Medicaid is the largest publicly funded health financing program in the United States, providing insurance to roughly 63 million low-income people. The Affordable Care Act expanded Medicaid eligibility beginning in 2014, but the Supreme Court ruled in 2012 that the expansion is optional for states.
Authorized in 1965 through the Social Security Act, Medicaid is a health insurance program for low-income families, a long-term care program for the low-income elderly and disabled, and an additional funding source for acute-care services to the low-income elderly and disabled enrolled in Medicare.
Medicaid is jointly funded by the federal government and states. The federal share (called the Federal Medical Assistance Percentage or FMAP) of total Medicaid expenditures varies by state and year. It’s based on state per capita income but is limited to 50 to 82 percent of Medicaid costs. During recessions, Congress has temporarily raised the federal matching rate to help states. The FMAP can also vary by type of service (e.g., administrative expenses vs. medical expenses) and by population (e.g., Medicaid enrollees who will be newly eligible through the Affordable Care Act vs. currently eligible enrollees).
States have a great degree of flexibility in how they structure their programs, such as setting income eligibility levels and payment rates for Medicaid providers within federal requirements. Additionally, while coverage of certain eligibility groups or services is mandatory, states can determine which optional services and populations to cover.
States can also apply for waivers to make health care delivery and financing changes to the program. Services covered by a state Medicaid program can differ between various populations within a state. Undocumented immigrants are not eligible for full Medicaid benefits, but emergency services are covered if an individual would have been eligible were it not for his or her immigration status.
In addition to paying for the cost of acute care and long-term care for enrollees, Medicaid also finances administrative costs and Medicare premiums for individuals eligible for both Medicaid and Medicare. Hospitals that serve a greater-than-average share of Medicaid enrollees and indigent patients get disproportionate share hospital payments through Medicaid to help cover their costs.