How Medicaid Works: Program Basics

Publication Date: February 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

Type:

Abstract:

Medicaid is a means-tested entitlement program that has been in existence for over 35 years. It provides primary and acute care as well as long-term care to over 40 million Americans at a cost to federal and state governments of approximately $258.2 billion in FY2002. Of all federally supported social programs, only Medicare comes close to this level of spending, and only Social Security costs more.

Medicaid is jointly financed by the federal and state governments, but each state designs and administers its own version of the program under broad federal guidelines. The complexity of Medicaid presents an enormous challenge for anyone attempting to generalize about the program. State variability in eligibility, covered services and how those services are reimbursed and delivered is the rule, rather than the exception. Furthermore, Medicaid is targeted at individuals with low income, but not all of the poor are eligible, and not all those covered are poor.

This report summarizes the basic elements of Medicaid. Specifically, it describes federal Medicaid rules governing: (1) who is eligible, (2) what services are covered and how they are delivered, (3) how the program is financed and administered, (4) key provider reimbursement issues, and (5) the significant role of waivers in expanding eligibility and modifying services and health care delivery systems. It concludes with a brief history of Medicaid legislation enacted since 1996. This report will be updated periodically.