Medicaid

How It Works

Medicaid is a joint federal/state entitlement program that pays for medical assistance to certain groups of low-income individuals. Within broad national guidelines, established by Federal policy, each state establishes its own eligibility standards, services, rate of payment and program administration. Therefore, Medicaid programs vary widely between States.

Medicaid does not provide medical assistance for all poor persons. Low income is only one criteria for Medicaid eligibility. For mandatory Medicaid “categorically needy” eligibility groups to qualify for Federal matching funds, click here. !!!

States also have the option of providing Medicaid coverage for additional “categorically related” groups, for which they will receive Federal matching funds. For optional groups, click here. !!!

Funding for the Medicaid program is shared between States and the Federal government. The Federal government share, known as the Federal Medical Assistance Percentage, is determined annually using a formula that takes into account the State’s average per capita income level and the national income average. States with a higher per capita income level are reimbursed a smaller share of their costs. By law, the FMAP cannot be lower than 50% or higher than 83%. States may pay providers directly on a fee-for-service basis or through various prepayment arrangements, such as health maintenance organizations (HMOs).

Flexibility is given to States to determine the scope of services provided. However, to receive Federal matching funds, certain mandatory requirements must be met. For mandatory services, click here. !!!

States may also receive Federal matching funds for certain optional services (including diagnostic services, clinic services, prescribed drugs, optometrist services and eyeglasses, nursing facility services for children under age 21, transportation, physical therapy and home and community-based care for certain persons with chronic impairments).

Early and periodic screening, diagnostic and treatment services (EPSDT) is Medicaid’s comprehensive and preventive child health program for children under age 21. EPSDT requires periodic screening, vision, dental and hearing services. Screening includes comprehensive health and developmental history, comprehensive unclothed physical exam, appropriate immunizations, laboratory tests, lead screening and health education. In addition, when a screening examination indicates the need for further evaluation, diagnostic services and treatment must be provided, even if the service is not normally available under the State’s Medicaid program.

Currently, Medicaid provides health care coverage for more than 55 million individuals, 28 million of which are children. However, the elderly and disabled account for 70% of expenditures.

Medicaid, along with SCHIP, has helped to bring the gap of health care disparities for minority children in the United States. It has increased access to primary care and preventive services. Current challenges still remain for Medicaid patients. Medicaid has improved quality of coverage for Medicaid patients, but access to subspecialists and dentists is still a challenge for much of the Medicaid population.

History

The Medicaid Program was signed into law, under Title XIX of the Social Security Act, on July 30, 1965 by President Lyndon B. Johnson. The program was developed to provide health care services to low-income children, their caretakers, the elderly and individuals with disabilities.

Since its inception, the Medicaid program has undergone many changes. Some legislation has expanded the program, such as the Early Periodic Screening, Diagnostic and Treatment (EPSDT) program and expansion of mandatory eligibility groups. However, the most recent legislation, the Deficit Reduction Act of 2005, is aimed at reducing Medicaid spending.

For a more complete timeline, click here.

Policy Update

The Deficit Reduction Act of 2005 (DRA) was signed into law on February 8, 2006 by President George W. Bush. The DRA is aimed at reducing Medicaid expenditures by $28.3 billion over the next 10 years and does this, in part, by shifting cost to beneficiaries. Changes that affect beneficiaries include the following:

  • Prior to the DRA, Medicaid beneficiaries were provided cost-sharing protections. States could not charge most beneficiaries premiums or enrollment fees and cost-sharing was limited to nominal amounts (e.g. $3) for limited populations. Children and pregnant women could not be charged cost sharing and certain services, such as emergency room visits, family planning and hospice care were also protected. The DRA allows States to charge unlimited premiums and co-payments up to 20% of the cost of medical services for beneficiaries with family incomes over 150% of the FPL (including children). Co-payment limits are set at 10% for those with family incomes between 100-150% of the FPL. Mandatory children and pregnant women and certain services, including preventive services for children, pregnancy related services and emergency services, remain exempt.

  • Prior to the DRA, Medicaid benefits packages included both Federally mandatory and optional services. The DRA would allow States to replace current benefits packages with “benchmark” (limited) coverage for children and certain other groups. States would be required to provide “wrap around” benefits coverage for EPSDT services for children and ensure that affected beneficiaries have access to rural health clinics or federally qualified health centers.

  • Starting July 1, 2006, the DRA also required that new applicants and current beneficiaries at re-determination provide documentation of citizenship.

In most instances, the policy changes are optional for State Medicaid programs. The documentation of citizenship is mandatory. It is to be seen which changes States will implement.

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