2021 Hero Medicaid Primer 1.11.21 Medicaid

Medicaid: A primer on America’s biggest health insurance program

What is Medicaid?

Medicaid is the largest source of health care coverage in the U.S., providing a critical safety net for some of the most vulnerable Americans, including low-income families, children, seniors and individuals with disabilities. Today, nearly 75 million Americans – about one in every five people – receive health care services through the Medicaid program, and nearly half of Medicaid beneficiaries are children.

Medicaid spending totaled more than $603 billion in 2019, split among federal and state governments. While Medicaid operates as a state and federal partnership, and some benefits and services are required, each state has the flexibility to tailor the program to meet the needs of its local population and can design and innovate their own Medicaid programs, including eligibility criteria, care delivery and optional benefits.

How is Medicaid different from Medicare?

Medicare is federal health insurance available to eligible individuals age 65 and over or individuals under 65 with certain disabilities or medical conditions, such as End-Stage Renal Disease. The federal government administers Medicare, so benefits are consistent from state to state. Medicare has different parts (referred to as Parts A, B, C and D) for services including hospital care, doctor visits, dental, vision and hearing services as well as prescription drugs. 

Medicaid is a state-based health insurance program that is funded by both federal and state dollars and covers a set of benefits and services that can vary by state. Some low-income seniors who receive Medicare are also eligible for certain Medicaid benefits to pay for certain services or for some out-of-pocket costs. Medicaid and Medicare eligibility requirements differ, and special rules apply for individuals eligible for coverage under both programs.

What type of benefits does Medicaid cover?

In every state, Medicaid covers essential health care services such as inpatient and outpatient hospital care, doctor visits, prenatal care, laboratory tests, x-rays, home health services and nursing home stays. It also covers smoking cessation classes for pregnant women, births at a freestanding birth center or with a certified nurse midwife, and pediatric care. In fact, 43 percent of all births in the United States are covered by Medicaid.

Optional benefits can include physical therapy, dental care and dentures, optometry and glasses, prosthetics, care for hearing, speech and language disorders, and private duty nursing and hospice care.

Does Medicaid play a role in improving patient outcomes or reducing costs?

Medicaid beneficiaries have a much higher rate of chronic conditions than those covered by employers or through Medicare. One in 10 adult Medicaid enrollees has diabetes, and nearly one in three has heart disease. More than a third suffer from a mental illness. With these more complex needs comes higher use of health care services, including emergency room trips, hospital and doctor visits, as well as prescription drugs.

To meet the needs of their Medicaid populations, many states work closely with Medicaid managed care organizations (MCOs) to provide enrollees with better access to disease management, care coordination and mental health services. Some even provide tools to help with housing, education, job training and financial counseling. Approximately 70 percent of Medicaid enrollees are covered by a comprehensive managed care plan.

How has the Medicaid program changed since it was created?

President Lyndon B. Johnson signed both Medicaid and Medicare into law in 1965. At the time, Medicaid was the smaller of the two programs. Initially, Medicaid only covered single parents and children receiving public assistance.  Since then, the program has grown to encompass families with two parents, the working poor and people with medical conditions that limit their ability to live independently. The number of Medicaid recipients grew significantly through the 1980s and 1990s as Congress and states acted to expand eligibility.

More recently, the Affordable Care Act enabled states to expand Medicaid coverage to low-income adults, enlarging the program by an additional 12 million people. The ACA also provided additional federal funding to incentivize states to expand Medicaid. The most recent expansion also provided mental health and addiction treatment services, increasingly crucial as the nation faces an opioid addiction epidemic.

How is Medicaid responding to COVID-19?

Medicaid has seen significant enrollment increases since the onset of the pandemic and resulting economic downturn. The Centers for Medicare & Medicaid Services approved 1,135 waivers across the 50 states to grant flexibility in modifying Medicaid programs to meet the emergency, which included greater flexibility to offer telehealth services. Medicaid managed care organizations rapidly transitioned services and care coordination to virtual care.

In response to the economic and social disruption caused by the pandemic, these organizations also support a breadth of programs to serve their members, from drive-through food banks to address food insecurity to mobile care vans that reach children who may have missed routine vaccinations. Other federal action protected Medicaid beneficiaries from being removed from coverage rolls during the pandemic.

What challenges and opportunities will Medicaid face in the future?

Medicaid funding is complicated by the twin pressures of lawmakers looking to reduce federal spending and states whose budgets are squeezed by a variety of factors, including rising health care costs. The flexibility built into Medicaid allows states to test new models of care delivery and innovative care interventions that can be scaled and adopted throughout the health care system.


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