Medicaid

Medicaid, which became law in 1965 as part of the Social Security Act, is a social insurance program that pays for basic medical services for the nation's individuals and families who have the least income and resources. It is the biggest health safety net program in the United States, with more than 50 million people enrolled. It accounts for 16% of our nation's spending on health care, at an annual cost of over $300 billion. Unlike Medicare, which was enacted into law at the same time but is federally funded and administered, Medicaid is jointly financed by the federal and state governments. It is the third largest nondefense program in the federal budget after Medicare and Social Security, with 8% of federal outlays in 2004. At the state level, Medicaid is the second largest expenditure, after K–12 education, and it accounts for 16% of state own-source spending.

Medicaid enrollees must meet various financial criteria and belong to one of the “mandatory” eligibility groups, including pregnant women, children and teenagers, parents of dependent children, seniors, and people with disabilities. Private insurance is usually unavailable to Medicaid enrollees. Low-income workers and retirees might not have access to or cannot afford insurance through their current or previous employers. Many private insurance programs also exclude people with disabilities and chronic illnesses.

However, not all uninsured individuals qualify for Medicaid coverage, even if they are poor. Having assets in excess of a few thousand dollars may be enough to disqualify someone. Incidentally, although many immigrants meet various financial/asset criteria and mandatory categories, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, popularly known as “welfare reform,” prevents new immigrants from applying for Medicaid during their first 5 years in the United States.

More than 7 million Medicaid beneficiaries, or 14% of Medicaid enrollees, are low-income seniors and people with disabilities who are also enrolled in Medicare. These “dual eligibles” usually have substantial health needs, comprising 42% of total Medicaid spending. They rely on Medicare to cover basic health services such as physician and hospital care, but depend on Medicaid to pay Medicare Part B premiums for the aforementioned services and copayments to cover prescription drugs and long-term care, which are not covered by Medicare. Now prescription drug coverage for dual eligibles is covered under Medicare Part D.

Federal statutes, regulations, and policies establish broad national guidelines for Medicaid. For example, state Medicaid programs are required to cover the following basic services for the mandatory groups of beneficiaries: (1) in- and outpatient hospital services; (2) physician, midwife, and certified nurse practitioner services; (3) laboratory and X-ray services; (4) nursing [Page 1364]home and home health care for adults; (5) early and periodic screening, diagnosis, and treatment for children; (6) family planning; and (7) rural health clinic services. However, the scope and composition of Medicaid programs varies across states. States have substantial flexibility in administering their own program and setting their own guidelines regarding eligibility standards as well as types, amount, duration, and scope of services covered. They can also offer additional services such as prescription drugs and dental care for the mandatory beneficiary groups and other populations with significant needs. The majority of “optional” spending (86%) pays for services to the elderly and people with disabilities. Medicaid is the largest payer of long-term care, public mental health services, and AIDS treatment.

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