Federal Legislative Milestones in Medicaid and CHIP

Year Legislative milestones or key provisions
1965   Medicaid, an individual entitlement with federal-state financing, is enacted as Title XIX of the Social Security Act (the Act, (P.L. 89-97)) to provide health coverage for certain groups of low-income people. Title XIX:

  • links Medicaid eligibility to receipt of Aid to Families with Dependent Children (AFDC) for families with dependent children under age 18 considered to be deprived of parental support due to the death, continued absence, incapacity, or unemployment of the principal family earner in a two-parent household, and
  • requires hospital payments to be based on reasonable cost.

Medicare is also created as Title XVIII of the Act.

1967 Social Security Amendments of 1967 (P.L. 90-248) limit Medicaid eligibility to the medically needy, that is, individuals with income below 133⅓ percent of the AFDC maximum payment level for a given family size in a state. P.L. 90-248 also:

  • requires states to “assure that payments are not in excess of reasonable charges consistent with efficiency, economy, and quality of care”;
  • establishes Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit for all Medicaid-enrolled children under age 21; and
  • allows Medicaid beneficiaries to use Medicaid-participating providers of their choice.
1971 Social Security Amendments of 1971 (Public Law 92-223) allow states to provide Medicaid coverage for services in intermediate care facilities (ICFs), as well as those for “the mentally retarded” (ICF-MRs).
1972 Social Security Amendments of 1972 (P.L. 92-603): repeal the maintenance of effort, allowing states to reduce expenditures from one year to the next. It also:

  • creates the Supplemental Security Income (SSI) program to federalize cash assistance for the aged, blind, and permanently and totally disabled, which entitles SSI beneficiaries to Medicaid coverage;
  • requires that payments to nursing facilities and ICFs are based on a reasonable cost-related basis; and
  • requires that payments for inpatient hospital services not exceed customary charges.
1977 Departments of Labor and Health, Education, and Welfare Appropriations Act for FY 1977 (P.L. 94-439) enacts the Hyde Amendment, prohibiting federal Medicaid payments for abortions except when the life of the mother is endangered and in cases of rape and incest.
1980 Omnibus Budget Reconciliation Act of 1980 (P.L. 96-499) enacts the Boren Amendment, which removes Medicaid’s state plan requirement to pay nursing facilities according to Medicare cost principles. Instead, the Boren Amendment requires Medicaid payments to be “reasonable and adequate” to meet the costs of “efficiently and economically operated” facilities.
1981 Omnibus Budget Reconciliation Act of 1981 (OBRA 81, P.L. 97–35) establishes two new types of Medicaid waivers to test new Medicaid payment methods:

  • Section 1915(b) freedom-of-choice waivers, which allow states to pursue mandatory managed care enrollment of certain Medicaid populations, and
  • Section 1915(c) home-and community-based services waivers, which allow states to cover home- and community-based long-term care services for the elderly and individuals with disabilities who are at risk of institutional care.

OBRA 81 also:

  • expands the Boren Amendment’s nursing facility requirements to hospitals, removing the requirement that Medicaid state plans pay according to Medicare cost principles;
  • removes the reasonable charges limitation added in 1980; and
  • institutes additional payments to hospitals serving a disproportionate share of Medicaid and low-income patients, which are now known as disproportionate share hospital (DSH) payments.
1982 Tax Equity and Fiscal Responsibility Act (P.L. 97-248) expands states’ options to impose cost-sharing requirements on Medicaid beneficiaries and services.
1984 Deficit Reduction Act of 1984 (P.L. 98–369) mandates Medicaid coverage of children born after September 30, 1983, up to age five, in AFDC-eligible families and mandates coverage for AFDC-eligible, first-time pregnant women and pregnant women in two-parent unemployed families.
1985 Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99–272) requires Medicaid coverage for all remaining AFDC-eligible pregnant women. It also requires hospice payments to be in the same amounts and using the same methodology as Medicare, and permits separate room and board payment for hospice patients residing in nursing facilities or ICFs.
1986 Omnibus Budget Reconciliation Act of 1986 (P.L. 99–509) requires states to cover treatment of emergency medical conditions for illegal immigrants otherwise eligible for Medicaid and allows states to cover pregnant women and infants under age one with income up to 100 percent of the federal poverty level (FPL) at their option.
1987 Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203) requires that payment methods for nursing facilities take into account the cost of complying with new quality requirements. It also:

  • phases out the distinction between skilled nursing facilities and ICFs, upgrades quality of care requirements, and revises monitoring and enforcement;
  • adds Section 1923 of the Act, strengthening DSH requirements and outlining DSH payment methods;
  • gives states the option of covering pregnant women and children under age one in families with income up to 185 percent FPL; and
  • gives states the option to cover children up to age eight in families below 100 percent FPL.
1988 Medicare Catastrophic Coverage Act of 1988 (P.L. 100-360) requires states to phase in coverage for pregnant women and infants with incomes below 100 percent FPL. It also:

  • establishes special eligibility rules for an institutionalized person whose spouse remains in the community to prevent spousal impoverishment, and
  • establishes the qualified Medicare beneficiary eligibility group requiring states to pay premiums, deductibles and cost-sharing for individuals dually eligible for Medicare and Medicaid with incomes up to 100 percent FPL.

Family Support Act of 1988 (P.L. 100-485) requires states to extend 12 months of transitional Medicaid coverage to families leaving AFDC rolls due to earnings from work, and requires states to cover unemployed 2-parent families meeting AFDC income and resource (asset) standards.

1989 Omnibus Budget Reconciliation Act of 1989 (OBRA 89, P.L. 101–239) requires states, by April 1, 1990, to provide Medicaid coverage to pregnant women and to children up to age six in families with income up to 133 percent FPL (or the state’s income threshold at enactment, if higher). It also:

  • adds a requirement to Section 1902(a)(30)(A) of the Act that provider payments are sufficient to attract enough providers to ensure that covered services will be as available to Medicaid beneficiaries as they are to the general population (this requirement was previously established only by regulation);
  • establishes specific reporting requirements for obstetric and pediatric payment rates in order to allow the Secretary of the U.S. Department of Health and Human Services (the Secretary) to determine the adequacy of state payments for these services;
  • requires coverage and full payment of reasonable cost of federally qualified health centers (FQHCs);
  • requires payment for room and board for hospice patients residing in nursing facilities that is equal to 95 percent of the Medicare nursing facility rate; and
  • expands the EPSDT benefit for children under age 21 to include optional diagnostic and treatment services that not covered under the state’s Medicaid program for adult beneficiaries.
1990 Omnibus Budget Reconciliation Act of 1990 (P.L. 101–508) requires states to phase in Medicaid coverage for all poor children under age 19 born after September 30, 1983, by the year 2002. It also:

  • establishes the prescription drug rebate program requiring “best price” rebates to states and federal government;
  • modifies the Boren Amendment to require that Medicaid payment methods take into account the cost of implementing 1987 nursing home quality reforms;
  • creates additional flexibility in DSH payment method design; and
  • establishes the specified low-income Medicare beneficiary eligibility group, which requires states to pay Medicare Part B premiums for enrollees with incomes 120 percent to 135 percent FPL.
1991 Medicaid Voluntary Contribution and Provider-Specific Tax Amendments (P.L. 102-234) restrict the use of provider donations and provider taxes as non-federal share. They also:

  • prohibit the Health Care Financing Administration (HCFA)[1] from restricting intergovernmental transfers of state or local tax revenues, and
  • place national and state-specific ceilings on special payments to DSH hospitals.
1993 Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) places hospital-specific ceilings on DSH payments. It also:

  • establishes standards for state use of formularies to limit prescription drug coverage;
  • strengthens prohibitions against transferring assets with the purpose of qualifying for Medicaid nursing home coverage;
  • requires recovery of nursing home payments from beneficiary estates; and
  • establishes the Vaccines for Children program, which uses federal Medicaid funds to pay for vaccines provided to public health clinics and enrolled private providers.
1996 Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (P.L.104–193) repeals the AFDC program and replaces it with Temporary Assistance for Needy Families (TANF), a program that provides block grants to states. It also:

  • severs the link between AFDC and Medicaid, meaning that enrollment or termination of Medicaid is no longer automatic with receipt or loss of cash assistance;
  • establishes Section 1931 family-coverage category, requiring states to extend Medicaid eligibility to families meeting July 16, 1996 AFDC eligibility criteria and allowing states to establish higher income eligibility thresholds; and
  • bars full-benefit Medicaid coverage for legal immigrants who enter the U.S. after August 22, 1996 and who have been in the country less than five years (allowing coverage after the five-year bar at state option.
1997 Balanced Budget Act of 1997 (BBA 97, P.L. 105-33) permits states to require most Medicaid beneficiaries to enroll in managed care plans without obtaining a Section 1915(b) waiver. The BBA also:

  • requires Medicaid managed care payments to be actuarially sound;
  • creates the State Children’s Health Insurance Program (CHIP), providing federal matching funds to states to expand health insurance coverage for children above states’ Medicaid eligibility levels;
  • repeals OBRA 89 requirements for state reporting on obstetric and pediatric payments;
  • repeals the Boren Amendment, and instead requires state agencies to use a public process to determine payment rates for inpatient hospitals, nursing facilities, and ICF-MRs;
  • for FQHCs and rural health clinics (RHCs), begins phase-out of cost-based payment and adds supplemental payments for difference between Medicaid managed care and fee-for-service payments; and
  • limits state DSH allotments to 12 percent of states’ total annual Medicaid expenditures

Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA, P.L. 106-113) slows the phase-out of cost-based payment for FQHCs and RHCs and increases DSH allotments for the District of Columbia, Minnesota, New Mexico, and Wyoming.

Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170) allows states to cover working disabled individuals with incomes above 250 percent FPL and requires them to pay income-related premiums.


Breast and Cervical Cancer Prevention and Treatment Act of 2000 (P.L. 106–354) allows states to provide Medicaid coverage at enhanced CHIP federal matching rates to uninsured women—regardless of their income or resources—who are screened by the Centers for Disease Control and Prevention’s National Breast and Cervical Cancer Early Detection Program and found to need treatment for breast or cervical cancer.

The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act, as incorporated into the Consolidated Appropriations Act, 2001 (P.L. 106-554) directs the Secretary to issue regulations tightening upper payment limits (UPLs), as well as:

  • creates a new prospective payment system for FQHCs and RHCs and establishes a floor for payments based on 100 percent of the average cost of services provided; and
  • modifies DSH funding amounts.

Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 108-27) raises state-specific DSH allotments for FY 2004 for all states and through FY 2009 for low-DSH states.

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173) creates Medicare Part D, a prescription drug benefit for Medicare enrollees effective January 1, 2006, shifting coverage of prescription drugs for dually eligible individuals  from Medicaid to the new plans created under Medicare Part D. Additionally, the MMA:

  • specifies that dually eligible beneficiaries may choose a Medicare Part D plan during the six-month Medicare enrollment period, or be automatically enrolled in one;
  • provides dually eligible beneficiaries with low-income subsidies to cover Part D cost sharing to varying degrees based on income and assets, including premiums, copayments, and deductibles; and
  • requires states to make monthly payments known as Medicare Part D clawback payments, which help offset the cost to the federal government of providing prescription drug coverage to dually eligible individuals.
2005 Deficit Reduction Act of 2005 (P.L. 109-171) permits states to use benchmark coverage for certain populations, instead of the regular Medicaid benefits package. It also:

  • permits states to increase copayments for non-emergency services;
  • increases penalties for assets transferred at less than fair market value to qualify for nursing home cares; and
  • changes the basis of the federal upper limit for Medicaid payment of multiple source drugs from the lowest published price to the average manufacturer price, to improve the collection of rebates on physician-administered drugs.
2007 Medicare, Medicaid, and SCHIP Extension Act of 2007 (P.L. 110-173) extends CHIP funding through March 31, 2009 and extends Transitional Medical Assistance (TMA) for individuals transitioning from welfare to work. TMA provides Medicaid coverage to members of low-income families who would otherwise lose Medicaid coverage because of an increase in work hours or increased income from child or spousal support.
2009 Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, P.L. 111-3) extends CHIP appropriations through 2013. CHIPRA also:

  • establishes the express lane eligibility option, allowing states to rely on findings about eligibility factors from another program such as the National School Lunch Program or the Temporary Assistance for Needy Families (TANF) program in order to enroll eligible children in Medicaid and CHIP;
  • phases out coverage of parents by 2014;
  • establishes the Medicaid and CHIP Payment and Access Commission (MACPAC) to review state and federal Medicaid and CHIP access and payment policies and to make recommendations to the Congress, the Secretary, and the states on issues affecting Medicaid and CHIP populations;
  • improves collection of physician-administered drug rebates; and
  • makes children’s hospitals eligible for the 340B Drug Pricing Program requiring drug manufacturers to offer Medicaid the lowest price paid by any other purchaser of the drug.

American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) contains a temporary increase to the federal medical assistance percentage (FMAP) for 2009 and 2010. It also establishes the Health Information Technology for Economic and Clinical Health Act of 2009, which creates the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs to encourage providers to adopt, implement, operate, upgrade, or meaningfully use EHR technology.

2010 Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148, as amended) expands Medicaid eligibility to include nearly all individuals under age 65 with incomes up to 133 percent FPL based on modified adjusted gross income. The U.S. Supreme Court later ruled in National Federation of Independent Business v. Sebelius that Congress could not compel states to participate in this Medicaid expansion. The ACA also:

  • increases some primary care payment rates provided by certain physicians to 100 percent of the Medicare payment rates for 2013 and 2014;
  • extends CHIP funding an additional two years through 2015 and enacts a 23 percentage point increase in CHIP’s enhanced FMAP;
  • prohibits Medicaid payments for health care-acquired conditions;
  • establishes a new Center for Medicare and Medicaid Innovation to support pilot programs for innovative payment and delivery arrangements in Medicare and Medicaid;
  • establishes the Federal Coordinated Health Care Office to improve the integration between Medicaid and Medicare for dually eligible beneficiaries;
  • schedules reductions in federal Medicaid DSH allotments; and
  • includes demonstration program funding for bundled payments, global payment for safety-net hospitals, pediatric accountable care organizations, and a project to provide Medicaid payment to institutions for mental disease in certain cases.

Amendments to the ARRA incorporated into H.R. 1586 (P.L. 111-226) extend the ARRA FMAP increase through June 30, 2011.

2012 Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96), extends Medicaid DSH allotment reductions to FY 2021.

American Taxpayer Relief Act of 2012 (P.L. 112-240) extends Medicaid DSH allotment reductions to FY 2022.

Bipartisan Budget Act of 2013 (P.L. 113-67) allows state Medicaid agencies to recover any payments by a third party, rather than limiting recovery to payments made solely for health care items or services, and creates an exception to Medicaid’s anti-lien statute for third-party liability. It also delays the onset of Medicaid DSH allotment reductions until FY 2016 by eliminating the FY 2014 reduction and adding the FY 2015 reduction to that for FY 2016, and extends the reductions to FY 2023.

2014 Protecting Access to Medicare Act of 2014 (P.L. 113-93) delays the implementation of the third-party liability changes enacted in the Bipartisan Budget Act of 2013. It also:

  • eliminates the FY 2016 reduction in Medicaid DSH allotments, delaying the reductions until FY 2017, adjusting the amounts of reductions in future years and extending them to FY 2024;
  • creates a demonstration program for certified community behavioral health clinics (CCBHCs);
  • extends a number of other Medicaid-related provisions, such as the Medicaid and CHIP express lane eligibility program and TMA; and
  • requires MACPAC to submit an annual report to Congress on DSH payments.
2015 Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10) extends funding for CHIP through FY 2017, leaving the enhanced federal CHIP matching rate intact and extending the authorization of contingency fund payments through FY 2017. It also:

  • permanently extends the Qualifying Individuals program, which pays Medicare Part B premiums for qualified individuals with incomes between 120–135 percent of FPL;
  • permanently extends TMA;
  • extends the state express lane eligibility (ELE) option for children in Medicaid or CHIP from September 30, 2015 through September 30, 2017. ELE permits states to rely on findings from another program designated as an Express Lane agency, such as the Supplemental Nutrition Assistance Program, the National School Lunch Program, or Head Start, when making Medicaid and CHIP eligibility determinations; and
  • delays the time period for DSH allotment reductions to FYs 2018–2025, rather than FYs 2017–2024. Changes the aggregate amount of DSH allotment reductions to $2 billion in FY 2018, increasing by $1 billion each subsequent fiscal year up to $8 billion in FYs 2024 and 2025.

Bipartisan Budget Act of 2015 (P.L. 114-74) applies the Medicaid additional rebate requirement, imposed when a drug’s price rises faster than the rate of inflation, to generic drugs.

Consolidated Appropriations Act, 2016 (P.L. 114-113) provides additional funding for Medicaid and CHIP program integrity activities and limits state Medicaid durable medical equipment payment to Medicare payment rates.

2016 21st Century Cures Act (P.L. 114-255) includes provisions addressing a range of different Medicaid issues, including several designed to enhance access to mental health services and improve program integrity:

  • beginning in FY 2018, limits federal financial participation (FFP) for Medicaid payments for durable medical equipment, prosthetics/orthotics, and supplies to Medicare payment rates;
  • establishes a new requirement for states to screen and enroll all providers participating in Medicaid or CHIP managed care (who are not already enrolled) in the state’s fee-for-service program;
  • requires states to submit additional information to the Secretary about terminated providers, and requires the Secretary to create and maintain a centralized and uniform database of terminated Medicaid and CHIP providers with the reasons for termination;
  • prohibits FFP for items and services furnished by terminated providers (including those delivered through a managed care organization);
  • requires state Medicaid programs to provide an electronic directory of participating physicians to beneficiaries enrolled in fee for service or primary care case management;
  • permits non-elderly individuals with disabilities to set up special needs trusts for themselves without filing a petition with a court;
  • eliminates FFP for Medicaid expenditures for non-medically necessary prescription drugs used for cosmetic purposes or hair growth;
  • clarifies that Medicaid patients may see a physical and a mental health provider on the same day, eliminating the so-called same day billing glitch;
  • requires the Secretary to conduct studies, release reports, and issue guidance around several issues relating to mental health services (e.g., improving care delivery to individuals with mental illness, the emergency psychiatric demonstration project, and mental health parity);
  • specifies that children receiving Medicaid-covered inpatient psychiatric hospital services are eligible for the full range of EPSDT services; and
  • directs states to require the use of electronic visit verification systems for Medicaid-provided personal care by January 1, 2019 and home health services by January 1, 2023.

Comprehensive Addiction and Recovery Act of 2016 (CARA, P.L. 114-198) excludes certain abuse-deterrent drug formulations from the definition of line-extension drugs in the Medicaid drug rebate program. Additionally, the statute:

  • adds $5 million to the Medicaid Improvement Fund;
  • requires the Government Accountability Office (GAO) to issue reports on the impact of the Medicaid institution for mental diseases exclusion on access to treatment for individuals with substance abuse disorders, and on Medicaid coverage of neonatal abstinence syndrome; and
  • prohibits states from using or disclosing analytic technologies to identify improper Medicaid claims (including predictive modeling systems), except for the purposes of administering a state Medicaid or CHIP program (as long as a state has adequate data security and control policies).

Second Continuing Appropriations, Fiscal Year 2018 (P.L. 115-90) includes provisions to ensure the availability of CHIP redistribution funding for states experiencing CHIP funding shortfalls before December 31, 2017.

Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017 (P.L. 115-96) provided an appropriation to make semi-annual CHIP allotments for the first half of FY 2018.

2018 The HEALTHY KIDS Act as incorporated into Making further continuing appropriations for the fiscal year ending September 30, 2018, and for other purposes (P.L. 115-120) extends funding for CHIP through FY 2023 and extends several other CHIP provisions until FY 2023, including:

  • the child enrollment contingency fund;
  • express lane eligibility as a state option; and
  • funding for child obesity demonstrations, the pediatric quality measures program, and outreach and enrollment grants.


  • provides an 11.5 percentage point increase to the enhanced CHIP matching rate in FY 2020;
  • returns the matching rate to the regular CHIP enhanced matching rate in FY 2021 and subsequent years;
  • continues the Medicaid and CHIP maintenance of effort requirements for children with family incomes below 300 percent FPL until FY 2023; and
  • creates a new program for CHIP children and children enrolled in look-alike programs to be included in the same risk pool.

Bipartisan Budget Act of 2018 (P.L. 115-123) makes several changes to CHIP and Medicaid:

CHIP and children’s coverage

Extends for four additional years, FY 2024 – 2027:

  • CHIP funding;
  • the CHIP child enrollment contingency fund;
  • the CHIP qualifying states option;
  • express lane eligibility as a state option;
  • the CHIP and Medicaid maintenance of effort for coverage of children with family income at or below 300 percent of the federal poverty level (FPL);
  • pediatric quality measures program funding, and mandates state report the pediatric core set for Medicaid and CHIP beginning FY 2024; and
  • outreach and enrollment grant funding.

Dually eligible beneficiaries

  • permanently authorizes Medicare Advantage dual-eligible special needs plans (D-SNPs)
  • directs the Secretary to establish a unified grievances and appeals process no later than April 1, 2020

Prescription drugs

  • makes a technical correction to the alternative rebate calculation for line extension drugs in Section 1927(c)(2)(C). The correction makes the additional rebate the greater of the line extension’s additional rebate or the highest additional rebate (calculated as a percentage of average manufacturer price) for any strength of the original single source drug or innovator multiple source drug.


  • eliminates DSH allotment reductions for FY 2018 and FY 2019
  • changes the amount of DSH allotment reductions for FYs 2020–2025

Third-party liability

  • eliminates requirement that states pay for prenatal care services and then seek reimbursement from the liable third party (i.e., pay and chase)
  • repeals the provision that permits states to recover a broader range of payments from third parties, and limits them to those where there is legal liability for health care items and services
  • applies Medicaid TPL requirements to CHIP

Other provisions

  • directs states to count qualified lottery winnings or qualified lump sum income for the purpose of MAGI-based eligibility determinations
  • rescinds funding for the Medicaid Improvement Fund

[1] HCFA was renamed the Centers for Medicare & Medicaid Services in 2001.
Source: MACPAC analysis as of February 2018.