Medicaid U.S. joint Federal and State health care program for the poor Enacted July 30, 1965; 61 years ago Administered by Centers for Medicare & Medicaid Services (CMS) and individual state agencies Core Eligibility * Low-income individuals and families* Pregnant women* Children (often via CHIP)* Individuals with disabilities* Elderly adults requiring long-term care Program Structure & Components The program operates under a decentralized, federal-state partnership: Mandatory Benefits: Federal law requires coverage for inpatient/outpatient hospital services, physician visits, laboratory tests, and home health services. Optional Benefits: States may choose to cover additional services, including prescription drugs, physical therapy, dental care, and vision services. Delivery Systems: Administered via standard Fee-For-Service (FFS) or private Managed Care Organizations (MCOs). Primary Funding Mechanisms Federal Funding Funded through general revenues via the Federal Medical Assistance Percentage (FMAP), ranging from 50% to 83% based on state per capita income. State Funding Funded via state general funds, provider taxes, and local government contributions to match federal allocations. ACA Expansion Enhanced 90% federal matching rate (FMAP) for states expanding coverage to adults up to 138% of the Federal Poverty Level. Baseline Financial Metrics (2026) Premiums $0 for the vast majority of enrollees; minor premiums permitted only for specific higher-income populations. Out-of-Pocket Costs Limited nominal copayments or coinsurance; strictly capped by federal law at 5% of a household's monthly income.
Medicaid is a government program in the United States that provides health insurance for adults and children with limited income and resources. The program is partially funded and primarily managed by state governments, which also have wide latitude in determining eligibility and benefits, but the federal government sets baseline standards for state Medicaid programs and provides a significant portion of their funding. States are not required to participate in the program, although all have since 1982.
Medicaid was established by the Social Security Amendments of 1965 as part of the Great Society set of programs that formed the policy agenda of President Lyndon B. Johnson, and was significantly expanded by the Affordable Care Act (ACA), which was passed in 2010. In most states, any member of a household with income up to 138% of the federal poverty line qualifies for Medicaid coverage under the provisions of the ACA. A 2012 Supreme Court decision established that states may continue to use pre-ACA Medicaid eligibility standards and receive previously established levels of federal Medicaid funding, which led some Republican-controlled states to not expand Medicaid coverage. The 2025 One Big Beautiful Bill Act established requirements for most able-bodied adult Medicaid enrollees to work or volunteer for 80 hours per month in order to maintain coverage; these provisions will become effective in 2027.
Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States, providing taxpayer-funded health insurance to 85 million low-income and disabled people as of 2022; in 2019, the program paid for half of all U.S. births. In 2023, the total (federal and state) annual cost of Medicaid was $870 billion, with an average cost per enrollee of $7,600 for 2021. 37% of enrollees were children, but they only accounted for 15% of the spending, ($3,000 per person) while seniors and disabled persons accounted for 21% of enrollees and 52% of spending (more than $18,000 per person). In general, Medicaid recipients must be U.S. citizens or qualified non-citizens, and may include low-income adults, their children, and people with certain disabilities. Medicaid also covers long-term services and supports, including both nursing home care and home- and community-based services, for those with low incomes and minimal assets. Of the 7.7 million Americans who used long-term services and supports in 2020, about 5.6 million were covered by Medicaid.
Along with Medicare, Tricare, ChampVA, and CHIP, Medicaid is one of the several Federal Government-sponsored medical insurance programs in the United States. Medicaid covers healthcare costs for people with low incomes; Medicare is a universal program providing health coverage for the elderly; and the CHIP program covers uninsured children in families with incomes that are too high to be covered by Medicaid. Medicaid offers elder care benefits not normally covered by Medicare, including nursing home care and personal care services. There are also dual health plans for people who have both Medicaid and Medicare.
Research shows that existence of the Medicaid program improves health outcomes, health insurance coverage, access to health care, and recipients' financial security and provides economic benefits to states and health providers. In American politics, the Democratic Party tends to support Medicaid while the Republican Party is divided on reductions in Medicaid spending.
Features Beginning in the 1980s, many states received waivers from the federal government to create Medicaid managed care programs. Under managed care, Medicaid recipients are enrolled in a private health plan, which receives a fixed monthly premium from the state. The health plan is then responsible for providing for all or most of the recipient's healthcare needs. Today, all but a few states use managed care to provide coverage to a significant proportion of Medicaid enrollees. As of 2014, 26 states have contracts with managed care organizations (MCOs) to deliver long-term care for the elderly and individuals with disabilities. The states pay a monthly capitated rate per member to the MCOs, which in turn provide comprehensive care and accept the risk of managing total costs. Nationwide, roughly 80% of Medicaid enrollees are enrolled in managed care plans. Core eligibility groups of low-income families are most likely to be enrolled in managed care, while the "aged" and "disabled" eligibility groups more often remain in traditional "fee for service" Medicaid.
Because service level costs vary depending on the care and needs of the enrolled, a cost per person average is only a rough measure of actual cost of care. The annual cost of care will vary state to state depending on state approved Medicaid benefits, as well as the state specific care costs. A 2014 Kaiser Family Foundation report estimates the national average per capita annual cost of Medicaid services for children to be $2,577, adults to be $3,278, persons with disabilities to be $16,859, aged persons (65+) to be $13,063, and all Medicaid enrollees to be $5,736.
History
The Social Security Amendments of 1965 created Medicaid by adding Title XIX to the Social Security Act.Social Security Amendments of 1965, Pub. L. No. 89-97. Under the program, the federal government provided matching funds to states to enable them to provide Medical Assistance to residents who met certain eligibility requirements. The objective was to help states assist residents whose income and resources were insufficient to pay the costs of traditional commercial health insurance plans.
By 1982, all states were participating. The last state to do so was Arizona.
The Medicaid Drug Rebate Program and the Health Insurance Premium Payment Program (HIPP) were created by the Omnibus Budget Reconciliation Act of 1990 (OBRA-90). This act helped to add Section 1927 to the Social Security Act of 1935 and became effective on January 1, 1991. This program was formed due to the costs that Medicaid programs were paying for discount price outpatient drugs.
The Omnibus Budget Reconciliation Act of 1993 (OBRA-93) amended Section 1927 of the Act, bringing changes to the Medicaid Drug Rebate Program. It requires states to implement a Medicaid estate recovery program to recover from the estate of deceased beneficiaries the long-term-care-related costs paid by Medicaid, and gives states the option of recovering all non-long-term-care costs, including full medical costs.
Medicaid also offers a Fee for Service (Direct Service) Program to schools throughout the United States for the reimbursement of costs associated with the services delivered to students with special education needs. Federal law mandates that children with disabilities receive a "free appropriate public education" under Section 504 of The Rehabilitation Act of 1973. Decisions by the United States Supreme Court and subsequent changes in federal law require states to reimburse part or all of the cost of some services provided by schools for Medicaid-eligible disabled children.
Expansion under the Affordable Care Act
The Affordable Care Act (ACA), passed in 2010, substantially expanded the Medicaid program. Before the law was passed, some states did not allow able-bodied adults to participate in Medicaid, and many set income eligibility far below the Federal poverty level. Under the provisions of the law, any state that participated in Medicaid would need to expand coverage to include anyone earning up to 138% of the Federal poverty level beginning in 2014. The costs of the newly covered population would initially be covered in full by the Federal government, although states would need to pay for 10% of those costs by 2020.
However, in 2012, the Supreme Court held in National Federation of Independent Business v. Sebelius that withdrawing all Medicaid funding from states that refused to expand eligibility was unconstitutionally coercive. States could choose to maintain pre-existing levels of Medicaid funding and eligibility, and some did; over half the national uninsured population lives in those states. As of March 2023, 40 states have accepted the Affordable Care Act Medicaid extension, as has the District of Columbia, which has its own Medicaid program; 10 states have not. Among adults aged 18 to 64, states that expanded Medicaid had an uninsured rate of 7.3% in the first quarter of 2016, while non-expansion states had a 14.1% uninsured rate.
The Centers for Medicare and Medicaid Services (CMS) estimated that the cost of expansion was $6,366 per person for 2015, about 49 percent above previous estimates. An estimated 9 to 10 million people had gained Medicaid coverage, mostly low-income adults. The Kaiser Family Foundation estimated in October 2015 that 3.1 million additional people were not covered in states that rejected the Medicaid expansion.
In some states that chose not to expand Medicaid, income eligibility thresholds are significantly below 133% of the poverty line. Some of these states do not make Medicaid available to non-pregnant adults without disabilities or dependent children, no matter their income. Because subsidies on commercial insurance plans are not available to such individuals, most have few options for obtaining any medical insurance. For example, in Kansas, where only non-disabled adults with children and with an income below 32% of the poverty line were eligible for Medicaid, those with incomes from 32% to 100% of the poverty level ($6,250 to $19,530 for a family of three) were ineligible for both Medicaid and federal subsidies to buy insurance.
Studies of the impact of Medicaid expansion rejections calculated that up to 6.4 million people would have too much income for Medicaid but not qualify for exchange subsidies. Several states argued that they could not afford the 10% contribution in 2020. Some studies suggested that rejecting the expansion would cost more due to increased spending on uncompensated emergency care that otherwise would have been partially paid for by Medicaid coverage.