer is their primary source of insurance.

Delivering Medicaid services to elderly persons

Because of the more extensive health care needs of elderly Medicaid beneficiaries, the elderly population accounts for a substantial share of spending under Medicaid. Of the $169 billion in total Medicaid expenditures in 1998, $46 billion (27 percent) was spent on services for the 10 percent of beneficiaries who were low-income elderly persons. Nearly three-quarters of Medicaid spending on the elderly population was for long-term care services, primarily nursing-home care; about 7 percent was for prescription drugs; and nearly 6 percent was payments to the Medicare program for premiums or cost-sharing. Largely due to the high cost of long-term care, elderly beneficiaries had the highest per capita expenditures of any Medicaid eligibility group (see Figure 3).

One of the most important roles that Medicaid plays for elderly Americans is financing long-term care. With nursing-home care averaging more than $50,000 per year and regular assistance in the community costing more than $10,000 per year in 2001, long-term care can be quite costly and can drain private resources quickly. Medicaid is the major public program that covers nursing-home care; the program finances care for over two-thirds of the nation's nursing-home residents and pays nearly half of all nursing-home costs in the nation. However, because Medicaid coverage is available only to low-income individuals, many people in nursing homes who receive Medicaid assistance must spend down, or deplete, their personal resources before Medicaid assistance is available. They must also continue to contribute any available income from Social Security or pensions toward the monthly cost of their care.

note:The first three programs are entitlements; the last two are block grants available on a first-come, first-serve basis.

In response to the high cost of nursing-home care and people's desire to remain in their community, all states also offer home health and home and community-based services (HCBS) under their Medicaid programs; some states also offer personal care services. These services provide assistance to people in the community and may target a specific mix of noninstitutional long-term care services to a distinct population or geographic area. While community-based services are crucial to enabling many elderly persons with long-term care needs to remain in their homes, they represent less than 10 percent of Medicaid spending and have not been shown to reduce nursing-home utilization. A 1999 Supreme Court decision (Olmstead v. L.C. ) has helped to promote the broader use of home care as an alternative to institutionalization for people with disabilities, and it may create pressure to increase the amount and share of Medicaid resources devoted to community-based long-term care.

Medicaid's role in covering the cost of prescription drugs to Medicare beneficiaries with low incomes is another key function of the program for elderly persons. Outpatient drug therapy has become an increasingly important part of the therapeutic regimen for millions of elderly Americans. In 1996, eight out of ten Medicare beneficiaries utilized prescription drugs on an ongoing basis as a way of managing chronic conditions, delaying or even preventing the onset of serious illness, or substituting for more invasive methods of care. Prescription drugs come at a substantial cost, however, and, on average, range from $800 to $1,400 per person, per year (as of 2001). People who do not have insurance to help with these costs are less likely to fill prescriptions, and they may pay more for some drugs because they cannot participate in pharmacy discounts negotiated by insurers. All states cover prescription drugs under their Medicaid programs, a benefit that accounted for over 8 percent of total program spending in 1998. One-quarter of Medicaid spending on drugs is on behalf of elderly beneficiaries.

note: Expenditures do not include DSH, adjustments, or administrative costs.

For both long-term and acute care services, elderly persons receiving Medicaid face particular challenges in receiving health services from both Medicare and Medicaid programs. Medicare remains the primary source of insurance for elderly people, while Medicaid covers wraparound services. Depending on how a state's Medicaid program works, dual eligibles may have to see different providers for different services one for their acute care needs and one for their long-term care needs. This situation creates confusion among beneficiaries, is administratively difficult for providers, and may encourage the programs to try to shift the cost of care to each other. The growing use of managed care, which relies on a restricted network of providers for services, in both Medicare and Medicaid programs for the elderly population, brings yet another layer of complexity to coordination of services. However, without the services in Medicaid to complement Medicare coverage, the four million elderly dual eligibles would have their substantial health needs go unmet. Medicaid functions as a true safety net for Medicare's most vulnerable and sickest beneficiaries.

Medicaid's impact

Medicaid supplemental assistance makes a difference in the lives of the elderly people enrolled in the program. Problems in getting medical care are often tied to financial barriers: If people cannot afford to pay their share for services, they often delay or avoid seeking care, which ultimately compromises their health status and results in greater suffering and mortality. Medicaid coverage helps remove financial barriers to care and substantially improves access to health care for Medicare beneficiaries. Despite their greater health care needs, dual eligibles are much more likely than beneficiaries without any supplemental coverage (Medicare only) to have regular check-ups and to obtain care in a timely manner (see Figure 4). People who receive both Medicare and Medicaid are also more likely to have a usual source of care than are those who have no supplemental coverage, an indicator that Medicaid helps people gain entry into the primary health care system and receive basic health services.

Dual eligibles also have lower out-of-pocket spending than other beneficiaries, spending four to five times less of their income on health care than the average Medicare beneficiary (see Figure 5). While other types of supplemental insurance may also moderate Medicare beneficiaries' out-of-pocket costs, people receiving Medicaid assistance are in the lowest income group, but they also spend far less of their income on medical care.

note: *Community residents only.

Future challenges in Medicaid coverage of elderly persons

Medicaid has made great strides in assuring access to care and alleviating financial burdens for elderly Americans. The program is a critical source of assistance to four million low-income elderly people. However, despite its importance as a complement to Medicare, Medicaid still faces many challenges in serving current and future beneficiaries.

One of the biggest challenges facing Medicaid is the aging of the general population, which will increase demand for Medicaid services in the future and place a larger financial burden on the program. The elderly population in the United States is expected to double to 70 million people by 2030, and the population over age eighty-five is expected to grow more than fourfold by 2050 to over 18 million people. These demographic changes are not only likely to lead to a greater number of people relying on Medicaid, but also are likely to greatly increase expenditures, as elderly Medicaid beneficiaries are high users of some of the most costly services in the programlong-term care and prescription drugs.

Medicaid's growing role in caring for the poorest elderly Americans and filling in Medicare's gaps occurs at a time when the federal and state governments, with limited resources, are likely to be addressing other, often competing, policy issues. For example, future changes to the Medicare program that add benefits (i.e., prescription drugs) or enact changes to the structure of the program could lead to increased costs for Medicaid and strain state financing. Many state governments operate under very tight budgets and do not have additional resources to cover these costs. Responsibility for financing the care of the growing elderly population remains a major policy challenge.

Future additional burdens on Medicaid coverage of elderly Americans are especially problematic in light of the fact that the existing program still needs several improvements. Currently, Medicaid's coverage of the low-income Medicare population is limited. In 1997, the program reached only half of all poor, and 13 percent of near-poor, Medicare beneficiaries. States have the option to extend full Medicaid benefits to Medicare beneficiaries at higher income levels or use more liberal methods for determining income and assets for eligibility, but levels and allowable assets generally remain low. In addition, many Medicare beneficiaries who are eligible for Medicare premium assistance through the buyin programs, particularly the SLMB and QI programs, are not enrolled. Lack of significant outreach efforts, complex and burdensome enrollment processes, and limited benefits all contribute to limited enrollment. Simplified or automatic eligibility determination and a meaningful benefit would help expand the scope of Medicaid coverage for low-income elderly persons.

note: *Noninstitutionalized beneficiaries age sixty-five and older. **Not enrolled in Medicaid. The 1997 federal poverty level of people over age sixty-five was $7,698 for individuals and $9.712 for couples.

The Medicaid program must also work to assure access to high quality health services for this vulnerable population. With rising prescription drug costs and utilization, states are looking into various methods to control spending in this area, including restricting access to expensive brand-name drugs or limiting the number of prescriptions a beneficiary can fill. Such efforts could lead Medicaid to restrain, rather than expand, its role in providing prescription drug coverage at a time when prescription drugs' importance to maintaining health is growing.

Medicaid can also improve the provision of long-term care to elderly persons. Despite improvements in nursing-home quality following comprehensive nursing-home reforms in the late 1980s, serious problems persist in many facilities. In addition, the supply of community-based services falls far short of demand. Increases in payment levels to levels that allow facilities to properly care for elderly persons and a greater commitment to providing community-based services can enhance the quality of care and the quality of life for elderly Medicaid beneficiaries.

Medicaid is critical to making Medicare work for over four million elderly people in the United States. Despite the importance of Medicare's universal coverage, millions of elderly Americans struggle to gain access to the health care they need. To assure Medicare's adequacy for coverage of elderly persons in future years, it is important to maintain and improve the assistance with financial obligations and additional benefits that Medicaid provides today.

Rachel Garfield Diane Rowland

See also Long-Term Care; Long-Term Care Financing; Medicare Medigap; Poverty.

BIBLIOGRAPHY

Health Care Financing Administration. "Medicare Savings Programs: Medicare/Medicaid Dual Eligible Home Page." World Wide Web document, 2001. http://www.hcfa.gov/medicaid/dualelig/default.htm.

Hoffman, E. D., Jr.; Klees, B. S.; and Curtis, C. A. "Overview of the Medicare and Medicaid Programs." Health Care Financing Review 22 (2000): 175193.

Lamphere, J. A., and Rosenbach, M. L. "Promises Unfulfilled: Implementation of Expanded Coverage for the Elderly Poor." HSR: Health Services Research 35, no. 1, Part II (2000): 207217.

Moon, M., and Mulvey, J. Entitlements and the Elderly. Washington, D.C.: Urban Institute Press, 1995.

Moon, M.; Brennan, N.; and Segal, M. "Options for Aiding Low-Income Medicare Beneficiaries." Inquiry 35 (1998): 346356.

Nemore, P. B. Variations in State Medicaid Buy-In Practices for Low-Income Medicare Beneficiaries, A 1999 Update. (Publication # 1566.) Washington, D.C.: The Kaiser Family Foundation, 1999.

Niefield, M.; O'Brien, E.; and Feder, J. Long-Term Care: Medicaid's Role and Challenges. (Publication #2172.) Washington, D.C.: The Kaiser Commission on Medicaid and the Uninsured, 1999.

United States General Accounting Office. Low-Income Medicare Beneficiaries: Further Outreach and Administrative Simplification Could Increase Enrollment. (Publication #GAO/HEHS-99-61.) Washington, D.C.: USGAO, 1999.

Weiner, J. M., and Stevenson, D. G. "State Policy on Long-Term Care for the Elderly." Health Affairs 17, no. 3 (1998): 81100.

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Medicaid

MEDICAID

Enacted in 1965, Medicaid is the major public financing program for providing health and long-term care coverage to the low-income population of the United States. It was originally enacted as a means of providing funds to help states provide health care for welfare recipients and has evolved into a program that finances care for more than one in seven Americans. Medicaid enables millions of Americans to gain access to needed health services, helping to close the gaps in care between the poor and nonpoor, ease the financial burdens of health care, and provide a health care safety net for the nation.

Authorized under Title XIX of the Social Security Act, Medicaid is a means-tested entitlement program financed by the states and the federal government and administered by the states. Federal financial assistance is provided to states for coverage of specific groups of people, and benefits are paid for by the states and through federal matching payments based on each state's per capita income. The federal share ranges from 50 to 80 percent of Medicaid expenditures and averaged 56.5 percent in 1998. State participation in the Medicaid program is voluntary, but all states have chosen to participate.

MEDICAID COVERAGE

Although Medicaid was created to assist low-income Americans, coverage is dependent upon several other criteria in addition to income. Eligibility is primarily for those persons falling into particular categories, such as low-income children, pregnant women, elderly people, people with disabilities, and parents not exceeding specific income thresholds. Single adults are generally ineligible, no matter how poor, unless they are disabled. Within federal guidelines, states set their own income and asset eligibility criteria for Medicaid, resulting in large variations in coverage among states.

In 1998, 40.4 million people were enrolled in Medicaid. This included 20.7 million low-income children and 8.6 million low-income adults in families with children. The vast majority of adults were women. Historically, most women and children have been eligible for Medicaid because they received cash assistance through Aid to Families with Dependent Children (AFDC). Over time, eligibility was expanded to women and children not receiving welfare. The Temporary Assistance to Needy Families (TANF) welfare reforms implemented in 1996 officially severed the automatic link between Medicaid coverage and cash assistance for families.

There were 4.1 million elderly persons covered by Medicaid in 1998. Some elderly persons are eligible because they receive cash assistance through Supplemental Security Income (SSI), and others have incomes too high to qualify for cash assistance but spend-down to Medicaid by incurring high health care expenses. Many elderly Medicaid beneficiaries are "dual eligibles," or people who receive both Medicare and Medicaid. These people rely on Medicaid for assistance with Medicare's cost-sharing requirements and premiums, and sometimes for coverage of services not included in the Medicare benefits package (i.e., long-term care or prescription drugs).

Medicaid also covered 7.0 million blind and disabled persons in 1998. Most disabled persons

Figure 1

are eligible for Medicaid because they receive SSI cash assistance, though some spend-down to eligibility. Some disabled Medicaid beneficiaries are also dual eligibles.

From the perspective of whom is served, Medicaid is predominantly a program assisting low-income families, but from the perspective of how Medicaid dollars are spent, Medicaid funds primarily serve the low-income aged and low-income disabled populations. Adults and children in low-income families make up nearly three quarters (73%) of enrollees, but account for only 25 percent of spending (see Figure 1). In contrast, the elderly and disabled account for 27 percent of enrollees and the majority (67%) of spending, largely due to their intensive use of acute care services and the costliness of long-term care in institutional settings. In 1998, the average per capita cost for a child on Medicaid was $1,225, almost all of which went to basic acute care, while the corresponding figures for the disabled and elderly were $9,558 and $11,235, respectively, a significant portion of which went to long-term care services.

Although Medicaid is a key source of coverage for the low-income population, in 1998 it covered

Figure 2

only about a quarter of nonelderly Americans with incomes below 200 percent of the poverty level. Limits on coverage were largely due to limits on eligibility, especially for adults, and enrollment obstacles for those who are eligible. The decoupling of Medicaid and welfare, as well as the 1997 State Children's Health Insurance Program to extend coverage additional low-income children, offers states new opportunities to extend Medicaid coverage to millions of low-income children and their parents. Many states, however, have yet to draw on this new flexibility to extend Medicaid.

COVERED SERVICES

Medicaid covers a broad range of services with nominal, if any, cost sharing by beneficiaries. Every individual entitled to Medicaid is guaranteed a minimum package of federally mandated services, including:

  • Inpatient and outpatient hospital care
  • Physician, midwife, and certified nurse practitioner services
  • Laboratory and X-ray services
  • Nursing home care and home health care

Figure 3

  • Early and periodic screening, diagnosis, and treatment (EPSDT) for children under twenty-one years of age
  • Family planning
  • Rural health clinic/federally qualified health center services

States also have the option to cover additional services and still receive federal matching funds. Commonly offered services include prescription drugs, clinic services, case management, hearing aids, dental care, and intermediate care facilities for the mentally retarded (ICF/MR).

Because they are so costly, long-term care services account for a significant amount of Medicaid spending. Of the $169.3 billion spent in 1998 (see Figure 2), 38 percent was spent on long-term care services, primarily nursing home care. Acutecare services were about half (53%) of total spending, with nearly half of all acute-care spending allocated for premiums to managed care organizations (MCOs). About 9 percent of Medicaid spending does not go directly to benefits for enrollees, but provides supplemental payments for hospitals with a disproportionately large population of indigent patients; these are called disproportionate share hospital payments (DSH). These additional payments are intended to enable these hospitals to

Figure 4

offset some of the costs of providing services to uninsured patients.

CARE DELIVERY

Traditionally, Medicaid services have been delivered on a fee-for-service basis. Beginning in the 1990s, however, many states began to look to managed care as a model of service delivery in an effort to decrease costs and emphasize primary care and care coordination. Medicaid managedcare models range from health maintenance organizations (HMOs) that use prepaid capitated contracts to loosely structured networks that contract with selected providers for discounted services and use gatekeeping to control utilization.

States initially targeted low-income families for managed-care enrollment, but efforts to enroll aged or disabled beneficiaries increased in the late 1990s. In 1997, states were given more latitude in using Medicaid managed care under the Balanced Budget Act (BBA) of 1997, including the authority to mandate managed-care enrollment for most Medicaid populations. AS of June 1999,17.8 million Medicaid beneficiariesover half of all Medicaid beneficiarieswere enrolled in managed care, a sixfold increase from the 2.7 million enrolled in 1991.

States may also seek waivers of federal Medicaid rules to design new service delivery models for Medicaid beneficiaries. Home and community-based service (HCBS) waivers (also called 1915(c) waivers) are often used by states to deliver targeted community-based care for frail elderly or disabled individuals. Although all states have such waivers, the population served remains small.

TRENDS IN ENROLLEE AND EXPENDITURE GROWTH

Medicaid enrollment rose dramatically in the early 1990s, peaking at 41.7 million beneficiaries in 1995 (see Figure 3). This growth was mostly attributable to expanded coverage of low-income pregnant women and young children and increases in the number of blind and disabled beneficiaries. However, from 1995 to 1998, enrollment declined, especially for low-income adults and children eligible for Medicaid based on receipt of cash assistance under welfare programs, due in part to state and federal changes in welfare and immigration policy.

During the early 1990s, Medicaid expenditures grew nearly 30 percent annually, due to a combination of health care inflation, state use of alternative financing mechanisms, and an increase in enrollment. Only a small fraction of spending growth was due to the expansions in coverage of low-income pregnant women and children (see Figure 4). Legislation enacted to limit the states' capacity to raise funds through provider taxes and to limit DSH payments played a role in slowing Medicaid spending growth during these years. By 1995, growth in annual expenditures had dropped to under 10 percent, and it had nearly leveled off by 1998 rising less than 4 percent annually from 1995 to 1998.

MEDICAID'S IMPACT

Since the mid-1960s, Medicaid has been a major force in shaping health and long-term care services for the most vulnerable and needy Americans. In the year 2000, Medicaid covered more Americans than any other health insurer, accounted for 15 percent of the nation's spending on health care, and was the major source of federal financial assistance to the states, accounting for 40 percent of all federal grant-in-aid payments to states. It covers one-quarter of all American children, 40 percent of all births, and is the single largest source of public financing for HIV/AIDS (human immunodeficiency virus/acquired immunodeficiency syndrome) care. Medicaid is also the only significant public program providing financing for long-term care, covering 70 percent of nursing home residents and nearly half of nursing home costs nationwide. It has impacted every sector of health care in America, from hospital care to nonmedical support services.

More importantly, Medicaid has a significant impact on the individuals it serves. Before Medicaid, the poor saw providers less often than the nonpoor, and they faced serious financial burdens in obtaining care. Medicaid has reshaped the availability and provision of care to the poor, raising access to levels similar to those with private coverage. In contrast, poor Americans who do not have Medicaid coverage continue to face significant barriers to care.

Diane Rowland

Rachel Garfield

(see also: Access to Health Services; Medicare; National Health Systems; Poverty and Health; Uninsurance )

Bibliography

Coughlin, T. A.; Ku, L..; and Holahan, J. (1994). Medicaid Since 1980. Washington, DC: The Urban Institute Press.

Hurley, R.; Freund, D.; and Paul, J. (1993). Managed Care in Medicaid: Lessons for Policy and Program Design. Chicago: The Health Administration Press.

Iglehart, J. (1994). "The American Health Care SystemMedicaid." New England Journal of Medicine 340(5): 403408.

(1995). "Medicaid and Managed Care." New England Journal of Medicine 332(25):17271731.

Kaiser Commission on Medicaid and the Uninsured (1999). Medicaid: A Primer. Washington, DC: The Kaiser Family Foundation.

Lillie-Blanton, M.; Martinez, R. M.; Lyons, B.; and Rowland, D., eds. (1999). Access to Health Care: Promises and Prospects for Low-Income Americans. Washington, DC: The Kaiser Family Foundation.

Riley, T. (1995). "Medicaid: The Role of the States." Journal of the American Medical Association 274(3):267270.

Rogers, D. E.; Blendon, R. J.; and Moloney, T. W. (1982). "Who Needs Medicaid?" New England Journal of Medicine 307(1):1318.

Rowland, D. (1995). "Medicaid at 30." Journal of the American Medical Association 274(3):271273.

Rowland, D.; Salganicoff, A.; and Keenan, P. S. (1999). "The Key to the Door: Medicaid's Role in Improving Health Care for Women and Children." Annual Review of Public Health 20:403426.

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Medicaid

MEDICAID

A joint federal-state program that provideshealth careinsurance to low-income persons.

Medicaid was enacted in 1965 as an amendment to the Social Security Act of 1935 (title XIX, 42 U.S.C.A. § 1396), entitling low-income persons to medical care. The program is a joint federal-state endeavor, with the federal government providing money to the states, which provide additional financing and administer medical programs for the poor that satisfy federal standards. Medicaid has become a major social welfare program. By 1995, 34 million people were covered by Medicaid, including 17 million children.

Before 1965, a patchwork of programs financed by state and local governments, along with charities and community hospitals, provided indigent persons with limited health care. Most of these programs provided emergency health care services. President lyndon b. johnson supported Medicaid as well as medicare legislation for retired persons in 1965. The enactment of Medicaid meant that persons who met federal financial eligibility requirements were entitled to health care.

Medicaid furnishes at least five general categories of treatment: inpatient hospital services, outpatient hospital services, laboratory and X-ray services, skilled nursing home services, and physicians' services. Generally, each of these services is available to treat conditions that cause acute suffering, endanger life, result in illness or infirmity, interfere with the capacity for normal activity, or present a significant handicap. In addition, all states provide eye and dental care and prescription drugs. Almost all states provide physical therapy, hospice care, and rehabilitative services.

Medicaid is a "vendor" plan because payment is made directly to the vendor (the person or entity that provides the services) rather than to the patient. Only approved nursing homes, physicians, and other providers of medical care are entitled to receive Medicaid payments for their services. Since the early 1970s, rising medical costs have placed financial pressures on the

Medicaid program. Consequently, health care providers are not fully reimbursed for the services they provide to Medicaid patients. Because of lower reimbursement payments, one-third of physicians limit the number of Medicaid patients they see, and one-quarter of them refuse to accept any Medicaid patients.

The federal government, through statutes and regulations, has enacted an increasing number of criteria for the states to follow in administering the Medicaid program. For example, from 1987 to 1992, the federal government imposed 30 mandates on states that related to eligibility, reimbursement, and services. The intent of these mandates was to reduce variations among the states and to create more consistency in the coverage to low-income persons.

Under federal law, states cannot reduce other welfare benefits that people receive when they become eligible for Medicaid. State plans cannot impose a citizenship or residency requirement other than requiring that an applicant be a resident of the state. No age requirement exists, and everyone receiving welfare may apply for Medicaid. People who are "medically needy" because they are unable to cover costs for their medical care are also eligible, even if their incomes or resources exceed the level that would qualify them for welfare. Beginning in 1988, Medicaid was extended to the "working poor"—low-income persons who have jobs with no health coverage.

When Medicaid began, persons who were eligible had the right to select their own doctors, hospitals, or other medical facilities. Because of skyrocketing medical expenditures, almost all states have received waivers from the federal government concerning the choice of physician. These states now direct most of their Medicaid clients to private, managed care programs. Managed care is a general term that refers to health plans that attempt to control the cost and quality of care by coordinating medical and other health-related services.

The federal government has also granted waivers to states that prefer to pay for home and community care for elderly beneficiaries who otherwise would end up in nursing homes. This type of care is less expensive than nursing home care and allows state funds to be stretched further.

The federal government reimburses states based mainly on their per capita income. States with high per capita incomes, such as New York and Illinois, receive 50 cents from the federal government for every dollar they spend on Medicaid. Poorer states receive more, with Mississippi receiving reimbursement of 79 percent. The average reimbursement level is 57 percent.

Medicaid fraud has plagued the program. The size and complexity of the system, with each state administering Medicaid differently, create opportunity for health care providers and state employees to engage in abuse. It is estimated that ten percent of Medicaid expenditures are paid on fraudulent claims by vendors. Relatively little fraud is attributable to individuals who provide false information to receive Medicaid benefits.

Another problem for Medicaid has been the growing number of middle-class, elderly persons who divest their assets, usually to their children, to meet the Medicaid financial guidelines and qualify for state-paid nursing home care. This practice results in cases where the truly needy cannot find a bed in a nursing home. In addition, the divestiture of assets imposes additional financial pressures on a program that already has difficulty meeting the demands of the truly needy. If an individual or couple gives away or sells a resource at less than fair market value, the social security administration must report such a transfer to the state Medicaid agency. A transfer of assets may result in a period of ineligibility for certain Medicaid covered nursing home services.

The U.S. Supreme Court, in Wisconsin Department of Health and Family Service v. Blumer, 534 U.S. 473, 122 S. Ct. 962, 151 L. Ed. 2d 935 (2002), upheld a Medicaid formula for determining Medicaid eligibility for a person needing nursing home care. More than 30 states developed Medicaid rules that used an "income-first" formula, while the remainder of the states used a "resource-first" formula to help determine eligibility for Medicaid assistance and the proper amount of income for the community spouse. The "income-first" rule generally calls upon the community spouse to count more of his or her assets toward his spouse's nursing home care. The "resource-first" rule allows the spouse to keep more assets, in the belief that income from these assets will help to support the community spouse.

The state of Wisconsin used the income-first formula. A married coupled challenged this formula, and the U.S. Supreme Court determined that either formula could be used by a state without violating the Medicare Catastrophic Coverage Act of 1988 (MCCA). The Court placed great emphasis on the fact that the health and human services department (HHS) had issued several statements in support of the income-first rule and noted that in late 2001 HHS had proposed a rule that would formalize this support.

The seriousness of these fraudulent transfers led Congress in 1996 to make a person criminally liable who "knowingly and willfully disposes of assets (including by any transfer in trust) in order for an individual to become eligible for medical assistance" (42 U.S.C.A. § 1320a–7b(a)). A person convicted of this offense may be fined $25,000 and imprisoned for five years.

The Balanced Budget Act of 1997 provided a new opportunity for states to further expand health insurance coverage for children under Medicaid. The legislation created a new State Children's Health Insurance Program under Title XXI of the social security act. Funding is available to states for this voluntary program. A state's allotment may be used to expand Medicaid, to develop a new program or to expand an existing program to provide health insurance to uninsured children, or to implement a combination of the two approaches. Up to ten percent of a state's allotment may be used for administrative costs, outreach, or other health care services for children. The new funds must be used to serve children below age 19 living in families with incomes at or below 200 percent of the federal poverty level.

The increase in state and federal expenditures on Medicaid ($240 billion in 2003) and in federal mandates to states on administration of the program have led to calls for reform. Reform efforts, which have been based on the payment to the states of block grants for medical assistance, have been unsuccessful. President george w. bush asked Congress to consider a block grant program for Medicaid in his 2003 legislative proposals. His proposal would give more authority to the states to set eligibility requirements. By 2003, 45 million people qualified for Medicaid assistance.

further readings

Bove, Alexander A., Jr. 1996. The Medicaid Planning Handbook: A Guide to Protecting Your Family's Assets from Catastrophic Nursing Home Costs. 2d ed. Boston: Little Brown.

Bremner, Faith. 2002 "Kempthorne Pleased with Bush Medicaid Reform Plan." Gannett News Service (February 24).

cross-references

Health Care Law; Health Insurance.

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Medicaid

Medicaid

Definition

Medicaid is a federal-state entitlement program for low-income citizens of the United States. The Medicaid program is part of Title XIX of the Social Security Act Amendment that became law in 1965. Medicaid offers federal matching funds to states for costs incurred in paying health care providers for serving covered individuals. State participation is voluntary, but since 1982, all 50 states have chosen to participate in Medicaid.


Description

Medicaid benefits

Medicaid benefits cover basic health care and long-term care services for eligible persons. About 58% of Medicaid spending covers hospital and other acute care services. The remaining 42% pays for nursing home and long-term care.

States that choose to participate in Medicaid must offer the following basic services:

  • hospital care, both inpatient and outpatient
  • nursing home care
  • physician services
  • laboratory and diagnostic x ray services
  • immunizations and other screening, diagnostic, and treatment services for children
  • family planning
  • health center and rural health clinic services
  • nurse midwife and nurse practitioner services
  • physician assistant services

Participating states may offer the following optional services and receive federal matching funds for them:

  • prescription medications
  • institutional care for the mentally retarded
  • home- or community-based care for the elderly, including case management
  • personal care for the disabled
  • dental and vision care for eligible adults

Because participating states are allowed to design their own benefits packages as long as they meet federal minimum requirements, Medicaid benefits vary considerably from state to state. About half of all Medicaid spending covers groups of people and services above the federal minimum.


Eligibility for Medicaid

Medicaid covers three major groups of low-income Americans:

  • All recipients. In 2001, Medicaid covered 44 million low-income persons in the United States.
  • Parents and children. In 2001, Medicaid covered 24 million low-income children, approximately one-fifth of all children in the United States. It provided coverage to an estimated 9.3 million low-income adults in families with children; most of these low-income adults were women.
  • The elderly. In 2001, Medicaid covered five million adults over the age of 65. Medicaid is the largest single purchaser of long-term and nursing home care in the United States.
  • The disabled. About 17% of Medicaid recipients are blind or disabled. Most of these persons are eligible for Medicaid because they receive assistance through the Supplemental Security Income (SSI) program.

All Medicaid recipients must have incomes and resources below specified eligibility levels. These levels vary from state to state depending on the local cost of living and other factors. For example, in 2001, the federal poverty level (FPL) was determined to be $14,630 for a family of three on the mainland of the United States, but $16,830 in Hawaii and $18,290 in Alaska.

In most cases, persons must be citizens of the United States to be eligible for Medicaid, although legal immigrants may qualify in some circumstances depending on their date of entry. Illegal aliens are not eligible for Medicaid, except for emergency care.

Persons must fit into an eligibility category to receive Medicaid, even if their income is low. Childless couples and single childless adults who are not disabled or elderly are not eligible for Medicaid.


Medicaid costs

Medicaid is by far the government's most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2001, its share had risen to nearly 9%. Combined federal and state spending for Medicaid takes approximately 20 cents of every tax dollar. The federal government covers about 56% of costs associated with Medicaid. The states pay for the remaining 44%.

As of 2001, costs for Medicaid rose at an average annual rate of 7.9%. The federal government spent $107 billion on Medicaid in fiscal year (FY) 1999, a sum that is expected to rise to $159 billion in 2004. The states spent $81 billion to cover Medicaid costs in FY 1999. These costs are projected to increase to $120 billion by FY 2004.

Although more than half (54%) of all Medicaid beneficiaries are children, most of the money (more than 70%) goes for services for the elderly and disabled. The single largest portion of Medicaid money pays for long-term care for the elderly. Only 18% of Medicaid funds are spent on services for children.

There are several factors involved in the steep rise of Medicaid costs:

  • The rise in the number of eligible individuals. As the lifespan of most Americans continues to increase, the number of elderly individuals eligible for Medicaid also rises. The fastest-growing age group in the United States is people over 85.
  • The price of medical and long-term care. Advances in medical technology, including expensive diagnostic imaging tests, cause these costs to rise.
  • The increased use of services covered by Medicaid.
  • The expansion of state coverage from the minimum benefits package to include optional groups and optional services.

Normal results

The need to contain Medicaid costs is considered one of the most problematic policy issues facing legislators. In addition, the complexity of the Medicaid system, its vulnerability to billing fraud and other abuses, the confusing variety of the benefits packages available in different states, and the time-consuming paperwork are other problems that disturb both taxpayers and legislators.

Medicaid has increased the demand for health care services in the United States without greatly impacting or improving the quality of health care for low-income Americans. Medicaid is the largest health insurer in the United States. As such, it affects the employment of several hundred thousand health care workers, including health care providers, administrators, and support staff. Participation in Medicaid is optional for physicians and nursing homes . Many do not participate in the program because the reimbursement rates are low. As a result, many low-income people who are dependent on Medicaid must go to overcrowded facilities where they often receive substandard health care.


See also Medicare.


Resources

books

Albanese, Beverly H. and Heidi Macomber. Medicaid EZ: A Guide to Get Those Nursing Home Bills Paid. New York: iUniverse, 2000.

Conklin, Joan H. Medicare for the Clueless: The Complete Guide to This Federal Program. New York: Kensington Publishing, 2002.

Pratt, David A., and Sean K. Hornbeck. Social Security and Medicare Answer Book Gaithersburg, MD: Aspen, 2002.

Stevens, Robert, and Rosemary Stevens. Welfare Medicine in America: A Case Study of Medicaid. Somerset, NJ: Transaction Publishers, 2003.


periodicals

Benko, L. B. "Health Hazard. Medicaid Cuts Could Endanger Patients." Modern Healthcare 33 (2003): 2627.

Chaudry, R. V, W. P. Brandon, C. R. Thompson, R. S. Clayton, and N. B. Schoeps. "Caring for Patients under Medicaid Mandatory Managed Care: Perspectives of Primary Care Physicians." Qualitative Health Research 13 (2003): 3756.

Lambert, D., J. Gale, D. Bird, and D. Hartley. "Medicaid Managed Behavioral Health in Rural Areas." Journal of Rural Health 19 (2003): 2232.

Vastag, B. "Capitol Health Call: Proposal for State Medicaid Autonomy under Fire." Journal of the American Medical Association, 289 (2003): 10931094.


organizations

Health Care Financing Administration. United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, D.C. 20201. <http://www.hcfa.gov>.

Kaiser Commission on Medicaid and the Uninsured. 1450 G Street NW, Suite 250, Washington, DC 20005. (202) 347-5270; Fax: (202) 347-5274. <http://www.kff.org>.

National Center for Policy Analysis. 655 15th Street NW, Suite 375, Washington, DC 20005. (202) 628-6671; Fax: (202) 628-6474. <http://www.ncpa.org>.

United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. <http://www.hhs.gov>.

other

Centers for Medicare and Medicaid Services, US Department of Health and Human Services [cited March 14, 2003]. <http://cms.hhs.gov/>.

National Association of State Medicaid Directors [cited March 14, 2003]. <http://www.nasmd.org/>.

National Governor's Association [cited March 14, 2003]. <http://www.nga.org/>.

Social Security Administration [cited March 14, 2003]. <http://www.ssa.gov/>.


L. Fleming Fallon, Jr, MD, DrPH

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Medicaid

Medicaid

BIBLIOGRAPHY

The U.S. Medicaid program was enacted in 1965 as Title XIX of the Social Security Act. It is a federal-state program of health-care coverage for some low-income Americans, administered at the federal level by the Centers for Medicare and Medicaid Services. There are distinct Medicaid programs in every state, the District of Columbia, and the U.S. territories, but every program operates within guidelines set at the federal level. Medicaid is financed through federal and state general revenue funds using a formula (based on a states per capita income) whereby federal dollars are matched to state dollars at a rate of between 50 and 77 percent. In fiscal year 2004, Medicaid served approximately fifty-two million recipients at a cost of $288 billion.

Medicaid is a highly complex program, in part because there is considerable variation among states. Federal law requires states to cover some populations, referred to as categorically needy, and some services, referred to as mandatory. States may also cover medically needy and special populations and optional services and still receive federal matching funds. The major categorically needy groups are pregnant women and children under age six with family income at or below 133 percent of the federal poverty level (FPL); children ages six to nineteen with family income up to 100 percent of the FPL; and aged or disabled people who meet the income eligibility standards for the Supplemental Security Income program. Although there are many more recipients in the first two categories, the largest share of Medicaid dollars is spent on behalf of the third. Aged and disabled Medicaid recipients may also be eligible for Medicare, in which case Medicaid covers what Medicare does not.

Mandatory services for the categorically needy population comprise a comprehensive medical benefit, including inpatient and outpatient hospital, physician, prenatal, and postpartum care, as well as laboratory and x-ray, home-health, and nursing-facility services. Because Medicaid is a means-tested program vying with other state programs for general revenue funds, however, Medicaid reimbursement rates are typically substantially lower than those paid by Medicare and private insurers. Consequently, many Medicaid recipients have difficulty finding providers who will treat them for what the program will pay. Some states have addressed the access problem by requiring that Medicaid enroll recipients in managed-care organizations that contract to serve the program population in return for a yearly per capita payment. Managed care is also viewed as a cost-containment strategy.

Medicaid pays for almost half of all nursing-home care, compared with approximately 12 percent by Medicare and 8 percent by private insurers. Although Medicaid coverage is limited to low-income elders, program rules allow residents to qualify for nursing-home benefits by spending down their resources first and then turning to the program for assistance. Because Medicare covers only short-term and medically involved nursing-home stays and because private long-term care insurance is costly and time-limited, even middle-class elderly seek Medicaid benefits in a nursing home. In recent years, states have received federal waivers of some program requirements in order to provide comprehensive longterm care in recipients homes.

SEE ALSO Medicare; Medicine, Socialized; National Health Insurance; Poverty; Poverty, Indices of; Public Health; Welfare; Welfare State

BIBLIOGRAPHY

Centers for Medicare and Medicaid Services. Medicaid-At-a-Glance 2005: A Medicaid Information Source. http://www.cms.hhs.gov/MedicaidGenInfo/.

Grogan, Colleen, and Eric Patashnik. 2003. Between Welfare Medicine and Mainstream Entitlement: Medicaid at the Political Crossroads. Journal of Health Politics, Policy, and Law 28 (5): 821858.

Kaiser Commission on Medicaid and the Uninsured. May 2006. Medicaid Enrollment and Spending Trends. http://www.kff.org/medicaid/7523.cfm.

Sandra J. Tanenbaum

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Medicaid

Medicaid, national health insurance program in the United States for low-income persons and persons with disabilities. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. In 2010 the program was expanded as part of heath insurance legislation, to provide insurance for low-income people not eligible for subsidies under the new law, but the expansion was made voluntary for the states, and only about half the states elected to participate in the expansion (effective 2014). The federal role in Medicaid is limited to setting standards, issuing regulations and guidelines, and overseeing operation of the program by the states. More than 58 million people received Medicaid in 2013. Of the various services covered under Medicaid, about half of the funds are used to purchase in-patient hospital services and nursing home services; the remainder covers physician services, drugs, laboratory services, X rays, and other services. Political debate on the future of Medicaid has accompanied health-care reform and budget deficit reduction debates.

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Medicaid

MEDICAID


Medicaid is a large social welfare program operated jointly by the federal and state governments. A 1965 amendment to the Social Security Act of 1935 created the program, which allows low-income individuals access to medical care.

How does it work? The federal government provides money to the states. The states then add funding of their own to this amount and administer medical programs for the poor in compliance with federally established standards.

Before Medicaid developed, health care for the poor was very limited and came from a variety of sources, including hospitals, charities, and state and local governments.

What type of care can a Medicaid patient receive? A Medicaid recipient may obtain treatment from five different categories of care: inpatient hospital services, outpatient hospital services, laboratory and x-ray services, skilled nursing home services, and physician services.

Initially, Medicaid recipients were able to select their own doctors and hospitals, but because of a large increase in medical expenditures, states now direct Medicaid recipients to certain health plans that attempt to control costs and quality of care. As a result, only approved medical care providers, including physicians, nursing homes, and hospitals are entitled to receive Medicaid payments for their services.

In 1995, there were about 30 million Medicaid recipients.

See also: Medicare, Social Security Act

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Medicaid

Med·i·caid / ˈmediˌkād/ a federal system of health insurance for those requiring financial assistance.

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Medicaid

Medicaidabrade, afraid, aid, aide, ambuscade, arcade, balustrade, barricade, Belgrade, blade, blockade, braid, brigade, brocade, cannonade, carronade, cascade, cavalcade, cockade, colonnade, crusade, dissuade, downgrade, enfilade, esplanade, evade, fade, fusillade, glade, grade, grenade, grillade, handmade, harlequinade, homemade, invade, jade, lade, laid, lemonade, limeade, made, maid, man-made, marinade, masquerade, newlaid, orangeade, paid, palisade, parade, pasquinade, persuade, pervade, raid, serenade, shade, Sinéad, spade, staid, stockade, stock-in-trade, suede, tailor-made, they'd, tirade, trade, Ubaid, underpaid, undismayed, unplayed, unsprayed, unswayed, upbraid, upgrade, wade •nightshade • renegade • decade •Medicaid • motorcade • switchblade •Adelaide • accolade • rollerblade •marmalade • razor blade • handmaid •barmaid • Teasmade • milkmaid •dairymaid • bridesmaid • housemaid •chambermaid •parlourmaid (US parlormaid) •mermaid • nursemaid • escapade •ram raid • centigrade • multigrade •comrade • retrograde • lampshade •eyeshade • sunshade

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Medicaid

Medicaid

Definition

Medicaid is a federal-state entitlement program for low-income citizens of the United States. The Medicaid program is part of Title XIX of the Social Security Act that became law in 1965. Medicaid offers federal matching funds to states for costs incurred in paying healthcare providers for serving covered individuals. State participation is voluntary, but since 1982 all 50 states have chosen to participate in Medicaid.

Description

Medicaid benefits

Medicaid benefits cover basic health care and long-term care services for eligible persons. About 59% of Medicaid spending covers hospital and other acute care services. The remaining 41% pays for nursing home and long-term care.

States that choose to participate in Medicaid must offer the following basic services:

  • hospital care, both inpatient and outpatient
  • nursing home care
  • physicians' services
  • laboratory and diagnostic x-ray services
  • immunizations and other screening, diagnostic, and treatment services for children
  • family planning
  • health center and rural health clinic services
  • nurse midwife and nurse practitioner services

Participating states may offer the following optional services and receive federal matching funds for them:

  • prescription medications
  • institutional care for the mentally retarded
  • home- or community-based care for the elderly, including case management
  • personal care for the disabled
  • dental and vision care for eligible adults

Because the participating states are allowed to design their own benefits packages as long as they meet federal minimum requirements, Medicaid benefits vary considerably from state to state. About half of all Medicaid spending covers groups of people and services above the federal minimum.

Eligibility for Medicaid

Medicaid covers three major groups of low-income Americans:

  • Parents and children. In 1997 Medicaid covered 21 million low-income children—one-fifth of all children in the United States—and 8.6 million low-income adults in families with children. Most of these low-income adults are women.
  • The elderly. In 1997 Medicaid covered 4 million adults over the age of 65. Medicaid is the largest single purchaser of long-term and nursing home care in the United States. In 1997, Medicaid paid for 38% of the $115 billion spent on long-term care and 47% of the $83 billion spent on nursing home care.
  • The disabled. About 17% of Medicaid recipients are blind or disabled. Most of these are eligible for Medicaid because they receive assistance through the Supplemental Security Income (SSI) program.

All Medicaid recipients must have incomes and resources below specified eligibility levels. These levels vary from state to state depending on the local cost of living and other factors. For example, in 1999 the federal poverty level (FPL) was determined to be $13,880 for a family of three on the mainland of the United States, but $15,970 in Hawaii and $17,360 in Alaska.

In most cases, persons must be citizens of the United States to be eligible for Medicaid, although legal immigrants may qualify in some circumstances depending on their date of entry. Illegal aliens are not eligible for Medicaid except for emergency care.

A person must fit into an eligibility category to receive Medicaid even if their income is low. Childless couples and single childless adults who are not disabled or elderly are not eligible for Medicaid.

Medicaid costs

Medicaid is by far the government's most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2001 its share had risen to nearly 9%. Combined federal and state spending for Medicaid takes nearly 20 cents of every tax dollar. The federal government covers about 57% of Medicaid's costs, with the states paying for the remaining 43%.

As of 2001, Medicaid's costs rise at an average annual rate of 7.9%. The federal government spent $107 billion on Medicaid in fiscal year (FY) 1999, a sum that is expected to rise to $159 billion in 2004. The states spent $81 billion to cover Medicaid costs in FY 1999. These costs are projected to increase to $120 billion by FY 2004.

Although 50% of all Medicaid beneficiaries are children, most of the money (72%) goes for services for the elderly and disabled. The single largest portion of Medicaid money pays for long-term care for the elderly. Only 17% of Medicaid funds are spent on services for children.

There are several factors involved in the steep rise of Medicaid costs:

  • The rise in the number of eligible individuals. As the life span of most Americans continues to increase, the number of elderly individuals eligible for Medicaid also rises. The fastest-growing age group in the United States is people over 85.
  • The price of medical and long-term care. Advances in medical technology, including expensive diagnostic imaging, keep these costs high.
  • The increased use of services covered by Medicaid.
  • The expansion of state coverage from the minimum benefits package to include optional groups and optional services.

Viewpoints

The need to contain Medicaid costs is considered one of the most problematic policy issues that legislators will face in the coming years. In addition, the complexity of the Medicaid system, its vulnerability to billing fraud and other abuses, the confusing variety in the benefits packages available in different states, and the time-consuming paperwork are other problems that disturb taxpayers and legislators alike.

KEY TERMS

Categorically needy— A term that describes certain groups of Medicaid recipients who qualify for the basic mandatory package of Medicaid benefits. There are categorically needy groups that states participating in Medicaid are required to cover, and others that the states have the option to cover.

DHHS— The Department of Health and Human Service. It is a federal agency that distributes funds for Medicaid.

Entitlement— A program that creates a legal obligation on the federal government to any person, business, or government entity that meets the legally defined criteria. Medicaid is an entitlement both for eligible individuals and for the states that decide to participate in it.

Federal poverty level (FPL)— The federal government's definition of poverty used as the reference point for Medicaid eligibility for certain groups of beneficiaries. The FPL is adjusted every year to allow for inflation.

HCFA— Health Care Financing Administration. A federal agency that provides guidelines for the Medicaid program.

Medically needy— A term that describes a group whose coverage is optional with the states because of high medical expenses. These persons meet Medicaid's category requirements (they are children or parents or elderly or disabled) but their income is too high to qualify them for "categorically needy" coverage.

Supplemental Security Income (SSI)— A federal entitlement program that provides cash assistance to low-income blind, disabled, and elderly people. In most states, people receiving SSI benefits are eligible for Medicaid.

Professional implications

Medicaid has increased the demand for health care services in the United States without greatly improving the quality of health care for low-income Americans. On the one hand, Medicaid's position as the largest health insurer in the United States means that it affects the employment of several hundred thousand health care workers. In 1997, Medicaid payments went to over 5,000 hospitals, 3,000 nursing homes, 7,000 homes for the mentally retarded, 670 community health clinics, and 550 managed care plans—all of which provide employment for thousands of health care providers, administrators, and support staff. On the other hand, participation in Medicaid is optional for physicians and nursing homes. Many do not participate in the program because the reimbursement rates are low. As a result, many low-income people who are dependent on Medicaid must go to overcrowded facilities where they often receive substandard health care.

Resources

BOOKS

Morris, Virginia. "Paying the Way." Chapter 13 in How to Care for Aging Parents. New York: Workman Publishing, 1996.

ORGANIZATIONS

Health Care Financing Administration. United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. 〈http://www.hcfa.gov〉.

Kaiser Commission on Medicaid and the Uninsured. 1450 G Street NW, Suite 250, Washington, DC 20005. (202) 347-5270. Fax: (202) 347-5274. 〈http://www.kff.org〉.

National Center for Policy Analysis. 655 15th Street NW, Suite 375, Washington, DC 20005. (202) 628-6671. Fax: (202) 628-6474. 〈http://www.ncpa.org〉.

United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. 〈http://www.hhs.gov〉.

OTHER

Medicaid: A Primer. Washington, DC: Kaiser Commission on Medicaid and the Uninsured, 1999.

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Medicaid

Medicaid

A joint federal-state program that provides health care insurance to low-income persons.

Arkansas Department of Health and Human Services v. Ahlborn

When states agree to participate in the Medicaid program they receive reimbursement of patient care from the federal government that ranges from 50% to 83% of their costs. In return states must comply with the requirement of the federal Medicaid statute for eligibility rules, collecting and maintaining information, and administering the program. One provision of the law mandates that the state agency in charge of the Medicaid program "take all reasonable measures to ascertain the legal liability of third parties … to pay for care and services available under the plan." The law further declares that if a Medicaid recipient receives compensation from a third party the state must be assigned a portion of the compensation to reimburse itself for medical expenses. In Arkansas Department of Health and Human Services v. Ahlborn, __U.S.__, 126 S.Ct. 1752, __L.Ed.2d __ (2006), the Supreme Court was called on to decide whether a state could lay claim to a substantial portion of a personal injury settlement to reimburse Medicaid. The Court held that the state could only claim the portion of the settlement that was allocated to medical expenses.

Heidi Ahlborn was a 19-year-old college student in 1996 when she became a victim of a car accident. The accident left her with permanent and severe brain injuries and medical bills she could not pay. The Arkansas Department of Health and Human Services (ADHHS) deemed her eligible for medical assistance and paid over $215,000 to medical providers. Ahlborn retained a lawyer to seek compensation for her injuries. ADHHS sent letters to the lawyer, which stated that under state law the agency had a claim of reimbursement from any settlement or award that Ahlborn obtained from a third party. Ahlborn had assigned this right to ADHHS when she applied for benefits. The lawyer filed suit in 1997, asking that Ahlborn be compensated for past medical costs, permanent physical injury, future medical expenses, pain and suffering, lost earnings, and mental anguish. In 2002 the case was settled out of court for $550,000. The parties did not allocate the settlement between the various categories of damages. ADHHS then asserted a lien against the settlement proceeds for the $215,000 it had paid in medical care expenses for Ahlborn.

Ahlborn filed a lawsuit in Arkansas federal district court, asking the court to declare that the lien violated federal Medicaid laws because the state sought money from the settlement that did not address past medical expenses. ADHHS and Ahlborn stipulated that her entire claim was valued at over $3 million, that the settlement was approximately one-sixth of this amount, and that, if Ahlborn's interpretation of federal law was correct, ADHHS would be entitled only to $35,000, the portion of the settlement that applied to reimbursement for medical payments. The district ruled in favor of ADHHS, finding that Ahlborn had assigned to ADHHS her right to any recovery to the full extent of the Medicaid payments made on her behalf. The Eighth Circuit Court of Appeals reversed, holding that ADHHS was only entitled to that part of the settlement that represented payments for medical care.

The Supreme Court, in a unanimous decision, upheld the appeals court ruling. Justice John Paul Stevens, writing for the Court, noted that the federal Medicaid law provision requires Medicaid recipients to assign to the state any rights "to payment for medical care from any third party." This limitation on the assignment of payments was reinforced by another provision that third parties who paid Medicaid recipients for their injuries had legal liability "to pay for care and services available under the plan." In Ahlborn's case the third parties accepted liability for one-sixth of her overall damages and ADHHS agreed that only $35,000 (one-sixth) of that sum represented compensation for medical expenses. The agency pointed to other Medicaid law provisions that suggested it could demand full reimbursement of its costs from Ahlborn's settlement but Justice Stevens concluded that these provisions referred not to the entire settlement but only that part allocated for medical expenses.

Justice Stevens also noted another Medicaid law provision that prohibited states from placing liens against or seeking recovery of benefits from a Medicaid recipient. Read literally it would ban a lien for the recovery of medical payments, yet even Ahlborn did not make that argument. Instead, she contended that this anti-lien provision precluded "attachment or encumbrance of the remainder of the settlement." Justice Stevens agreed with this interpretation, rejecting the agency's claim that the anti-lien provision did not apply because Ahlborn lost her property rights the moment she applied for Medicaid. Stevens found this illogical, for why would ADHHS "need a lien on its own property?" The agency called the lien an "assignment" but that did not change the Court's analysis. Arkansas was entitled to recover that part of the settlement allocated to medical expenses but it could claim other parts of the settlement to full reimburse itself for all medical expenses paid on behalf of Ahlborn because the anti-lien provision "affirmatively prohibits it from doing so."

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Medicaid

Medicaid

Sections within this essay:

Background
History
Eligibility
How Medicaid Funds Are Administered
Fee-For-Service Medicaid
Medicaid Managed Care

Benefits
State-By-State Guide To Medicaid
Additional Resources
Organizations
Centers for Medicare and Medicaid Services
Henry J. Kaiser Family Foundation
U. S. Department of Health and Human Services

Background

Of the federal governments two major health programs, Medicare and Medicaid, Medicaid has had by far the rockier history. Medicare has enjoyed fairly broad based support in its goal of covering the elderly and disabled. While there has been controversy over the extent of benefits, the basic coverage of the Medicare program has remained the same since it was it was first enacted, and the federal government has always had primary responsibility for the program.

In contrast, Medicaid has always inspired battles, between the federal government and the states over funding of the program, between conservatives and liberals over what the purpose of the program should be, and between different interest groups whose members argue over how the Medicaid pie should be divided. There have been suggestions from several quarters that Medicaid be ended entirely, either eliminated or turned into something completely different, and these suggestions have increased since welfare reform was passed in 1996.

In part, these controversies stem from the reason Medicaid was originally set up—to enable each state, as far as practicable, to furnish medical assistance to individuals whose income and resources are insufficient to meet the costs of medically necessary services. The goal is simple, but the arguments on how to best accomplish that goal are complex. Although many commentators argue Medicaid has been one of the most successful government programs, in terms of the number of people it has helped, the eventual fate of the program remains to be seen.

History

Medicaid was created in 1965 under Title XIX of the Social Security Act, as part of Lyndon Johnson's War on Poverty. It was enacted at the same time the Medicare program was passed.

Unlike Medicare, Medicaid—the brainchild of Congressman Wilbur Mills, the chairman of the House Ways and Means Committee—involved federal funds given to the states to administer their own programs. The federal government set the basic standards for who was covered by the program, and the states could decide if they wanted to broaden the program beyond those standards

Originally, Medicaid categories were defined by welfare recipient status, but this began to change in the mid-1980's and ceased completely with the passage of welfare reform in the mid-1990's. Over its his-tory, the Medicaid program has changed from a program to provide health insurance to the welfare population to a catch-all program that provides health and long term care services to around 40 million people at a cost of $170 billion dollars to federal and state governments. As of 2000, Medicaid was the source of health care insurance for one in four American children and covered 40 percent of all births.

Eligibility

Medicaid eligibility has evolved over the years. Originally, it was supposed to assist the so-called "deserving poor," those medically needy people who were aged, blind, disabled, or families with dependant children, or falling into some other status of poverty where assistance was favored. Not every person whose income falls below the poverty line qualifies for Medicaid, and this has always been true of the program.

Medicaid recipients have historically been divided into the "categorically needy," persons who were eligible for Supplemental Security Income (SSI) benefits for disability, for Aid to Families with Dependant Children (AFDC) benefits, or had been eligible for other government benefit programs; and the "medically needy," persons whose income exceeds financial standards for the above programs but who incur regular medical expenses that, when deducted from their income, bring their income down to the eligibility level for financial assistance. Technically, these categories no longer exist under the current Medicaid system, but state programs that expand Medicaid coverage beyond the traditional categorically needy are still known as "medically needy" programs. Typically these "medically needy" programs cover nursing home and other long-term care.

Currently the program covers the following groups as "categorically needy." For definitional purposes, the poverty level was $8,350 for an individual, and $17,050 for a family of four as of the year 2000:

  • Medicaid must cover all pregnant women with incomes of up to 133 percent of the poverty level.
  • Medicaid must cover all children under the age of six with family incomes below 133 percent of the poverty level and children under age 19 born after 1983 in families with incomes up to 100 percent of the poverty level.
  • Medicaid must cover the Medicare premiums and cost-sharing obligations for "Qualified Medicare Beneficiaries" whose income does not exceed 100 percent of the poverty level. It must also cover Medicare Part B premiums for "Specified Low-Income Medical Beneficiaries", persons whose income is between 100 percent and 120 percent of the poverty level. Medicaid also covers nursing home costs for persons below a certain income level or asset level set by the state, and provides outpatient drug coverage for some qualified Medicare recipients.
  • Medicaid covers disabled persons whose income falls below a certain level, including children eligible for SSI disability benefits. Coverage of other adult disabled recipients is generally mandatory if they receive SSI and are at 74 percent of the poverty level, although some states have been waived in at lower levels than this, and one state, Mississippi, does not cover SSI benefit recipients at all. Many states provide home and community-based care for disabled utilizing Medicaid funds as well.

Medicaid funds also help finance health coverage in several states for persons below a certain income who otherwise would not qualify for Medicaid. In general, states have much leeway in terms of coverage with Medicaid funds. Nearly two-thirds of all Medicaid spending is attributable to optional benefits and services.

How Medicaid Funds Are Administered

The Medicaid program has changed over the years in terms of the way medical and other services are paid for. The original Medicaid law guaranteed recipients their choice of providers. However, beginning in the 1980's, states began making consistent requests for waivers to allow them to enter Medicaid recipients in managed care programs, and in 1997, the law was finally amended to allow states to do this explicitly. As of 2002, there are two types of ways Medicaid funds are administered, the traditional fee-for-service way and through Medicaid Managed Care (MMC).

Fee-For-Service Medicaid

This is the traditional way Medicaid made payments for services and was the only way technically allowed until 1997 by federal Medicaid law, which mandated freedom of choice for all Medicaid recipients. However, there was a catch to this freedom of choice—doctors have the option of opting out of the Medicaid system and refusing to accept Medicaid patients.

Medicaid fees for physicians are set by the state and so vary from region to region. However, they are usually low—paying well below private rates for physician services and usually below what Medicare pays. As a result, the argument has been made that Medicaid recipients often do not get the quality care received by other medical insurance recipients. In many areas, it is difficult to find doctors who will treat Medicare patients because of the low payments, and in other cases doctors have sued to force higher payments from Medicaid programs. Hospitals are more limited in their abilities to turn down Medicaid patients, since they are often tax exempt or have obligations under other federal statutes.

Because states are allowed to set payment rates, such rates can be changes at anytime. Thus, when a state undergoes a budget shortfall or other problem, rates can be and often are lowered.

Medicaid Managed Care

Because of the problems inherent in fee-for-service Medicaid, many states over the years requested waivers from the freedom of choice requirement to allow them to enter Medicaid recipients in managed care programs. Finally, the federal government amended the Medicaid statute with the 1997 Balanced Budget Act to permit states to require Medicaid recipients to enroll in a Medicaid Managed Care (MMC) program. A waiver is still needed to require Medicare recipients also receiving Medicaid, Native Americans, and special needs children to enroll in an MMC program.

Currently over half of Medicaid recipients receive care through these programs. MMC programs are similar to managed care programs used by the privately insured. The two most common are:

  • The Risk-Based Model: Under this model, the MMC program is paid a fixed monthly fee per enrollee and assumes some or all the financial risk for a broad range of services. About four-fifths of Medicaid MMC enrollees receive services under this model.
  • Fee-For-Service Primary Care Case Management (PCCM): Under this model, a health care provider acts as"gatekeeper" to approve and monitor the services given to MMC enrollees. These providers do not assume any financial risk and are paid a perpatient monthly case management fee.

Benefits

Benefits provided under the Medicaid program vary widely from state to state. Twenty-six categories of services are listed under the Medicaid states as services states may cover, in addition to a provision allowing coverage of "any other medical care, and any other type of remedial care, specified by the Secretary."

As of 2002, states must provide Medicaid recipients who are required by federal law to be covered with inpatient hospital services; outpatient hospital services and rural health clinic services; early and periodic screening; other laboratory and X-ray services; nursing facility services; early and periodic screening, diagnostic and treatment services for children; family planning services and supplies, physician services; and nurse-midwife and other certified nurse practitioners services.

Medicaid also covers long-term care. States have considerable flexibility in their long-term care programs. Although states must cover home health services under Medicaid, they have the option of providing personal care services and also may design home and community-based care programs. Medicaid funds half of all nursing home care in this country. Medicaid also pays for much of the care provided by intermediate care facilities for the mentally disabled.

Nursing homes present a special problem for Medicaid, in that many elderly are too well-off to qualify for Medicaid when they go into the nursing home but become impoverished paying for nursing home expenses and other medical expenses. Thirty-six states allow such people to "spend down" their assets until they reach Medicaid asset eligibility levels. At that point, Medicaid assumes the cost of nursing home and medical care. Not all states allow this, only those that cover the medically needy.

Some states cover optional services, such as podiatry, dental care, eyeglasses, or dentures, under Medicaid. These optional services are usually the first to go if there are cutbacks in the program.

State-By-State Guide To Medicaid

States have different Medicaid eligibility requirements, with some states being more generous than others. Here is a state-by-state guide to what the eligibility requirements are. All eligibility levels are expressed as a percent of the federal poverty level for a specific group. For example, a child 1-5 in Alabama must be part of a family that makes 133 percent of the federal poverty level ($17,050 for a family of four) or less in order to qualify for Medicaid.

  • ALABAMA: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • ALASKA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; No Medically Needy Program.
  • ARIZONA: Infants, 140%; Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 50%; Pregnant Women, 140%; Supplemental Security Income Recipients, 74%; No Medically Needy Program.
  • ARKANSAS: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 16%; Medically Needy, Couple, 24%.
  • CALIFORNIA: Infants, 200%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 300%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 89%; Medically Needy, Couple, 104%.
  • COLORADO: Infants, Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 43%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • CONNECTICUT: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 69%; Medically Needy, Individual, 71%; Medically Needy, Couple, 70%.
  • DELAWARE: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 200%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • DISTRICT OF COLUMBIA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 56%; Medically Needy, Couple, 44%.
  • FLORIDA: Infants, 200%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 27%; Medically Needy, Couple, 27%.
  • GEORGIA: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 235%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 31%; Medically Needy, Couple, 35%.
  • HAWAII: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 185%; Supplemental Security Income Recipients, 69%; Medically Needy, Individual, 54%; Medically Needy, Couple, 54%.
  • IDAHO: Infants, Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • ILLINOIS: Infants, 200%; Children 1-5, 133%; Children 6-19, 133%; Pregnant Women, 200%; Supplemental Security Income Recipients, 41%; Medically Needy, Individual, 42%; Medically Needy, Couple, 41%.
  • INDIANA: Infants, Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 150%; Supplemental Security Income Recipients 76%; No Medically Needy Program.
  • IOWA: Infants, 200%; Children 1-5, 133%; Children 6-19, 133%; Pregnant Women, 200%; Supplemental Security Income Recipients, 41%; Medically Needy, Individual, 72%; Medically Needy, Couple, 53%.
  • KANSAS: Infants, 150%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 150%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 71%; Medically Needy, Couple, 53%.
  • KENTUCKY: Infants, 185%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, In-dividual, 32%; Medically Needy, Couple, 30%.
  • LOUISIANA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 15%; Medically Needy, Couple, 21%.
  • MAINE: Infants, 200%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 47%; Medically Needy, Couple, 38%.
  • MARYLAND: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 52%; Medically Needy, Couple, 43%.
  • MASSACHUSETTS: Infants, 200%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 78%; Medically Needy, Couple, 72%.
  • MICHIGAN: Infants, 185%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 61%; Medically Needy, Couple, 60%.
  • MINNESOTA: Infants, 280%; Children 1-5, 275%; Children 6-19, 275%; Pregnant Women, 275%; Supplemental Security Income Recipients, 70%; Medically Needy, Individual, 70%; Medically Needy, Couple, 64%.
  • MISSISSIPPI: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 133%; No Supplemental Security Income Recipients Program; No Medically Needy Program.
  • MISSOURI: Infants, Children 1-5, 300%; Children 6-19, 300%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • MONTANA: Infants, Children 1-5, 133%; Children 6-16 100%; Children 17-19, 71%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 73%; Medically Needy, Couple, 54%.
  • NEBRASKA: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 58%; Medically Needy, Couple, 43%.
  • NEVADA: Infants, Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 89%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • NEW HAMPSHIRE: Infants, 300%; Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 76%; Medically Needy, Individual, 76%; Medically Needy, Couple, 71%.
  • NEW JERSEY: Infants, 185%; Children 1-5, 133%; Children 6-19, 133%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 55%; Medically Needy, Couple, 48%.
  • NEW MEXICO: Infants, Children 1-5, 235%; Children 6-19, 235%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • NEW YORK: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 87%; Medically Needy, Couple, 94%.
  • NORTH CAROLINA: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 60%; Medically Needy, Couple, 50%.
  • NORTH DAKOTA: Infants, Children 1-5, 133%; Children 6-19 100%; Pregnant Women, 133%; Supplemental Security Income Recipients, 65%; Medically Needy, Individual, 60%; Medically Needy, Couple, 50%.
  • OHIO: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients 64%; No Medically Needy Program.
  • OKLAHOMA: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 39%; Medically Needy, Couple, 36%.
  • OREGON: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 170%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 100%; Medically Needy, Couple, 100%.
  • PENNSYLVANIA: Infants, 185%; Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 71%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 63%; Medically Needy, Couple, 49%.
  • RHODE ISLAND: Infants, Children 1-5, 250%; Children 6-19, 250%; Pregnant Women, 250%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 83%; Medically Needy, Couple, 66%.
  • SOUTH CAROLINA: Infants, 185%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • SOUTH DAKOTA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • TENNESSEE: Infants, Children 1-18-, eligibility IS based on child's lack of insurance with no upper income limit; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 26%; Medically Needy, Couple, 21%.
  • TEXAS: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
  • UTAH: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 55%; Medically Needy, Couple, 50%.
  • VERMONT: Infants, Children 1-5, 300%; Children 6-19, 300%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 110%; Medically Needy, Couple, 82%.
  • VIRGINIA: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 250%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 37%; Medically Needy, Couple, 34%.
  • WASHINGTON: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 78%; Medically Needy, Couple, 65%.
  • WEST VIRGINIA: Infants, Children 1-5, 150 %; Children 6-19, 100%; Pregnant Women, 150%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 30%; Medically Needy, Couple, 30%.
  • WISCONSIN: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 86%; Medically Needy, Couple, 65%.
  • WYOMING: Infants, Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 67%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.

Additional Resources

"Celebrating 35 Years of Medicare and Medicaid" DeParle, Nancy-Ann Min, Health Care Financing Review, Oct. 1, 2000.

Health Care Law and Ethics, 2nd Edition. 2nd. ed., Hall, Mark A., Ellman, Ira Mark, Strouse, Daniel S.; West Group, St. Paul, 1999.

The Law of Health Care Organization and Finance, Fourth Edition. Furrow, Barry R., Greaney, Thomas L., et. al., West Group, St. Paul, 2001.

"Medicaid", Kaiser Family Foundation, 2002. Available at http://www.kff.org/,. Kaiser Family Foundation, 2002.

Organizations

Centers for Medicare and Medicaid Services

7500 Security Blvd.oulevard
Baltimore, MD 21244-1850 USA
Phone: (410) 786-3000
URL: http://cms.hhs.gov
Primary Contact: Thomas A Scully, Administrator

Henry J. Kaiser Family Foundation

2400 Sand Hill Road

Menlo Park, CA 94025 USA
Phone: (650) 854-9400
Fax: (650) 854-4800
URL: http://www.kff.org
Primary Contact: Drew Altman, President

U. S. Department of Health and Human Services

200 Independence Avenue S.W.
Washington, DC 20201 USA
Phone: (877) 696-6775
E-Mail: [email protected]
URL: http://www.hhs.gov/
Primary Contact: Janet Hale, Chief Information Officer

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Medicaid

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.

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Medicaid

Medicaid

Definition

Medicaid is a federal-state entitlement program for low-income citizens of the United States. The Medicaid program is part of Title XIX of the Social Security Act that became law in 1965. Medicaid offers federal matching funds to states for costs incurred in paying healthcare providers for serving covered individuals.

State participation is voluntary, but since 1982 all 50 states have chosen to participate in Medicaid.

Description

Medicaid benefits

Medicaid benefits cover basic health care and long-term care services for eligible persons. About 59% of Medicaid spending covers hospital and other acute care services. The remaining 41% pays for nursing home and long-term care.

States that choose to participate in Medicaid must offer the following basic services:

  • hospital care, both inpatient and outpatient
  • nursing home care
  • physicians' services
  • laboratory and diagnostic x-ray services
  • health center and rural health clinic services

Participating states may offer the following optional services and receive federal matching funds for them:

  • prescription medications
  • institutional care for the mentally retarded
  • home- or community-based care for the elderly, including case management
  • personal care for the disabled
  • dental and vision care for eligible adults

Because the participating states are allowed to design their own benefits packages as long as they meet federal minimum requirements, Medicaid benefits vary considerably from state to state. About half of all Medicaid spending covers groups of people and services above the federal minimum.

Eligibility for Medicaid

Medicaid covers three major groups of low-income Americans:

  • Parents and children. In 1997 Medicaid covered 21 million low-income children—one-fifth of all children in the United States—and 8.6 million low-income adults in families with children. Most of these low-income adults are women.
  • The elderly. In 1997 Medicaid covered 4 million adults over the age of 65. Medicaid is the largest single purchaser of long-term and nursing home care in the United States. In 1997, Medicaid paid for 38% of the $115 billion spent on long-term care and 47% of the $83 billion spent on nursing home care.
  • The disabled. About 17% of Medicaid recipients are blind or disabled. Most of these are eligible for Medicaid because they receive assistance through the Supplemental Security Income (SSI) program.

All Medicaid recipients must have incomes and resources below specified eligibility levels. These levels vary from state to state depending on the local cost of living and other factors. For example, in 1999 the federal poverty level (FPL) was determined to be $13,880 for a family of three on the mainland of the United States, but $15,970 in Hawaii and $17,360 in Alaska.

In most cases, persons must be citizens of the United States to be eligible for Medicaid, although legal immigrants may qualify in some circumstances depending on their date of entry. Illegal aliens are not eligible for Medicaid except for emergency care.

A person must fit into an eligibility category to receive Medicaid even if their income is low. Childless couples and single childless adults who are not disabled or elderly are not eligible for Medicaid.

Medicaid costs

Medicaid is by far the government's most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2001 its share had risen to nearly 9%. Combined federal and state spending for Medicaid takes nearly 20 cents of every tax dollar. The federal government covers about 57% of Medicaid's costs, with the states paying for the remaining 43%.

As of 2001, Medicaid's costs rise at an average annual rate of 7.9%. The federal government spent $107 billion on Medicaid in fiscal year (FY) 1999, a sum that is expected to rise to $159 billion in 2004. The states spent $81 billion to cover Medicaid costs in FY 1999. These costs are projected to increase to $120 billion by FY 2004.

Although 50% of all Medicaid beneficiaries are children, most of the money (72%) goes for services for the elderly and disabled. The single largest portion of Medicaid money pays for long-term care for the elderly. Only 17% of Medicaid funds are spent on services for children.

There are several factors involved in the steep rise of Medicaid costs:

  • The rise in the number of eligible individuals. As the life span of most Americans continues to increase, the number of elderly individuals eligible for Medicaid also rises. The fastest-growing age group in the United States is people over 85.
  • The price of medical and long-term care. Advances in medical technology, including expensive diagnostic imaging, keep these costs high.
  • The increased use of services covered by Medicaid.
  • The expansion of state coverage from the minimum benefits package to include optional groups and optional services.

Viewpoints

The need to contain Medicaid costs is considered one of the most problematic policy issues that legislators will face in the coming years. In addition, the complexity of the Medicaid system, its vulnerability to billing fraud and other abuses, the confusing variety in the benefits packages available in different states, and the time-consuming paperwork are other problems that disturb taxpayers and legislators alike.

Professional implications

Medicaid has increased the demand for health care services in the United States without greatly improving the quality of health care for low-income Americans. On the one hand, Medicaid's position as the largest health insurer in the United States means that it affects the employment of several hundred thousand health care workers. In 1997, Medicaid payments went to over 5,000 hospitals, 3,000 nursing homes , 7,000 homes for the mentally retarded, 670 community health clinics, and 550 managed care plans—all of which provide employment for thousands of health care providers, administrators, and support staff. On the other hand, participation in Medicaid is optional for physicians and nursing homes. Many do not participate in the program because the reimbursement rates are low. As a result, many low-income people who are dependent on Medicaid must go to overcrowded facilities where they often receive substandard health care.

KEY TERMS

Categorically needy —A term that describes certain groups of Medicaid recipients who qualify for the basic mandatory package of Medicaid benefits. There are categorically needy groups that states participating in Medicaid are required to cover, and others that the states have the option to cover.

DHHS —The Department of Health and Human Service. It is a federal agency that distributes funds for Medicaid.

Entitlement —A program that creates a legal obligation on the federal government to any person, business, or government entity that meets the legally defined criteria. Medicaid is an entitlement both for eligible individuals and for the states that decide to participate in it.

Federal poverty level (FPL) —The federal government 's definition of poverty used as the reference point for Medicaid eligibility for certain groups of beneficiaries. The FPL is adjusted every year to allow for inflation.

HCFA —Health Care Financing Administration. A federal agency that provides guidelines for the Medicaid program.

Medically needy —A term that describes a group whose coverage is optional with the states because of high medical expenses. These persons meet Medicaid's category requirements (they are children or parents or elderly or disabled) but their income is too high to qualify them for “categorically needy” coverage.

Supplemental Security Income (SSI) —A federal entitlement program that provides cash assistance to low-income blind, disabled, and elderly people. In most states, people receiving SSI benefits are eligible for Medicaid.

Resources

BOOKS

Morris, Virginia. “Paying the Way.” Chapter 13 in How to Care for Aging Parents. New York: Workman Publishing, 1996.

ORGANIZATIONS

Health Care Financing Administration. United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. http://www.hcfa.gov.

Kaiser Commission on Medicaid and the Uninsured. 1450 G Street NW, Suite 250, Washington, DC 20005. (202) 347-5270. Fax: (202) 347-5274. http://www.kff.org.

National Center for Policy Analysis. 655 15th Street NW, Suite 375, Washington, DC 20005. (202) 628-6671. Fax: (202) 628-6474. http://www.ncpa.org.

United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. http://www.hhs.gov.

OTHER

Medicaid: A Primer. Washington, DC: Kaiser Commission on Medicaid and the Uninsured, 1999.

Peggy Elaine Browning

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Medicaid

Medicaid

Definition
Description
Normal results

Definition

Medicaid is a federal-state entitlement program for low-income citizens of the United States. The Medicaid program is part of Title XIX of the Social Security Act Amendment that became law in 1965. Medicaid offers federal matching funds to states for costs incurred in paying health care providers for serving covered individuals. State participation is voluntary, but since 1982, all 50 states have chosen to participate in Medicaid.

Description

Medicaid benefits

Medicaid benefits cover basic health care and long-term care services for eligible persons. About 58% of Medicaid spending covers hospital and other acute care services. The remaining 42% pays for nursing home and long-term care.

States that choose to participate in Medicaid must offer the following basic services:

KEY TERMS

Categorically needy— A term that describes certain groups of Medicaid recipients who qualify for the basic mandatory package of Medicaid benefits. There are categorically needy groups that states participating in Medicaid are required to cover, and other groups that the states have the option to cover.

Department of Health and Human Service (DHHS)— It is a federal agency that houses the Centers for Medicare and Medicaid Services, and distributes funds for Medicaid.

Entitlement— A program that creates a legal obligation by the federal government to any person, business, or government entity that meets the legally defined criteria. Medicaid is an entitlement both for eligible individuals and for the states that decide to participate in it.

Federal poverty level (FPL)— The definition of poverty provided by the federal government, used as the reference point to determine Medicaid eligibility for certain groups of beneficiaries. The FPL is adjusted every year to allow for inflation.

Health Care Financing Administration (HCFA)— A federal agency that provides guidelines for the Medicaid program.

Medically needy— A term that describes a group whose coverage is optional with the states because of high medical expenses. These persons meet category requirements of Medicaid (they are children or parents or elderly or disabled) but their income is too high to qualify them for coverage as categorically needy.

Supplemental Security Income (SSI)— A federal entitlement program that provides cash assistance to low-income blind, disabled, and elderly people. In most states, people receiving SSI benefits are eligible for Medicaid.

  • hospital care, both inpatient and outpatient
  • nursing home care
  • physician services
  • laboratory and diagnostic x-ray services
  • immunizations and other screening, diagnostic, and treatment services for children
  • family planning
  • health center and rural health clinic services
  • nurse midwife and nurse practitioner services
  • physician assistant services

Participating states may offer the following optional services and receive federal matching funds for them:

  • prescription medications
  • institutional care for the mentally retarded
  • home- or community-based care for the elderly, including case management
  • personal care for the disabled
  • dental and vision care for eligible adults

Because participating states are allowed to design their own benefits packages as long as they meet federal minimum requirements, Medicaid benefits vary considerably from state to state. About half of all Medicaid spending covers groups of people and services above the federal minimum.

Eligibility for Medicaid

Medicaid covers three major groups of low-income Americans:

  • All recipients. In 2006, Medicaid covered an estimated 46.5 million low-income persons in the United States.
  • Parents and children. In 2005, Medicaid covered approximately 25.2 million low-income children, approximately one-fifth of all children in the United States. It provided coverage to an estimated 10.2 million low-income adults in families with children; most of these low-income adults were women.
  • The elderly. In 2006, Medicaid covered an estimated 5.8 million adults over the age of 65. Medicaid is the largest single purchaser of long-term and nursing home care in the United States.
  • The disabled. About 17% of Medicaid recipients are blind or disabled. Most of these persons are eligible for Medicaid because they receive assistance through the Supplemental Security Income (SSI) program.

All Medicaid recipients must have incomes and resources below specified eligibility levels. These levels vary from state to state depending on the local cost of living and other factors. For example, in 2006, the federal poverty level (FPL) was determined to be $16,600 for a family of three on the mainland of the United States, but $24,900 in Hawaii and $29,050 in Alaska.

In most cases, persons must be citizens of the United States to be eligible for Medicaid, although legal immigrants may qualify in some circumstances depending on their date of entry. Illegal aliens are not eligible for Medicaid, except for emergency care.

Persons must fit into an eligibility category to receive Medicaid, even if their income is low. Childless couples and single childless adults who are not disabled or elderly are not eligible for Medicaid.

Medicaid costs

Medicaid is by far the government’s most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2006, its share had risen to nearly 9.1%. Combined federal and state spending for Medicaid takes approximately 21 cents of every tax dollar. The federal government covers about 56% of costs associated with Medicaid. The states pay for the remaining 44%.

As of 2006, costs for Medicaid continued to rise at an average annual rate of approximately 8%. The states spent $303 billion in FY 2006 to cover Medicaid costs. These costs are projected to continue to increase.

Although more than half (54%) of all Medicaid beneficiaries are children, most of the money (more than 70%) goes for services for the elderly and disabled. The single largest portion of Medicaid money pays for long-term care for the elderly. Only 18% of Medicaid funds are spent on services for children.

There are several factors involved in the steep rise of Medicaid costs:

  • The rise in the number of eligible individuals. As the lifespan of most Americans continues to increase, the number of elderly individuals eligible for Medicaid also rises. The fastest-growing age group in the United States is people over 85.
  • The price of medical and long-term care. Advances in medical technology, including expensive diagnostic imaging tests, cause these costs to rise.
  • The increased use of services covered by Medicaid.
  • The expansion of state coverage from the minimum benefits package to include optional groups and optional services.

Normal results

The need to contain Medicaid costs is considered one of the most problematic policy issues facing legislators. In addition, the complexity of the Medicaid system, its vulnerability to billing fraud and other abuses, the confusing variety of the benefits packages available in different states, and the time-consuming paperwork are other problems that disturb both taxpayers and legislators.

Medicaid has increased the demand for health care services in the United States without greatly impacting or improving the quality of health care for low-income Americans. Medicaid is the largest health insurer in the United States. As such, it affects the employment of several hundred thousand health care workers, including health care providers, administrators, and support staff. Participation in Medicaid is optional for physicians and nursing homes . Many do not participate in the program because the reimbursement rates are low. As a result, many low-income people who are dependent on Medicaid must go to overcrowded facilities where they often receive substandard health care.

Resources

BOOKS

Atlantic Publishing Company. The Complete Guide to Medicaid and Nursing Home Costs: How to Keep Your Family Assets Protected - Up to Date Medicaid Secrets You Need to Know. Ocala, FL: Atlantic Pub Co, 2008.

Engel, J. Poor People’s Medicine: Medicaid and American Charity Care since 1965. Durham, NC: Duke University Press, 2006.

Scott, S. W. The Medicaid Handbook 2007: Protecting Your Assets From Nursing Home Costs. 3rd ed. Largo, FL: Masveritas Publishing, 2007.

Smith, D., and J. D. Moore. Medicaid Politics and Policy. New Brunswick, NJ: Transaction Publishers, 2007.

PERIODICALS

Bhuridej, P., KR. A. Kuthy, S. D. Flach, K. E. Keller, D. V. Dawson, M. J. Kanellis, and P. C. Damiano. “Four-year cost-utility analyses of sealed and nonsealed first permanent molars in Iowa Medicaid-enrolled children.” Journal of Public Health Dentistry 67, no. 4 (2007): 191–198.

Churchill, S. S., B. J. Williams, and N. L. Villareale. “Characteristics of publicly insured children with high dental expenses.” Journal of Public Health Dentistry 67, no. 4 (2007): 199–207.

Goetzel, R. Z., D. Schecter, R. J. Ozminkowski, D. C. Stapleton, P. J. Lapin, J. M. McGinnis, C. R. Gordon, and L. Breslow. “Can health promotion programs save Medicare money?.” Clinical Interventions in Aging 2, no. 1(2007): 117–122.

Grabowski, D. C. “Medicare and Medicaid: conflicting incentives for long-term care.” Milbank Quaterly 85, no. 4 (2007): 579–610.

Perry, C. D., and G. M. Kenney. “Preventive care for children in low-income families: how well do Medicaid and state children’s health insurance programs do?” Pediatrics 120, no. 6 (2007): e1393–e1401.

ORGANIZATIONS

Kaiser Family Foundation. 2400 Sand Hill Road, Menlo Park, CA 94025, Phone: (650) 854-9400, Fax: (650) 854-4800 http://www.kff.org/.

National Center for Policy Analysis. 12770 Coit Rd., Suite 800, Dallas, TX 75251-1339, Phone: (972) 386-6272, Fax: (972) 386-0924. http://www.ncpa.org.

National Library of Medicine. http://www.nlm.nih.gov/medlineplus/medicaid.html.

United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. http://www.hhs.gov.

OTHER

Centers for Medicare and Medicaid Services, US Department of Health and Human Services. Information about Medicaid. 2007 [cited December 26, 2007]. http://cms.hhs.gov/.

National Association of State Medicaid Directors. Information about Medicaid. 2007 [cited December 26, 2007]. http://www.nasmd.org/Home/home_news.asp.

National Governor’s Association. Information about Medicaid. 2007 [cited December 26, 2007]. http://www.nga.org/portal/site/nga.

Social Security Administration. Information about Medicaid. 2007 [cited December 26, 2007]. http://www.ssa.gov/.

L. Fleming Fallon, Jr, MD, DrPH

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Medicaid

MEDICAID

•••

Medicare and Medicaid were created in 1965, and together they revolutionized public health insurance in the United States. Before Medicaid, healthcare insurance for the poor was not perceived as a societal or governmental responsibility.

Initial Goals and Early Challenges

Medicare and Medicaid could not be more different in their underlying philosophies and structures. Medicare was designed to be a universal entitlement program like Social Security. It was established to provide basic hospital and physician-care insurance for all elderly Americans and is financed through a special trust fund. Its benefits are controlled by the federal government and do not vary by state.

In contrast, Medicaid was designed to be a meanstested program funded by general revenue from the federal government and the states. Within federal guidelines and options states determine who will be covered, what services will be paid for, how much providers will be paid, and how the program will be administered. It was not designed to provide social insurance to the full poverty population but to cover particular recipients of public aid, mainly those receiving Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI). Soon after its inception Medicare was thought to be a model for the next step toward universal health insurance, whereas Medicaid was seen as a stigmatized program for the poor.

The history of the two programs, however, has shown that Medicaid has been the more important and effective vehicle for increasing access to healthcare services. Medicare has remained largely constant and rigid in its covered population and its structure. By contrast, the Medicaid program has been the structure to which policymakers have turned to repeatedly over the years to make incremental additions to the population covered by health insurance.

Growth in the Medicaid Safety Net

Medicaid began small. In 1966, there were four million enrollees and the annual cost was $400 million. Those numbers increased as persons in need of long-term care were added to the program after 1972. Although the number of recipients grew slowly between 1975 and 1990 (22 million to 26 million), total government costs for Medicaid increased dramatically, rising from $12 billion to $72 billion. By 2002 the number of enrollees had reached 47 million, making Medicaid slightly larger than Medicare, and total costs had reached $257 billion. However, not everyone who is eligible for Medicaid enrolls. Seventy-two percent of eligible children and 51 percent of eligible nonelderly adults are estimated to be enrolled. In 1999 Medicaid covered 5 percent of nonelderly adults and 15 percent of those with incomes below 200 percent of the poverty level.

The Medicaid program has grown in several important ways. Although originally it was limited to those who received cash benefits under AFDC (poor women and children) and SSI (the permanently disabled), more than half the persons Medicaid covered in the early years of the twenty-first century did not receive cash benefits from other programs. Indeed, Medicaid at that time was the principal source of funding for a vast infrastructure that served the poor and disabled, including safety-net hospitals, community and migrant health centers, mental health clinics, and school-based health programs.

Long-term care was added to the mandated benefits in 1972. Without private insurance, middle-class Americans may become impoverished because of out-of-pocket nursing home costs and "spenddown" to qualify for Medicaid. Institutional coverage also is provided for inpatient mental health services and intermediate-care facilities for the mentally retarded. Medicaid is also the largest payer for medical services for persons with AIDS.

The largest and most important expansions of the scope of Medicaid have been in the areas of prenatal care for poor women and healthcare for children. In 1989 poor women began to receive coverage for prenatal care. In 1997 the State Children's Health Insurance Program (SCHIP) was enacted to cover low-income children who did not qualify for Medicaid under the previous criteria. Together Medicaid and SCHIP account for 16 percent of the nation's healthcare spending, nearly as much as Medicare's share (18%).

Impact on the Nation's Health

Medicaid has achieved significant advances in the healthcare of the poor and previously middle-class persons who require mental health services or long-term care. With Medicaid, poor persons use health services at the same rate as nonpoor persons with a similar health status. Medicaid also provides access to a broader service package that supplements physician care, such as dental care and prescription coverage.

Medicaid has proved to be a better vehicle for incremental reform than Medicare because it is more flexible and does not have the high level of national political visibility and volatility that Medicare has. Additions to the Medicaid program typically have had three effects; they have (1) increased access to care, (2) shifted at least part of the cost to the federal government, and (3) increased the uncompensated care burden on healthcare providers. Overall, the health of the poor has improved significantly in the post-Medicaid era, with substantial declines in infant mortality, maternal mortality, and death rates for major diseases for which medical intervention is effective.

Major Criticisms of the Program

Medicaid is not a "user-friendly" program. Many persons who are eligible for the program are not enrolled. Once a person is enrolled, eligibility status is evaluated periodically, as frequently as every month in some programs. When income eligibility standards are no longer met, Medicaid coverage is suspended. This results in poor continuity of care and personal hardship.

The state-based nature of the program has resulted in variations in coverage and benefits across the states. Federal requirements ensure relatively uniform coverage for children, pregnant women, the elderly, and the disabled across the states. Childless adults are not covered by Medicaid regardless of their income level. Adults who are parents are the group for whom Medicaid eligibility varies the most widely from state to state. Half the states set eligibility below 40 percent of the federal poverty line; those whose incomes put them at the poverty level ($15,020 for a family of three in 2002) make too much to qualify for Medicaid in all but eighteen states.

Throughout its history there have been repeated cycles of cutbacks and expansions in response to fiscal pressure in the states. From the 1970s until the mid-1980s cutbacks eroded Medicaid coverage of the poor and began to reverse the progress that had been made in closing gaps in access to care across income groups. Since the mid-1980s, however, the trend has been to expand Medicaid eligibility and services. This has not been due to the increased political leverage of the poor but has occurred because from both the federal and the state point of view the cost-sharing arrangement makes it attractive to add to the program. Only in the early 2000s did the nation begin to reenter a period of fiscal crisis at the state level. As a result of a general economic downturn, state revenues declined while Medicaid costs expanded to account for a very significant portion of state governmental budgets.

The prospects for the future of Medicaid are unclear. Some states want the authority to cap enrollment levels and create waiting lists so that even those who qualify with incomes at 40 percent of less of poverty may not be enrolled. About half the Medicaid enrollees in the country are in managed-care plans, but that has not stemmed the tide of rising costs.

Issues for the Future of Medicaid

Medicaid reform is charged with moral issues that frame the fundamental policy decisions. Can public health insurance be equitable when it is targeted only to the poor, or is the inevitable outcome a lesser program? Can an equitable package of minimum benefits be determined? Will the trend toward using Medicaid to expand access to health insurance incrementally be reversed by a weakening of federal requirements and the fiscal crisis of state governments that began at the turn of the twenty-first century? How should society share the costs that a decent healthcare safety net will incur?

diane rowland

catherine hoffman (1995)

revised by bruce jennings

SEE ALSO: Access to Healthcare; Healthcare Resources, Allocation of; Health Insurance; Health Policy in the United States; Medicare

BIBLIOGRAPHY

Boben, Paul J. 2000. "Medicaid Reform in the 1990s." Health Care Financing Review 22(2): 1–5.

Brown, E. Richard. 1983. "Medicare and Medicaid: The Process, Value, and Limits of Health Care Reforms." Journal of Public Health Policy 4(3): 335–356.

Brown, Lawrence D., and Sparer, Michael S. 2003. "Poor Program's Progress: The Unanticipated Politics of Medicaid Policy." Health Affairs 22(1): 31–44.

Davis, Karen, and Schoen, Cathy. 1978. "Medicaid: Successes and Problems." In Health and the War on Poverty: A Ten-Year Appraisal. Washington, D.C.: Brookings Institution.

Hurley, Robert E., and Draper, Debra A. 2002. "Medicaid Confronts a Changing Managed Care Marketplace." Health Care Financing Review 24(1): 11–25.

Jost, Timothy Stoltzfus. 2003. "The Tenuous Nature of the Medicaid Entitlement." Health Affairs 22(1): 145–143.

Kaiser Commission on Medicaid and the Uninsured. 2001. "Medicaid Facts: Medicaid's Role for the Disabled Population under Sixty-five." Washington, D.C.: Kaiser Family Foundation.

Kaiser Commission on Medicaid and the Uninsured. 2001. "Medicaid Facts: Medicaid's Disabled Population and Managed Care." Washington, D.C.: Kaiser Family Foundation.

Klemm, J. 2000. "Medicaid Spending: A Brief History." Health Care Financing Review (fall): 105–112.

Mann, Cindy. 2003. "The Flexibility Factor: Finding the Right Balance." Health Affairs 22(1): 62–76.

Reilly, Thomas W.; Clauser, Steven B.; and Baugh, David K. 1990. "Trends in Medicaid Payments and Utilization, 1975–89." Health Care Financing Review Annual Supplement: 15–33.

Rowland, Diane; Lyons, Barbara; and Edwards, Jennifer. 1988. "Medicaid: Health Care for the Poor in the Reagan Era." Annual Review of Public Health 9: 427–450.

Rowland, Diane, and Tallon, James R., Jr. 2003. "Medicaid: Lessons from a Decade." Health Affairs 22(1): 138–144.

Smith, V. K. 2002. Making Medicaid Better. Washington, D.C.: National Governors' Association.

Sparer, Michael. 1996. Medicaid and the Limits of Health Reform. Philadelphia: Temple University Press.

Stevens, Rosemary, and Stevens, Robert. 1974. "The Federal Role: An Aphilosophical Explanation." In Welfare Medicine in America: A Case Study of Medicaid, New York: Free Press.

Stuart, Mary E., and Weinrich, Michael. 1998. "Beyond Managing Medicaid Costs: Restructuring Care." Milbank Quarterly 76(2): 251–280.

Vladeck, Bruce. 2003. "Where the Action Really Is: Medicaid and the Disabled." Health Affairs 22(1): 90–100.

Weil, Alan. 2003. "There's Something about Medicaid." Health Affairs 22(1): 13–30.

INTERNET RESOURCE

Centers for Medicare and Medicaid Services. 2003. "Medicaid: A Brief Summary." Available from <http://www.cms.hhs.gov/publications>.

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