A joint state and federal program in the United States that helps finance healthcare costs for low-income populations

What is Medicaid?

Medicaid is a joint state and federal program in the United States that helps finance healthcare costs for low-income populations. The program covers outpatient hospital services, nursing facility services, home health services, long-term medical care, and other health-related expenses.


The state funding does not require re-authorization by Congress since it is an entitlement created by Title XIX of the Social Security Act. It is operated at the state level within broad federal guidelines, and therefore, eligibility and benefits vary widely among states because of a great deal of flexibility with which states design and administer Medicaid programs.

Medicaid only covers families and individuals whose incomes are within the eligibility standards. Beneficiaries of the programs include only U.S. citizens, legal immigrants, and permanent residents. According to the U.S. Census Bureau, Medicaid provides coverage to approximately one in five Americans.


  • Medicaid is a public insurance program in the United States administered by federal and state governments designed to cover the basic healthcare needs of low-income populations in the U.S. 
  • The Medicaid program underwent changes over the years to expand access to more vulnerable population groups.
  • Eligibility is based on income-level related to the Federal Poverty Level (FPL).

Understanding Medicaid

On July 30, 1965, then-President Lyndon B. Johnson signed the Social Security Amendments Act into law, creating the Medicaid program. It was in tandem with the Medicare program authorized by Title XVII, and together, the two became the most enduring social programs in the U.S.

Congress made changes to Medicaid over the years to expand access to mainstream healthcare for individuals of any age whose incomes are insufficient to cater to health services. In the U.S., Medicaid accounts for the largest funding costs for health-related services. Total Medicaid spending hit $593 billion in 2018, 62.5% and 37.5% financed by the federal government and states, respectively.

Since states can tailor their Medicaid programs to best suit their citizens, they decide on the eligibility criteria, the process of paying hospitals and healthcare workers, as well as the type of coverage. On the other hand, the federal government’s role is to match the state’s spending with the rate of matching varying by state from about 70% maximum to a minimum of 50%.

Initially, not all states were required to take part in the Medicaid program, unlike now. Each state’s matching formula and willingness to finance covered medical services determine the federal contributions. Medicaid does not directly cater to the individuals’ costs of medical services but instead pays the health providers, such as doctors, managed care plans, and hospitals.

Medicaid Eligibility

Federal Medicaid statutes define over 50 population categories as being potentially eligible for the state’s coverage. However, the coverage is broken down into four distinct groups – children, people with disabilities, seniors aged 65 years and above, and adults below 65 years. Beneficiaries must meet the program’s stringent income and resource eligibility requirements.

The largest group of enrollees are children with more than 40% of the total enrollment. Comparatively, 15% of enrollees are people with disabilities, with an average of 40% of the total costs.

Medicaid benefits can be applied using two approaches. The first approach works by directly contacting the state Medicaid agency where the individual resides. The second approach involves filling out an application found on the Health insurance Marketplace website.

Income is the determinant of eligibility concerning the Federal Poverty Level (FPL). The FPL shows whether a family or an individual meets the income criteria to qualify for federal benefits. There is a federal program available for pregnant women, disabled, children, or elderly and those with income that is generally below 100% to 200% of the FPL.

Also, there is a program for individuals with an income of less than 138%. The income under consideration is calculated using modified adjusted gross income (MAGI) and is subject to certain adjustments. MAGI is a taxable income alongside other deductions, such as tax-exempt interest and Social Security benefits.

Several proposals made by the Trump administration require that individuals who are not engaged in work activities for a specific time in a month or do not meet certain work requirements should not qualify for Medicaid coverage. As a result, 18,000 individuals lost health coverage in Arkansas after becoming the first state to implement it. However, after blocking the policy in federal courts, Arkansas no longer imposes such requirements.

The Medicaid and the Patient Protection and Affordable Care Act (ACA)

The Affordable Care Act (ACA) established the necessary legal protections that were non-existent in the U.S. until now. The final amended version of the law is sometimes referred to as Obamacare or ACA. The bill was signed into law on March 23, 2010 by then-President Barack Obama. It is regarded as a watershed in the U.S. public health policy.

ACA states that all individuals with incomes of up to 138% of the FPL and are citizens and legal residents of the U.S. qualify for Medicaid programs in the participating state. Initially, states were allowed to participate in the expansion of income eligibility policies and federal funding. However, following the U.S. Supreme Court ruling on January 1, 2014, states are no longer permitted to expand eligibility standards to continue receiving the already established funding levels.

Accessibility and Effectiveness of Care under Medicaid

Medicaid is deemed responsible for significantly increasing the number of individuals with health insurance, with the Affordable Care Act even boosting the figures further. Also, following the ACA’s implementation, the number of uninsured fell from 16% in 2010 to 9% in 2017. The program is enabling access to quality care with minimum costs.

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