Medicaid is a joint federal-state program that provided health care coverage to an estimated 109 million people in fiscal year 2023. As a major payer in the U.S. health care system, it accounted for about 18.5 percent of national health care spending in calendar year 2022.
Medicaid was enacted as part of the Social Security Amendments of 1965 (P.L. 89-97), the same legislation that created Medicare. Like Medicare, Medicaid is an entitlement program, meaning that eligible individuals have rights to payment for medically necessary health care services defined in statute, and the federal government is obligated to fund a share of the outlays for those services.
Medicaid varies across states. States establish their own eligibility standards, benefit packages, provider payment policies, and administrative structures under broad federal guidelines, effectively creating 56 different Medicaid programs—one for each state, territory, and the District of Columbia.
Medicaid financing is a joint responsibility of the federal government and the states. The federal medical assistance percentage (FMAP) determines the federal share of spending for most Medicaid services and ranges from 50 percent to 83 percent across states.
The Medicaid statute sets minimum requirements that states must meet to operate a Medicaid program. These mandatory requirements include coverage of certain populations and health benefits, such as pregnant individuals with incomes below 138 percent of the federal poverty line and home health services. States may also choose to cover additional populations and health benefits in their Medicaid programs. Some of these optional populations and benefits are not typically covered or are covered to a lesser extent by other insurers, such as ‘medically needy’ individuals and long-term services and supports.
Medicaid provides health care coverage for eligible low-income individuals, including children and their families, pregnant women, seniors, and people with disabilities. Medicaid also pays for Medicare premiums and cost sharing for individuals who are dually enrolled in both Medicaid and Medicare. Medicaid is a major source of financing for care delivered by certain providers, particularly safety net institutions that serve both low-income and uninsured individuals.
Looking to learn more about Medicaid policy and the State Children’s Health Insurance Program (CHIP)? Click here for information on CHIP. Click here for federal legislative milestones in Medicaid and CHIP. Visit our YouTube channel for our Medicaid 101 video series with topics ranging from prescription drugs to hospital payment and financing.