What is Medicaid?

Medicaid is a health coverage program, not a single health plan. The federal government and your state government share its cost, the federal government sets minimum standards, and your state administers it day to day. When you enroll, your state (or a managed-care plan working for your state) pays for covered health services you receive. In most cases you pay nothing or only a small copayment at the point of care.

Created in 1965, alongside Medicare

Medicaid was signed into law in 1965 as Title XIX of the Social Security Act, in the same legislation that created Medicare as Title XVIII. From the start the two programs had different jobs. Medicare was designed as social insurance for older Americans, funded mainly by payroll taxes and run by the federal government. Medicaid was designed as a joint federal-state program for people with low incomes, with states running it under federal rules. That original division still shapes both programs today.

Medicaid vs. Medicare: the honest comparison

Dual-eligible people: a pointer, not a second program

Some people qualify for both programs at once. They are usually older adults or people with disabilities whose incomes are low enough for Medicaid as well as meeting Medicare's age or disability rules. For them, Medicare generally pays first and Medicaid can pay Medicare premiums, cost sharing, and services Medicare does not cover, such as long-term care. The exact help depends on which dual-eligible category the person falls into, and those categories are set by income and resource levels that vary. If that describes you, your state Medicaid agency and the Medicare program each have their own explanations; this site does not duplicate Medicare's rules, because mixing the two programs' rules together is one of the commonest sources of confusion about Medicaid.

How Medicaid is paid for

Medicaid is not funded by a single trust fund the way parts of Medicare are. Each year, the federal government matches state spending at a rate that depends on the state and the group covered. The best-known rate is the expansion rate: the federal government pays 90 percent of the cost of care for adults covered through the Affordable Care Act expansion, and the state pays 10 percent. That 90 percent rate is set by statute and does not vary by state. For other groups, the federal matching rate varies: poorer states receive a higher federal share than wealthier ones, within limits set by law. This is why Medicaid is also one of the largest items in most state budgets and one of the largest sources of federal money flowing to states.

Managed care: how most people actually receive Medicaid

Most Medicaid enrollees today receive their care through a managed-care plan rather than through the state paying each provider directly. Your state contracts with private health plans, you choose (or are assigned) a plan, and that plan arranges your care through its network of doctors, hospitals, and pharmacies. The benefits the plan must cover are still set by the state plan and federal rules, but the network, the prior-authorization process, and the customer-service number are the plan's. If a service is denied, you have appeal rights, including a state fair hearing, and the denial letter must explain how to use them. Managed care changes the plumbing, not the eligibility rules explained on this site.

Sources: Medicaid.gov, Program History; Centers for Medicare & Medicaid Services, Brief Summaries of Medicare & Medicaid; Medicaid.gov, Managed Care; Social Security Act, Titles XVIII and XIX.