How Medicaid Works and Who it Covers

June 29, 2017

One of the biggest flash points in the debate over Republican legislation to repeal and replace the Affordable Care Act is the future of Medicaid.  Here are some basic facts about the 52-year-old program.


What is Medicaid?

It’s a public health insurance program largely for low-income people, though some middle-class disabled and elderly people also qualify.  States and the federal government share the cost.


Whom does Medicaid cover?

  • Nearly one in five Americans, 74 million people, are on Medicaid.
  • Federal law guarantees Medicaid coverage to pregnant women, children, elderly and disabled people under certain income levels.
  • It covers more than a third of the nation’s children and pays for half of all births.
  • States also have the option of covering other groups, like children and pregnant women whose household incomes are higher than the federal thresholds, or young adults up to age 26 who were once in foster care.
  • The Affordable Care Act allowed a new optional group:  any adults with income up to 138 percent of the poverty level, which would be $16,643 for an individual this year.  Thirty-one states now offer Medicaid to this group.

When was it created?

  • In 1965, as part of President Lyndon B. Johnson’s “Great Society.”
  • There was little political debate; the bigger fight was over creating Medicare, the program to cover the elderly, which Medicaid is often confused with.

Is Medicaid an entitlement program?

Yes.  Anyone who meets the eligibility rules has a right to Medicaid coverage, and for now, states are guaranteed open-ended financial support from the federal government.


How much does it cost?

  • Medicaid cost $553 billion in fiscal year 2016.  Of that amount, $348.9 billion came from the federal government; the states paid $204.5 billion.
  • Medicaid accounts for 9 percent of federal domestic spending.  For states, it is the biggest source of federal funding and the second-largest budget item, behind education.
  • The biggest costs in Medicaid are for the elderly and the disabled, often because of long-term care in nursing homes.
  • Washington pays 50 to 75 percent of Medicaid costs for most eligible groups, with poor states receiving more money.
  • Under the Affordable Care Act, the federal government initially covered all of the costs for the roughly 11 million people insured under the law’s expansion of Medicaid, who are largely adults without disabilities.
  • Under the law, Washington picks up 95 percent of state costs for the expansion of Medicaid this year, whittling down to 90 percent in 2020.

What changes are in store?

  • Both the House and Senate health bills would fundamentally change the way the federal government pays its share of Medicaid costs, setting a per-person limit on spending that would adjust annually for inflation.
  • The bills would also effectively end the Medicaid expansion, by sharply reducing how much the federal government pays for that population starting in 2020.
  • The result of these changes, according to independent analyses, would be major reductions in federal Medicaid spending over time.
  • Enrollment would drop, too, according to the nonpartisan Congressional Budget Office, with states making it harder to qualify for the program and getting rid of certain benefits to make up for tightened federal spending.

Source:  written by Abby Goodnough and Kate Zernike, June 23, 2017.; copyright 2017 The New York Times Company.  A version of this article appears in print on June 24, 2017, on Page A13 of the New York edition with the headline:  What is Medicaid, And Who Is Covered?