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Medicaid is a federal and state entitlement program that provides medical benefits to low-income and low-resource individuals and families who meet federal and state eligibility requirements. The Medicaid program is the largest source of medical funding for poor people in the United States. Medicaid is overseen by the Centers for Medicare and Medicaid Services (CMS) in the U.S. Department of Health and Human Services (HHS), but the program is primarily administered at the state level. The federal government provides financial assistance to states, with a greater share of financial support going to states with lower average per capita incomes. Although states vary widely in their program requirements and the services offered, there are certain groups and services that must be covered, including care for children, pregnant women, and disabled individuals. The State Children's Health Insurance Program (SCHIP) and the Program for All-Inclusive Care for the Elderly (PACE) are two special programs within Medicaid designed to cover uninsured children and to provide home- and community-based care to the elderly, respectively.

Background

Medicaid was initially planned as an addition to programs that provided cash assistance to vulnerable groups such as the elderly, disabled, and children and families. Medicaid was signed into law in 1965, as Title XIX of the Social Security Act. It was designed to be a joint program between the states and the federal government to provide medical assistance to qualified needy individuals. This program is primarily coordinated by state agencies with additional funding provided by the federal government.

Medicaid has grown significantly in recent years due to (a) increased use of services; (b) expanded coverage to larger and growing populations; (c) increased costs associated with medical care, drugs, and technology; and (d) an increased need for acute and long-term care. In 2006, total federal and state Medicaid costs reached $303.8 billion, and the program covered close to 59 million people or 20% of the population in fiscal year (FY) 2005. Medicaid costs are expected to rise significantly in the coming years: Estimates place Medicaid costs in FY2009 at $445 billion.

Who Medicaid Covers

To receive Medicaid, individuals or families must fit in a certain designated group. Although there is wide variation among the states, there are certain groups they must cover to receive federal funds. States must provide coverage to those already receiving federal income assistance, such as families eligible for coverage through Aid to Families With Dependent Children (AFDC). Although AFDC was replaced in the 1996 welfare reform bill with Temporary Aid for Needy Families (TANF), Medicaid generally covers anyone who would have been eligible under the AFDC guidelines of 1996. States must also cover individuals falling into one of the other seven categorically needy eligibility groups. Many of the designations for coverage require incomes at or below the federal poverty level; for reference, for 2007, 100% of the federal poverty level for a family of four was $20,650 per year or $1720.83 per month. (There are different poverty levels for families in Hawai'i Alaska, and Washington, D.C.) However, having a low income is not sufficient to receive coverage through Medicaid: One must also fit in one of the designated eligibility groups. Furthermore, low-income persons with a certain amount of other assets usually would not be eligible for Medicaid until they “spend down” or deplete their assets to fit in a medically needy category (see below).

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