MEDICAID

Millions of elderly people in the United States have extensive health care needs and expenses, but many have limited incomes or savings to help them cover the cost of care. Virtually all elderly Americans have Medicare, the federal health insurance program for elderly and disabled Americans, to help pay medical bills. However, limits in the scope of benefits, coupled with financial obligations for coverage, can impose a serious financial burden. Elderly persons with low incomes are particularly vulnerable to these burdens because they are more likely to have health problems than higher-income Medicare beneficiaries, yet are less able to afford care. In addition, they are less likely to be able to access or afford the supplemental coverage that many Medicare beneficiaries purchase to help fill in Medicare's gaps.

Medicaid, a means-tested entitlement program that provides health coverage to low-income Americans, serves as an important complement to Medicare by assisting low-income Medicare beneficiaries with Medicare premiums and cost-sharing, and by providing coverage for prescription drugs and long-term care services not available through Medicare. Medicaid's supplemental coverage helps many low-income elderly persons gain access to needed health services and provides financial security from the high cost of care.

The need for medical assistance

In general, elderly persons are less healthy and have greater health care needs than the general population. Nearly a third of people age sixty-five and over report that their health status is poor or fair, compared to 18 percent of people age 55 to 64 and just 6 percent of those age 25 to 44. A significant percent of elderly persons live with serious or disabling health problems, such as arthritis (56 percent), hypertension (53 percent), and heart disease (36 percent), and many live with multiple chronic conditions (69 percent). These are all conditions that require increased contact with the health care system and ongoing care, including frequent visits with a health care provider, prescription medications, and, at times, hospitalization or other inpatient medical services.

Medicare coverage

The Medicare program provides basic health coverage to most persons age 65 and older, regardless of income, assuring them access to the health system and protection from financial catastrophe when illness strikes. Medicare consists of two parts: Hospital Insurance (Part A), which covers inpatient hospital care, limited skilled nursing facility care, and home health and hospice services, and Supplementary Medical Insurance (Part B), which covers physician and outpatient hospital services, as well as some other screening, laboratory, and home health services. However, the program does not cover all medical services that elderly people need (most notably, prescription drugs and nursing home care) and requires beneficiaries to pay monthly premiums and some portion of the cost of services at the point of care. For example, in 2002 the deductible for Part A was $812 and beneficiaries had to pay some portion of the charge for extended hospital stays. Medicare also requires a monthly ($100 in 2002) premium for Part B coverage ($54 in 2002) and 20 percent co-insurance after the Part B deductible ($100 in 2002) is met.

While many Medicare recipients purchase supplemental insurance to help with these cost-sharing obligations, these requirements can impose a substantial financial burden on the more than eleven million elderly Medicare beneficiaries (36 percent) who are poor or near-poor (see Figure 1). Not only do many Medicare beneficiaries live on modest incomes, but most rely on Social Security benefits as their main source of income. Social Security benefits are often quite modest—the average in 2001 was about $800 per month. However, these benefits are the major source of income for nearly two-thirds of beneficiaries. Living on fixed incomes with little potential for additional earnings leaves these beneficiaries with minimal cushion to absorb additional medical costs.

The potential burden of medical costs is particularly important to low-income elderly people because they are more likely to need medical services than higher-income beneficiaries. Poor elderly Medicare beneficiaries are nearly twice as likely as higher-income beneficiaries to report their health status as fair or poor, and they are more likely to live with multiple chronic conditions and functional limitations than elderly people with higher incomes. Poor health status and chronic medical conditions translate into higher costs due to the increased need for medication and physician supervision, as well as the need for nonmedical support services such as transportation and personal care assistance with daily tasks such as bathing and cooking.

note: In 1999, the federal poverty level was $8,240 for individuals, $11,060 for couples.

To provide assistance in covering the cost of uncovered Medicare services and Medicare cost-sharing, many elderly persons have supplemental coverage in addition to Medicare. There are different types of supplemental coverage, and the cost and scope of benefits vary. Thirty-six percent of Medicare beneficiaries have employer-sponsored retiree coverage. This type of coverage is typically very generous, covering a wide range of benefits and limiting beneficiaries' out-of-pocket costs. Another source of supplemental coverage is individually purchased Medigap policies, which about a quarter of Medicare beneficiaries hold. Beneficiaries pay monthly premiums for Medigap coverage—on average $100 per month, though policies range in cost from about $1,400 to $4,700 per year, depending on where a person lives, the level of coverage they obtain, and their age.

Supplemental coverage of Medicare beneficiaries varies significantly by income (see Figure 2). Higher-income beneficiaries are more likely to have worked in jobs that offer retiree coverage, and higher- and moderate-income beneficiaries are also more likely to purchase Medigap policies. Lower-income beneficiaries, in contrast, are more likely to rely solely on Medicare. This difference in coverage exists because low-income elderly people are less likely to have worked in jobs that offer private supplemental coverage after retirement. In addition, though many purchase Medigap policies, the high cost of such coverage is unaffordable for some.

Ultimately, poor Medicare beneficiaries bear a disproportionate burden in out-of-pocket health care costs, spending more than a third of their income on health care, compared to 10 percent for higher-income beneficiaries. These costs may lead some elderly people into impoverishment or force them to choose between covering their health care costs and paying for other basic necessities.

Medicaid coverage for elderly persons

Medicaid, the nation's major public financing program for providing health and long-term care coverage to low-income people, fills in Medicare's gaps for millions of low-income elderly people. Medicaid is jointly funded by federal and state governments and administered by the states. Enacted as Title XIX of the Social Security Act in 1965, the program has evolved from one that primarily covered people receiving cash assistance to being an essential provider of health and long-term care coverage for over forty million low-income Americans.

Medicaid coverage is targeted to people who have low incomes, few assets, and who fall into particular categories, such as low-income children, some poor parents, pregnant women, people with disabilities, and elderly persons. In 1998, the program covered over four million elderly people, accounting for about 10 percent of total Medicaid enrollment and about 12 percent of elderly people on Medicare.

There are several pathways through which elderly people can become eligible for Medicaid assistance, and the scope of coverage varies according to which pathway is used (see Table 1). The poorest Medicare beneficiaries—those who are receiving or eligible for cash assistance through the Supplemental Security Income (SSI) program—receive assistance with all of Medicare's financial requirements and are also covered for the full range of Medicaid benefits. These benefits wrap around and supplement Medicare coverage. People who have exhausted their personal resources paying for health and long-term care services to the point that their available incomes fall below cash assistance income standards are also eligible for the same level of benefits. States also have the option to provide this level of coverage to elderly persons with slightly higher incomes or assets.

The majority of elderly people receiving Medicaid assistance fall into one of these groups and receive full Medicaid benefits. Because Medicaid supplements Medicare benefits, these beneficiaries (known as dual eligibles ) rely on Medicaid primarily for services not covered by Medicare, such as prescription drugs and long-term care, and for coverage of Medicare's premiums and cost-sharing.

Other low-income beneficiaries are eligible to receive assistance primarily limited to Medicare financial requirements (most notably, Part B premiums and cost-sharing), through four related programs, which are often referred to as the buy-in programs or "Medicare savings programs." Since the programs' inception in 1965, states have had the option to buy-in the poor to Medicare by paying their Part B premium and cost-sharing. In the late 1980s and the 1990s, the federal government expanded the Medicaid buy-in to assist low-income Medicare beneficiaries with the growing cost of Medicare premiums and cost-sharing. The first initiative was the Qualified Medicare Beneficiary (QMB) program, through which Medicaid pays the Medicare cost-sharing requirements and the Part B premium for beneficiaries with incomes below the federal poverty level (in 2000, the poverty level was $8,350 for an individual and $11,250 for couples) and limited assets. The Specified Low-Income Medicaid Beneficiary (SLMB) program pays the Part B premium for people with incomes between 100 and 120 percent of the federal poverty level and limited assets. Finally, the Qualified Individual (QI) programs provide a set amount of money to provide some assistance to Medicare beneficiaries with higher incomes (up to 175 percent of poverty) on a first come, first served basis.

note: Columns may not sum to 100 percent; employer/retiree includes both beneficiaries who have supplemental insurance from a former employer or union and those who are still working and whose current employer is their primary source of insurance.

Delivering Medicaid services to elderly persons

Because of the more extensive health care needs of elderly Medicaid beneficiaries, the elderly population accounts for a substantial share of spending under Medicaid. Of the $169 billion in total Medicaid expenditures in 1998, $46 billion (27 percent) was spent on services for the 10 percent of beneficiaries who were low-income elderly persons. Nearly three-quarters of Medicaid spending on the elderly population was for long-term care services, primarily nursing-home care; about 7 percent was for prescription drugs; and nearly 6 percent was payments to the Medicare program for premiums or cost-sharing. Largely due to the high cost of long-term care, elderly beneficiaries had the highest per capita expenditures of any Medicaid eligibility group (see Figure 3).

One of the most important roles that Medicaid plays for elderly Americans is financing long-term care. With nursing-home care averaging more than $50,000 per year and regular assistance in the community costing more than $10,000 per year in 2001, long-term care can be quite costly and can drain private resources quickly. Medicaid is the major public program that covers nursing-home care; the program finances care for over two-thirds of the nation's nursing-home residents and pays nearly half of all nursing-home costs in the nation. However, because Medicaid coverage is available only to low-income individuals, many people in nursing homes who receive Medicaid assistance must spend down, or deplete, their personal resources before Medicaid assistance is available. They must also continue to contribute any available income from Social Security or pensions toward the monthly cost of their care.

note:The first three programs are entitlements; the last two are block grants available on a first-come, first-serve basis.

In response to the high cost of nursing-home care and people's desire to remain in their community, all states also offer home health and home and community-based services (HCBS) under their Medicaid programs; some states also offer personal care services. These services provide assistance to people in the community and may target a specific mix of noninstitutional long-term care services to a distinct population or geographic area. While community-based services are crucial to enabling many elderly persons with long-term care needs to remain in their homes, they represent less than 10 percent of Medicaid spending and have not been shown to reduce nursing-home utilization. A 1999 Supreme Court decision (Olmstead v. L.C. ) has helped to promote the broader use of home care as an alternative to institutionalization for people with disabilities, and it may create pressure to increase the amount and share of Medicaid resources devoted to community-based long-term care.

Medicaid's role in covering the cost of prescription drugs to Medicare beneficiaries with low incomes is another key function of the program for elderly persons. Outpatient drug therapy has become an increasingly important part of the therapeutic regimen for millions of elderly Americans. In 1996, eight out of ten Medicare beneficiaries utilized prescription drugs on an ongoing basis as a way of managing chronic conditions, delaying or even preventing the onset of serious illness, or substituting for more invasive methods of care. Prescription drugs come at a substantial cost, however, and, on average, range from $800 to $1,400 per person, per year (as of 2001). People who do not have insurance to help with these costs are less likely to fill prescriptions, and they may pay more for some drugs because they cannot participate in pharmacy discounts negotiated by insurers. All states cover prescription drugs under their Medicaid programs, a benefit that accounted for over 8 percent of total program spending in 1998. One-quarter of Medicaid spending on drugs is on behalf of elderly beneficiaries.

note: Expenditures do not include DSH, adjustments, or administrative costs.

For both long-term and acute care services, elderly persons receiving Medicaid face particular challenges in receiving health services from both Medicare and Medicaid programs. Medicare remains the primary source of insurance for elderly people, while Medicaid covers wraparound services. Depending on how a state's Medicaid program works, dual eligibles may have to see different providers for different services— one for their acute care needs and one for their long-term care needs. This situation creates confusion among beneficiaries, is administratively difficult for providers, and may encourage the programs to try to shift the cost of care to each other. The growing use of managed care, which relies on a restricted network of providers for services, in both Medicare and Medicaid programs for the elderly population, brings yet another layer of complexity to coordination of services. However, without the services in Medicaid to complement Medicare coverage, the four million elderly dual eligibles would have their substantial health needs go unmet. Medicaid functions as a true safety net for Medicare's most vulnerable and sickest beneficiaries.

Medicaid's impact

Medicaid supplemental assistance makes a difference in the lives of the elderly people enrolled in the program. Problems in getting medical care are often tied to financial barriers: If people cannot afford to pay their share for services, they often delay or avoid seeking care, which ultimately compromises their health status and results in greater suffering and mortality. Medicaid coverage helps remove financial barriers to care and substantially improves access to health care for Medicare beneficiaries. Despite their greater health care needs, dual eligibles are much more likely than beneficiaries without any supplemental coverage (Medicare only) to have regular check-ups and to obtain care in a timely manner (see Figure 4). People who receive both Medicare and Medicaid are also more likely to have a usual source of care than are those who have no supplemental coverage, an indicator that Medicaid helps people gain entry into the primary health care system and receive basic health services.

Dual eligibles also have lower out-of-pocket spending than other beneficiaries, spending four to five times less of their income on health care than the average Medicare beneficiary (see Figure 5). While other types of supplemental insurance may also moderate Medicare beneficiaries' out-of-pocket costs, people receiving Medicaid assistance are in the lowest income group, but they also spend far less of their income on medical care.

note: *Community residents only.

Future challenges in Medicaid coverage of elderly persons

Medicaid has made great strides in assuring access to care and alleviating financial burdens for elderly Americans. The program is a critical source of assistance to four million low-income elderly people. However, despite its importance as a complement to Medicare, Medicaid still faces many challenges in serving current and future beneficiaries.

One of the biggest challenges facing Medicaid is the aging of the general population, which will increase demand for Medicaid services in the future and place a larger financial burden on the program. The elderly population in the United States is expected to double to 70 million people by 2030, and the population over age eighty-five is expected to grow more than fourfold by 2050 to over 18 million people. These demographic changes are not only likely to lead to a greater number of people relying on Medicaid, but also are likely to greatly increase expenditures, as elderly Medicaid beneficiaries are high users of some of the most costly services in the program—long-term care and prescription drugs.

Medicaid's growing role in caring for the poorest elderly Americans and filling in Medicare's gaps occurs at a time when the federal and state governments, with limited resources, are likely to be addressing other, often competing, policy issues. For example, future changes to the Medicare program that add benefits (i.e., prescription drugs) or enact changes to the structure of the program could lead to increased costs for Medicaid and strain state financing. Many state governments operate under very tight budgets and do not have additional resources to cover these costs. Responsibility for financing the care of the growing elderly population remains a major policy challenge.

Future additional burdens on Medicaid coverage of elderly Americans are especially problematic in light of the fact that the existing program still needs several improvements. Currently, Medicaid's coverage of the low-income Medicare population is limited. In 1997, the program reached only half of all poor, and 13 percent of near-poor, Medicare beneficiaries. States have the option to extend full Medicaid benefits to Medicare beneficiaries at higher income levels or use more liberal methods for determining income and assets for eligibility, but levels and allowable assets generally remain low. In addition, many Medicare beneficiaries who are eligible for Medicare premium assistance through the buyin programs, particularly the SLMB and QI programs, are not enrolled. Lack of significant outreach efforts, complex and burdensome enrollment processes, and limited benefits all contribute to limited enrollment. Simplified or automatic eligibility determination and a meaningful benefit would help expand the scope of Medicaid coverage for low-income elderly persons.

note: *Noninstitutionalized beneficiaries age sixty-five and older. **Not enrolled in Medicaid. The 1997 federal poverty level of people over age sixty-five was $7,698 for individuals and $9.712 for couples.

The Medicaid program must also work to assure access to high quality health services for this vulnerable population. With rising prescription drug costs and utilization, states are looking into various methods to control spending in this area, including restricting access to expensive brand-name drugs or limiting the number of prescriptions a beneficiary can fill. Such efforts could lead Medicaid to restrain, rather than expand, its role in providing prescription drug coverage at a time when prescription drugs' importance to maintaining health is growing.

Medicaid can also improve the provision of long-term care to elderly persons. Despite improvements in nursing-home quality following comprehensive nursing-home reforms in the late 1980s, serious problems persist in many facilities. In addition, the supply of community-based services falls far short of demand. Increases in payment levels to levels that allow facilities to properly care for elderly persons and a greater commitment to providing community-based services can enhance the quality of care and the quality of life for elderly Medicaid beneficiaries.

Medicaid is critical to making Medicare work for over four million elderly people in the United States. Despite the importance of Medicare's universal coverage, millions of elderly Americans struggle to gain access to the health care they need. To assure Medicare's adequacy for coverage of elderly persons in future years, it is important to maintain and improve the assistance with financial obligations and additional benefits that Medicaid provides today.

Rachel Garfield Diane Rowland

See also Long-Term Care; Long-Term Care Financing; Medicare Medigap; Poverty.

BIBLIOGRAPHY

Health Care Financing Administration. "Medicare Savings Programs: Medicare/Medicaid Dual Eligible Home Page." World Wide Web document, 2001. http://www.hcfa.gov/medicaid/dualelig/default.htm.

Hoffman, E. D., Jr.; Klees, B. S.; and Curtis, C. A. "Overview of the Medicare and Medicaid Programs." Health Care Financing Review 22 (2000): 175–193.

Lamphere, J. A., and Rosenbach, M. L. "Promises Unfulfilled: Implementation of Expanded Coverage for the Elderly Poor." HSR: Health Services Research 35, no. 1, Part II (2000): 207–217.

Moon, M., and Mulvey, J. Entitlements and the Elderly. Washington, D.C.: Urban Institute Press, 1995.

Moon, M.; Brennan, N.; and Segal, M. "Options for Aiding Low-Income Medicare Beneficiaries." Inquiry 35 (1998): 346–356.

Nemore, P. B. Variations in State Medicaid Buy-In Practices for Low-Income Medicare Beneficiaries, A 1999 Update. (Publication # 1566.) Washington, D.C.: The Kaiser Family Foundation, 1999.

Niefield, M.; O'Brien, E.; and Feder, J. Long-Term Care: Medicaid's Role and Challenges. (Publication #2172.) Washington, D.C.: The Kaiser Commission on Medicaid and the Uninsured, 1999.

United States General Accounting Office. Low-Income Medicare Beneficiaries: Further Outreach and Administrative Simplification Could Increase Enrollment. (Publication #GAO/HEHS-99-61.) Washington, D.C.: USGAO, 1999.

Weiner, J. M., and Stevenson, D. G. "State Policy on Long-Term Care for the Elderly." Health Affairs 17, no. 3 (1998): 81–100.

Medicaid

Sections within this essay:

Background

Of the federal governments two major health programs, Medicare and Medicaid, Medicaid has had by far the rockier history. Medicare has enjoyed fairly broad based support in its goal of covering the elderly and disabled. While there has been controversy over the extent of benefits, the basic coverage of the Medicare program has remained the same since it was it was first enacted, and the federal government has always had primary responsibility for the program.

In contrast, Medicaid has always inspired battles, between the federal government and the states over funding of the program, between conservatives and liberals over what the purpose of the program should be, and between different interest groups whose members argue over how the Medicaid pie should be divided. There have been suggestions from several quarters that Medicaid be ended entirely, either eliminated or turned into something completely different, and these suggestions have increased since welfare reform was passed in 1996.

In part, these controversies stem from the reason Medicaid was originally set up—to enable each state, as far as practicable, to furnish medical assistance to individuals whose income and resources are insufficient to meet the costs of medically necessary services. The goal is simple, but the arguments on how to best accomplish that goal are complex. Although many commentators argue Medicaid has been one of the most successful government programs, in terms of the number of people it has helped, the eventual fate of the program remains to be seen.

History

Medicaid was created in 1965 under Title XIX of the Social Security Act, as part of Lyndon Johnson's War on Poverty. It was enacted at the same time the Medicare program was passed.

Unlike Medicare, Medicaid—the brainchild of Congressman Wilbur Mills, the chairman of the House Ways and Means Committee—involved federal funds given to the states to administer their own programs. The federal government set the basic standards for who was covered by the program, and the states could decide if they wanted to broaden the program beyond those standards

Originally, Medicaid categories were defined by welfare recipient status, but this began to change in the mid-1980's and ceased completely with the passage of welfare reform in the mid-1990's. Over its his-tory, the Medicaid program has changed from a program to provide health insurance to the welfare population to a catch-all program that provides health and long term care services to around 40 million people at a cost of $170 billion dollars to federal and state governments. As of 2000, Medicaid was the source of health care insurance for one in four American children and covered 40 percent of all births.

Eligibility

Medicaid eligibility has evolved over the years. Originally, it was supposed to assist the so-called "deserving poor," those medically needy people who were aged, blind, disabled, or families with dependant children, or falling into some other status of poverty where assistance was favored. Not every person whose income falls below the poverty line qualifies for Medicaid, and this has always been true of the program.

Medicaid recipients have historically been divided into the "categorically needy," persons who were eligible for Supplemental Security Income (SSI) benefits for disability, for Aid to Families with Dependant Children (AFDC) benefits, or had been eligible for other government benefit programs; and the "medically needy," persons whose income exceeds financial standards for the above programs but who incur regular medical expenses that, when deducted from their income, bring their income down to the eligibility level for financial assistance. Technically, these categories no longer exist under the current Medicaid system, but state programs that expand Medicaid coverage beyond the traditional categorically needy are still known as "medically needy" programs. Typically these "medically needy" programs cover nursing home and other long-term care.

Currently the program covers the following groups as "categorically needy." For definitional purposes, the poverty level was $8,350 for an individual, and $17,050 for a family of four as of the year 2000:

• Medicaid must cover all pregnant women with incomes of up to 133 percent of the poverty level.
• Medicaid must cover all children under the age of six with family incomes below 133 percent of the poverty level and children under age 19 born after 1983 in families with incomes up to 100 percent of the poverty level.
• Medicaid must cover the Medicare premiums and cost-sharing obligations for "Qualified Medicare Beneficiaries" whose income does not exceed 100 percent of the poverty level. It must also cover Medicare Part B premiums for "Specified Low-Income Medical Beneficiaries", persons whose income is between 100 percent and 120 percent of the poverty level. Medicaid also covers nursing home costs for persons below a certain income level or asset level set by the state, and provides outpatient drug coverage for some qualified Medicare recipients.
• Medicaid covers disabled persons whose income falls below a certain level, including children eligible for SSI disability benefits. Coverage of other adult disabled recipients is generally mandatory if they receive SSI and are at 74 percent of the poverty level, although some states have been waived in at lower levels than this, and one state, Mississippi, does not cover SSI benefit recipients at all. Many states provide home and community-based care for disabled utilizing Medicaid funds as well.

Medicaid funds also help finance health coverage in several states for persons below a certain income who otherwise would not qualify for Medicaid. In general, states have much leeway in terms of coverage with Medicaid funds. Nearly two-thirds of all Medicaid spending is attributable to optional benefits and services.

How Medicaid Funds Are Administered

The Medicaid program has changed over the years in terms of the way medical and other services are paid for. The original Medicaid law guaranteed recipients their choice of providers. However, beginning in the 1980's, states began making consistent requests for waivers to allow them to enter Medicaid recipients in managed care programs, and in 1997, the law was finally amended to allow states to do this explicitly. As of 2002, there are two types of ways Medicaid funds are administered, the traditional fee-for-service way and through Medicaid Managed Care (MMC).

Fee-For-Service Medicaid

This is the traditional way Medicaid made payments for services and was the only way technically allowed until 1997 by federal Medicaid law, which mandated freedom of choice for all Medicaid recipients. However, there was a catch to this freedom of choice—doctors have the option of opting out of the Medicaid system and refusing to accept Medicaid patients.

Medicaid fees for physicians are set by the state and so vary from region to region. However, they are usually low—paying well below private rates for physician services and usually below what Medicare pays. As a result, the argument has been made that Medicaid recipients often do not get the quality care received by other medical insurance recipients. In many areas, it is difficult to find doctors who will treat Medicare patients because of the low payments, and in other cases doctors have sued to force higher payments from Medicaid programs. Hospitals are more limited in their abilities to turn down Medicaid patients, since they are often tax exempt or have obligations under other federal statutes.

Because states are allowed to set payment rates, such rates can be changes at anytime. Thus, when a state undergoes a budget shortfall or other problem, rates can be and often are lowered.

Medicaid Managed Care

Because of the problems inherent in fee-for-service Medicaid, many states over the years requested waivers from the freedom of choice requirement to allow them to enter Medicaid recipients in managed care programs. Finally, the federal government amended the Medicaid statute with the 1997 Balanced Budget Act to permit states to require Medicaid recipients to enroll in a Medicaid Managed Care (MMC) program. A waiver is still needed to require Medicare recipients also receiving Medicaid, Native Americans, and special needs children to enroll in an MMC program.

Currently over half of Medicaid recipients receive care through these programs. MMC programs are similar to managed care programs used by the privately insured. The two most common are:

• The Risk-Based Model: Under this model, the MMC program is paid a fixed monthly fee per enrollee and assumes some or all the financial risk for a broad range of services. About four-fifths of Medicaid MMC enrollees receive services under this model.
• Fee-For-Service Primary Care Case Management (PCCM): Under this model, a health care provider acts as"gatekeeper" to approve and monitor the services given to MMC enrollees. These providers do not assume any financial risk and are paid a perpatient monthly case management fee.

Benefits

Benefits provided under the Medicaid program vary widely from state to state. Twenty-six categories of services are listed under the Medicaid states as services states may cover, in addition to a provision allowing coverage of "any other medical care, and any other type of remedial care, specified by the Secretary."

As of 2002, states must provide Medicaid recipients who are required by federal law to be covered with inpatient hospital services; outpatient hospital services and rural health clinic services; early and periodic screening; other laboratory and X-ray services; nursing facility services; early and periodic screening, diagnostic and treatment services for children; family planning services and supplies, physician services; and nurse-midwife and other certified nurse practitioners services.

Medicaid also covers long-term care. States have considerable flexibility in their long-term care programs. Although states must cover home health services under Medicaid, they have the option of providing personal care services and also may design home and community-based care programs. Medicaid funds half of all nursing home care in this country. Medicaid also pays for much of the care provided by intermediate care facilities for the mentally disabled.

Nursing homes present a special problem for Medicaid, in that many elderly are too well-off to qualify for Medicaid when they go into the nursing home but become impoverished paying for nursing home expenses and other medical expenses. Thirty-six states allow such people to "spend down" their assets until they reach Medicaid asset eligibility levels. At that point, Medicaid assumes the cost of nursing home and medical care. Not all states allow this, only those that cover the medically needy.

Some states cover optional services, such as podiatry, dental care, eyeglasses, or dentures, under Medicaid. These optional services are usually the first to go if there are cutbacks in the program.

State-By-State Guide To Medicaid

States have different Medicaid eligibility requirements, with some states being more generous than others. Here is a state-by-state guide to what the eligibility requirements are. All eligibility levels are expressed as a percent of the federal poverty level for a specific group. For example, a child 1-5 in Alabama must be part of a family that makes 133 percent of the federal poverty level ($17,050 for a family of four) or less in order to qualify for Medicaid.

• ALABAMA: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• ALASKA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; No Medically Needy Program.
• ARIZONA: Infants, 140%; Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 50%; Pregnant Women, 140%; Supplemental Security Income Recipients, 74%; No Medically Needy Program.
• ARKANSAS: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 16%; Medically Needy, Couple, 24%.
• CALIFORNIA: Infants, 200%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 300%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 89%; Medically Needy, Couple, 104%.
• COLORADO: Infants, Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 43%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• CONNECTICUT: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 69%; Medically Needy, Individual, 71%; Medically Needy, Couple, 70%.
• DELAWARE: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 200%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• DISTRICT OF COLUMBIA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 56%; Medically Needy, Couple, 44%.
• FLORIDA: Infants, 200%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 27%; Medically Needy, Couple, 27%.
• GEORGIA: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 235%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 31%; Medically Needy, Couple, 35%.
• HAWAII: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 185%; Supplemental Security Income Recipients, 69%; Medically Needy, Individual, 54%; Medically Needy, Couple, 54%.
• IDAHO: Infants, Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• ILLINOIS: Infants, 200%; Children 1-5, 133%; Children 6-19, 133%; Pregnant Women, 200%; Supplemental Security Income Recipients, 41%; Medically Needy, Individual, 42%; Medically Needy, Couple, 41%.
• INDIANA: Infants, Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 150%; Supplemental Security Income Recipients 76%; No Medically Needy Program.
• IOWA: Infants, 200%; Children 1-5, 133%; Children 6-19, 133%; Pregnant Women, 200%; Supplemental Security Income Recipients, 41%; Medically Needy, Individual, 72%; Medically Needy, Couple, 53%.
• KANSAS: Infants, 150%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 150%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 71%; Medically Needy, Couple, 53%.
• KENTUCKY: Infants, 185%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, In-dividual, 32%; Medically Needy, Couple, 30%.
• LOUISIANA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 15%; Medically Needy, Couple, 21%.
• MAINE: Infants, 200%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 47%; Medically Needy, Couple, 38%.
• MARYLAND: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 52%; Medically Needy, Couple, 43%.
• MASSACHUSETTS: Infants, 200%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 78%; Medically Needy, Couple, 72%.
• MICHIGAN: Infants, 185%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 61%; Medically Needy, Couple, 60%.
• MINNESOTA: Infants, 280%; Children 1-5, 275%; Children 6-19, 275%; Pregnant Women, 275%; Supplemental Security Income Recipients, 70%; Medically Needy, Individual, 70%; Medically Needy, Couple, 64%.
• MISSISSIPPI: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 133%; No Supplemental Security Income Recipients Program; No Medically Needy Program.
• MISSOURI: Infants, Children 1-5, 300%; Children 6-19, 300%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• MONTANA: Infants, Children 1-5, 133%; Children 6-16 100%; Children 17-19, 71%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 73%; Medically Needy, Couple, 54%.
• NEBRASKA: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 58%; Medically Needy, Couple, 43%.
• NEVADA: Infants, Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 89%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• NEW HAMPSHIRE: Infants, 300%; Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 76%; Medically Needy, Individual, 76%; Medically Needy, Couple, 71%.
• NEW JERSEY: Infants, 185%; Children 1-5, 133%; Children 6-19, 133%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 55%; Medically Needy, Couple, 48%.
• NEW MEXICO: Infants, Children 1-5, 235%; Children 6-19, 235%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• NEW YORK: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 87%; Medically Needy, Couple, 94%.
• NORTH CAROLINA: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 60%; Medically Needy, Couple, 50%.
• NORTH DAKOTA: Infants, Children 1-5, 133%; Children 6-19 100%; Pregnant Women, 133%; Supplemental Security Income Recipients, 65%; Medically Needy, Individual, 60%; Medically Needy, Couple, 50%.
• OHIO: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients 64%; No Medically Needy Program.
• OKLAHOMA: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 39%; Medically Needy, Couple, 36%.
• OREGON: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 170%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 100%; Medically Needy, Couple, 100%.
• PENNSYLVANIA: Infants, 185%; Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 71%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 63%; Medically Needy, Couple, 49%.
• RHODE ISLAND: Infants, Children 1-5, 250%; Children 6-19, 250%; Pregnant Women, 250%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 83%; Medically Needy, Couple, 66%.
• SOUTH CAROLINA: Infants, 185%; Children 1-5, 150%; Children 6-19, 150%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• SOUTH DAKOTA: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• TENNESSEE: Infants, Children 1-18-, eligibility IS based on child's lack of insurance with no upper income limit; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 26%; Medically Needy, Couple, 21%.
• TEXAS: Infants, 185%; Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 185%; Supplemental Security Income Recipients 74%; No Medically Needy Program.
• UTAH: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 133%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 55%; Medically Needy, Couple, 50%.
• VERMONT: Infants, Children 1-5, 300%; Children 6-19, 300%; Pregnant Women, 200%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 110%; Medically Needy, Couple, 82%.
• VIRGINIA: Infants, Children 1-5, 133%; Children 6-19, 100%; Pregnant Women, 250%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 37%; Medically Needy, Couple, 34%.
• WASHINGTON: Infants, Children 1-5, 200%; Children 6-19, 200%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 78%; Medically Needy, Couple, 65%.
• WEST VIRGINIA: Infants, Children 1-5, 150 %; Children 6-19, 100%; Pregnant Women, 150%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 30%; Medically Needy, Couple, 30%.
• WISCONSIN: Infants, Children 1-5, 185%; Children 6-19, 185%; Pregnant Women, 185%; Supplemental Security Income Recipients, 74%; Medically Needy, Individual, 86%; Medically Needy, Couple, 65%.
• WYOMING: Infants, Children 1-5, 133%; Children 6-16, 100%; Children 17-19, 67%; Pregnant Women, 133%; Supplemental Security Income Recipients 74%; No Medically Needy Program.

Additional Resources

"Celebrating 35 Years of Medicare and Medicaid" DeParle, Nancy-Ann Min, Health Care Financing Review, Oct. 1, 2000.

Health Care Law and Ethics, 2nd Edition. 2nd. ed., Hall, Mark A., Ellman, Ira Mark, Strouse, Daniel S.; West Group, St. Paul, 1999.

The Law of Health Care Organization and Finance, Fourth Edition. Furrow, Barry R., Greaney, Thomas L., et. al., West Group, St. Paul, 2001.

"Medicaid", Kaiser Family Foundation, 2002. Available at http://www.kff.org/,. Kaiser Family Foundation, 2002.

Organizations

Centers for Medicare and Medicaid Services

7500 Security Blvd.oulevard
Baltimore, MD 21244-1850 USA
Phone: (410) 786-3000
URL: http://cms.hhs.gov
Primary Contact: Thomas A Scully, Administrator

Henry J. Kaiser Family Foundation

2400 Sand Hill Road

Menlo Park, CA 94025 USA
Phone: (650) 854-9400
Fax: (650) 854-4800
URL: http://www.kff.org
Primary Contact: Drew Altman, President

U. S. Department of Health and Human Services

200 Independence Avenue S.W.
Washington, DC 20201 USA
Phone: (877) 696-6775
E-Mail: HHS.Mail@hhs.gov
URL: http://www.hhs.gov/
Primary Contact: Janet Hale, Chief Information Officer

MEDICAID

Enacted in 1965, Medicaid is the major public financing program for providing health and long-term care coverage to the low-income population of the United States. It was originally enacted as a means of providing funds to help states provide health care for welfare recipients and has evolved into a program that finances care for more than one in seven Americans. Medicaid enables millions of Americans to gain access to needed health services, helping to close the gaps in care between the poor and nonpoor, ease the financial burdens of health care, and provide a health care safety net for the nation.

Authorized under Title XIX of the Social Security Act, Medicaid is a means-tested entitlement program financed by the states and the federal government and administered by the states. Federal financial assistance is provided to states for coverage of specific groups of people, and benefits are paid for by the states and through federal matching payments based on each state's per capita income. The federal share ranges from 50 to 80 percent of Medicaid expenditures and averaged 56.5 percent in 1998. State participation in the Medicaid program is voluntary, but all states have chosen to participate.

MEDICAID COVERAGE

Although Medicaid was created to assist low-income Americans, coverage is dependent upon several other criteria in addition to income. Eligibility is primarily for those persons falling into particular categories, such as low-income children, pregnant women, elderly people, people with disabilities, and parents not exceeding specific income thresholds. Single adults are generally ineligible, no matter how poor, unless they are disabled. Within federal guidelines, states set their own income and asset eligibility criteria for Medicaid, resulting in large variations in coverage among states.

In 1998, 40.4 million people were enrolled in Medicaid. This included 20.7 million low-income children and 8.6 million low-income adults in families with children. The vast majority of adults were women. Historically, most women and children have been eligible for Medicaid because they received cash assistance through Aid to Families with Dependent Children (AFDC). Over time, eligibility was expanded to women and children not receiving welfare. The Temporary Assistance to Needy Families (TANF) welfare reforms implemented in 1996 officially severed the automatic link between Medicaid coverage and cash assistance for families.

There were 4.1 million elderly persons covered by Medicaid in 1998. Some elderly persons are eligible because they receive cash assistance through Supplemental Security Income (SSI), and others have incomes too high to qualify for cash assistance but spend-down to Medicaid by incurring high health care expenses. Many elderly Medicaid beneficiaries are "dual eligibles," or people who receive both Medicare and Medicaid. These people rely on Medicaid for assistance with Medicare's cost-sharing requirements and premiums, and sometimes for coverage of services not included in the Medicare benefits package (i.e., long-term care or prescription drugs).

Medicaid also covered 7.0 million blind and disabled persons in 1998. Most disabled persons

Figure 1

are eligible for Medicaid because they receive SSI cash assistance, though some spend-down to eligibility. Some disabled Medicaid beneficiaries are also dual eligibles.

From the perspective of whom is served, Medicaid is predominantly a program assisting low-income families, but from the perspective of how Medicaid dollars are spent, Medicaid funds primarily serve the low-income aged and low-income disabled populations. Adults and children in low-income families make up nearly three quarters (73%) of enrollees, but account for only 25 percent of spending (see Figure 1). In contrast, the elderly and disabled account for 27 percent of enrollees and the majority (67%) of spending, largely due to their intensive use of acute care services and the costliness of long-term care in institutional settings. In 1998, the average per capita cost for a child on Medicaid was $1,225, almost all of which went to basic acute care, while the corresponding figures for the disabled and elderly were $9,558 and $11,235, respectively, a significant portion of which went to long-term care services.

Although Medicaid is a key source of coverage for the low-income population, in 1998 it covered

Figure 2

only about a quarter of nonelderly Americans with incomes below 200 percent of the poverty level. Limits on coverage were largely due to limits on eligibility, especially for adults, and enrollment obstacles for those who are eligible. The decoupling of Medicaid and welfare, as well as the 1997 State Children's Health Insurance Program to extend coverage additional low-income children, offers states new opportunities to extend Medicaid coverage to millions of low-income children and their parents. Many states, however, have yet to draw on this new flexibility to extend Medicaid.

COVERED SERVICES

Medicaid covers a broad range of services with nominal, if any, cost sharing by beneficiaries. Every individual entitled to Medicaid is guaranteed a minimum package of federally mandated services, including:

• Inpatient and outpatient hospital care
• Physician, midwife, and certified nurse practitioner services
• Laboratory and X-ray services
• Nursing home care and home health care

Figure 3

• Early and periodic screening, diagnosis, and treatment (EPSDT) for children under twenty-one years of age
• Family planning
• Rural health clinic/federally qualified health center services

States also have the option to cover additional services and still receive federal matching funds. Commonly offered services include prescription drugs, clinic services, case management, hearing aids, dental care, and intermediate care facilities for the mentally retarded (ICF/MR).

Because they are so costly, long-term care services account for a significant amount of Medicaid spending. Of the $169.3 billion spent in 1998 (see Figure 2), 38 percent was spent on long-term care services, primarily nursing home care. Acutecare services were about half (53%) of total spending, with nearly half of all acute-care spending allocated for premiums to managed care organizations (MCOs). About 9 percent of Medicaid spending does not go directly to benefits for enrollees, but provides supplemental payments for hospitals with a disproportionately large population of indigent patients; these are called disproportionate share hospital payments (DSH). These additional payments are intended to enable these hospitals to

Figure 4

offset some of the costs of providing services to uninsured patients.

CARE DELIVERY

Traditionally, Medicaid services have been delivered on a fee-for-service basis. Beginning in the 1990s, however, many states began to look to managed care as a model of service delivery in an effort to decrease costs and emphasize primary care and care coordination. Medicaid managedcare models range from health maintenance organizations (HMOs) that use prepaid capitated contracts to loosely structured networks that contract with selected providers for discounted services and use gatekeeping to control utilization.

States initially targeted low-income families for managed-care enrollment, but efforts to enroll aged or disabled beneficiaries increased in the late 1990s. In 1997, states were given more latitude in using Medicaid managed care under the Balanced Budget Act (BBA) of 1997, including the authority to mandate managed-care enrollment for most Medicaid populations. AS of June 1999,17.8 million Medicaid beneficiaries—over half of all Medicaid beneficiaries—were enrolled in managed care, a sixfold increase from the 2.7 million enrolled in 1991.

States may also seek waivers of federal Medicaid rules to design new service delivery models for Medicaid beneficiaries. Home and community-based service (HCBS) waivers (also called 1915(c) waivers) are often used by states to deliver targeted community-based care for frail elderly or disabled individuals. Although all states have such waivers, the population served remains small.

TRENDS IN ENROLLEE AND EXPENDITURE GROWTH

Medicaid enrollment rose dramatically in the early 1990s, peaking at 41.7 million beneficiaries in 1995 (see Figure 3). This growth was mostly attributable to expanded coverage of low-income pregnant women and young children and increases in the number of blind and disabled beneficiaries. However, from 1995 to 1998, enrollment declined, especially for low-income adults and children eligible for Medicaid based on receipt of cash assistance under welfare programs, due in part to state and federal changes in welfare and immigration policy.

During the early 1990s, Medicaid expenditures grew nearly 30 percent annually, due to a combination of health care inflation, state use of alternative financing mechanisms, and an increase in enrollment. Only a small fraction of spending growth was due to the expansions in coverage of low-income pregnant women and children (see Figure 4). Legislation enacted to limit the states' capacity to raise funds through provider taxes and to limit DSH payments played a role in slowing Medicaid spending growth during these years. By 1995, growth in annual expenditures had dropped to under 10 percent, and it had nearly leveled off by 1998 rising less than 4 percent annually from 1995 to 1998.

MEDICAID'S IMPACT

Since the mid-1960s, Medicaid has been a major force in shaping health and long-term care services for the most vulnerable and needy Americans. In the year 2000, Medicaid covered more Americans than any other health insurer, accounted for 15 percent of the nation's spending on health care, and was the major source of federal financial assistance to the states, accounting for 40 percent of all federal grant-in-aid payments to states. It covers one-quarter of all American children, 40 percent of all births, and is the single largest source of public financing for HIV/AIDS (human immunodeficiency virus/acquired immunodeficiency syndrome) care. Medicaid is also the only significant public program providing financing for long-term care, covering 70 percent of nursing home residents and nearly half of nursing home costs nationwide. It has impacted every sector of health care in America, from hospital care to nonmedical support services.

More importantly, Medicaid has a significant impact on the individuals it serves. Before Medicaid, the poor saw providers less often than the nonpoor, and they faced serious financial burdens in obtaining care. Medicaid has reshaped the availability and provision of care to the poor, raising access to levels similar to those with private coverage. In contrast, poor Americans who do not have Medicaid coverage continue to face significant barriers to care.

Diane Rowland

Rachel Garfield

(see also: Access to Health Services; Medicare; National Health Systems; Poverty and Health; Uninsurance )

Bibliography

Coughlin, T. A.; Ku, L..; and Holahan, J. (1994). Medicaid Since 1980. Washington, DC: The Urban Institute Press.

Hurley, R.; Freund, D.; and Paul, J. (1993). Managed Care in Medicaid: Lessons for Policy and Program Design. Chicago: The Health Administration Press.

Iglehart, J. (1994). "The American Health Care System—Medicaid." New England Journal of Medicine 340(5): 403–408.

—— (1995). "Medicaid and Managed Care." New England Journal of Medicine 332(25):1727–1731.

Kaiser Commission on Medicaid and the Uninsured (1999). Medicaid: A Primer. Washington, DC: The Kaiser Family Foundation.

Lillie-Blanton, M.; Martinez, R. M.; Lyons, B.; and Rowland, D., eds. (1999). Access to Health Care: Promises and Prospects for Low-Income Americans. Washington, DC: The Kaiser Family Foundation.

Riley, T. (1995). "Medicaid: The Role of the States." Journal of the American Medical Association 274(3):267–270.

Rogers, D. E.; Blendon, R. J.; and Moloney, T. W. (1982). "Who Needs Medicaid?" New England Journal of Medicine 307(1):13–18.

Rowland, D. (1995). "Medicaid at 30." Journal of the American Medical Association 274(3):271–273.

Rowland, D.; Salganicoff, A.; and Keenan, P. S. (1999). "The Key to the Door: Medicaid's Role in Improving Health Care for Women and Children." Annual Review of Public Health 20:403–426.

MEDICAID

Medicare and Medicaid were created in 1965, and together they revolutionized public health insurance in the United States. Before Medicaid, healthcare insurance for the poor was not perceived as a societal or governmental responsibility.

Initial Goals and Early Challenges

Medicare and Medicaid could not be more different in their underlying philosophies and structures. Medicare was designed to be a universal entitlement program like Social Security. It was established to provide basic hospital and physician-care insurance for all elderly Americans and is financed through a special trust fund. Its benefits are controlled by the federal government and do not vary by state.

In contrast, Medicaid was designed to be a meanstested program funded by general revenue from the federal government and the states. Within federal guidelines and options states determine who will be covered, what services will be paid for, how much providers will be paid, and how the program will be administered. It was not designed to provide social insurance to the full poverty population but to cover particular recipients of public aid, mainly those receiving Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI). Soon after its inception Medicare was thought to be a model for the next step toward universal health insurance, whereas Medicaid was seen as a stigmatized program for the poor.

The history of the two programs, however, has shown that Medicaid has been the more important and effective vehicle for increasing access to healthcare services. Medicare has remained largely constant and rigid in its covered population and its structure. By contrast, the Medicaid program has been the structure to which policymakers have turned to repeatedly over the years to make incremental additions to the population covered by health insurance.

Growth in the Medicaid Safety Net

Medicaid began small. In 1966, there were four million enrollees and the annual cost was $400 million. Those numbers increased as persons in need of long-term care were added to the program after 1972. Although the number of recipients grew slowly between 1975 and 1990 (22 million to 26 million), total government costs for Medicaid increased dramatically, rising from $12 billion to $72 billion. By 2002 the number of enrollees had reached 47 million, making Medicaid slightly larger than Medicare, and total costs had reached $257 billion. However, not everyone who is eligible for Medicaid enrolls. Seventy-two percent of eligible children and 51 percent of eligible nonelderly adults are estimated to be enrolled. In 1999 Medicaid covered 5 percent of nonelderly adults and 15 percent of those with incomes below 200 percent of the poverty level.

The Medicaid program has grown in several important ways. Although originally it was limited to those who received cash benefits under AFDC (poor women and children) and SSI (the permanently disabled), more than half the persons Medicaid covered in the early years of the twenty-first century did not receive cash benefits from other programs. Indeed, Medicaid at that time was the principal source of funding for a vast infrastructure that served the poor and disabled, including safety-net hospitals, community and migrant health centers, mental health clinics, and school-based health programs.

Long-term care was added to the mandated benefits in 1972. Without private insurance, middle-class Americans may become impoverished because of out-of-pocket nursing home costs and "spenddown" to qualify for Medicaid. Institutional coverage also is provided for inpatient mental health services and intermediate-care facilities for the mentally retarded. Medicaid is also the largest payer for medical services for persons with AIDS.

The largest and most important expansions of the scope of Medicaid have been in the areas of prenatal care for poor women and healthcare for children. In 1989 poor women began to receive coverage for prenatal care. In 1997 the State Children's Health Insurance Program (SCHIP) was enacted to cover low-income children who did not qualify for Medicaid under the previous criteria. Together Medicaid and SCHIP account for 16 percent of the nation's healthcare spending, nearly as much as Medicare's share (18%).

Impact on the Nation's Health

Medicaid has achieved significant advances in the healthcare of the poor and previously middle-class persons who require mental health services or long-term care. With Medicaid, poor persons use health services at the same rate as nonpoor persons with a similar health status. Medicaid also provides access to a broader service package that supplements physician care, such as dental care and prescription coverage.

Medicaid has proved to be a better vehicle for incremental reform than Medicare because it is more flexible and does not have the high level of national political visibility and volatility that Medicare has. Additions to the Medicaid program typically have had three effects; they have (1) increased access to care, (2) shifted at least part of the cost to the federal government, and (3) increased the uncompensated care burden on healthcare providers. Overall, the health of the poor has improved significantly in the post-Medicaid era, with substantial declines in infant mortality, maternal mortality, and death rates for major diseases for which medical intervention is effective.

Major Criticisms of the Program

Medicaid is not a "user-friendly" program. Many persons who are eligible for the program are not enrolled. Once a person is enrolled, eligibility status is evaluated periodically, as frequently as every month in some programs. When income eligibility standards are no longer met, Medicaid coverage is suspended. This results in poor continuity of care and personal hardship.

The state-based nature of the program has resulted in variations in coverage and benefits across the states. Federal requirements ensure relatively uniform coverage for children, pregnant women, the elderly, and the disabled across the states. Childless adults are not covered by Medicaid regardless of their income level. Adults who are parents are the group for whom Medicaid eligibility varies the most widely from state to state. Half the states set eligibility below 40 percent of the federal poverty line; those whose incomes put them at the poverty level ($15,020 for a family of three in 2002) make too much to qualify for Medicaid in all but eighteen states.

Throughout its history there have been repeated cycles of cutbacks and expansions in response to fiscal pressure in the states. From the 1970s until the mid-1980s cutbacks eroded Medicaid coverage of the poor and began to reverse the progress that had been made in closing gaps in access to care across income groups. Since the mid-1980s, however, the trend has been to expand Medicaid eligibility and services. This has not been due to the increased political leverage of the poor but has occurred because from both the federal and the state point of view the cost-sharing arrangement makes it attractive to add to the program. Only in the early 2000s did the nation begin to reenter a period of fiscal crisis at the state level. As a result of a general economic downturn, state revenues declined while Medicaid costs expanded to account for a very significant portion of state governmental budgets.

The prospects for the future of Medicaid are unclear. Some states want the authority to cap enrollment levels and create waiting lists so that even those who qualify with incomes at 40 percent of less of poverty may not be enrolled. About half the Medicaid enrollees in the country are in managed-care plans, but that has not stemmed the tide of rising costs.

Issues for the Future of Medicaid

Medicaid reform is charged with moral issues that frame the fundamental policy decisions. Can public health insurance be equitable when it is targeted only to the poor, or is the inevitable outcome a lesser program? Can an equitable package of minimum benefits be determined? Will the trend toward using Medicaid to expand access to health insurance incrementally be reversed by a weakening of federal requirements and the fiscal crisis of state governments that began at the turn of the twenty-first century? How should society share the costs that a decent healthcare safety net will incur?

diane rowland

catherine hoffman (1995)

revised by bruce jennings

SEE ALSO: Access to Healthcare; Healthcare Resources, Allocation of; Health Insurance; Health Policy in the United States; Medicare

BIBLIOGRAPHY

Boben, Paul J. 2000. "Medicaid Reform in the 1990s." Health Care Financing Review 22(2): 1–5.

Brown, E. Richard. 1983. "Medicare and Medicaid: The Process, Value, and Limits of Health Care Reforms." Journal of Public Health Policy 4(3): 335–356.

Brown, Lawrence D., and Sparer, Michael S. 2003. "Poor Program's Progress: The Unanticipated Politics of Medicaid Policy." Health Affairs 22(1): 31–44.

Davis, Karen, and Schoen, Cathy. 1978. "Medicaid: Successes and Problems." In Health and the War on Poverty: A Ten-Year Appraisal. Washington, D.C.: Brookings Institution.

Hurley, Robert E., and Draper, Debra A. 2002. "Medicaid Confronts a Changing Managed Care Marketplace." Health Care Financing Review 24(1): 11–25.

Jost, Timothy Stoltzfus. 2003. "The Tenuous Nature of the Medicaid Entitlement." Health Affairs 22(1): 145–143.

Kaiser Commission on Medicaid and the Uninsured. 2001. "Medicaid Facts: Medicaid's Role for the Disabled Population under Sixty-five." Washington, D.C.: Kaiser Family Foundation.

Kaiser Commission on Medicaid and the Uninsured. 2001. "Medicaid Facts: Medicaid's Disabled Population and Managed Care." Washington, D.C.: Kaiser Family Foundation.

Klemm, J. 2000. "Medicaid Spending: A Brief History." Health Care Financing Review (fall): 105–112.

Mann, Cindy. 2003. "The Flexibility Factor: Finding the Right Balance." Health Affairs 22(1): 62–76.

Reilly, Thomas W.; Clauser, Steven B.; and Baugh, David K. 1990. "Trends in Medicaid Payments and Utilization, 1975–89." Health Care Financing Review Annual Supplement: 15–33.

Rowland, Diane; Lyons, Barbara; and Edwards, Jennifer. 1988. "Medicaid: Health Care for the Poor in the Reagan Era." Annual Review of Public Health 9: 427–450.

Rowland, Diane, and Tallon, James R., Jr. 2003. "Medicaid: Lessons from a Decade." Health Affairs 22(1): 138–144.

Smith, V. K. 2002. Making Medicaid Better. Washington, D.C.: National Governors' Association.

Sparer, Michael. 1996. Medicaid and the Limits of Health Reform. Philadelphia: Temple University Press.

Stevens, Rosemary, and Stevens, Robert. 1974. "The Federal Role: An Aphilosophical Explanation." In Welfare Medicine in America: A Case Study of Medicaid, New York: Free Press.

Stuart, Mary E., and Weinrich, Michael. 1998. "Beyond Managing Medicaid Costs: Restructuring Care." Milbank Quarterly 76(2): 251–280.

Vladeck, Bruce. 2003. "Where the Action Really Is: Medicaid and the Disabled." Health Affairs 22(1): 90–100.

Weil, Alan. 2003. "There's Something about Medicaid." Health Affairs 22(1): 13–30.

INTERNET RESOURCE

Centers for Medicare and Medicaid Services. 2003. "Medicaid: A Brief Summary." Available from <http://www.cms.hhs.gov/publications>.

Medicaid

Definition
Description
Normal results

Definition

Medicaid is a federal-state entitlement program for low-income citizens of the United States. The Medicaid program is part of Title XIX of the Social Security Act Amendment that became law in 1965. Medicaid offers federal matching funds to states for costs incurred in paying health care providers for serving covered individuals. State participation is voluntary, but since 1982, all 50 states have chosen to participate in Medicaid.

Description

Medicaid benefits

Medicaid benefits cover basic health care and long-term care services for eligible persons. About 58% of Medicaid spending covers hospital and other acute care services. The remaining 42% pays for nursing home and long-term care.

States that choose to participate in Medicaid must offer the following basic services:

KEY TERMS

Categorically needy— A term that describes certain groups of Medicaid recipients who qualify for the basic mandatory package of Medicaid benefits. There are categorically needy groups that states participating in Medicaid are required to cover, and other groups that the states have the option to cover.

Department of Health and Human Service (DHHS)— It is a federal agency that houses the Centers for Medicare and Medicaid Services, and distributes funds for Medicaid.

Entitlement— A program that creates a legal obligation by the federal government to any person, business, or government entity that meets the legally defined criteria. Medicaid is an entitlement both for eligible individuals and for the states that decide to participate in it.

Federal poverty level (FPL)— The definition of poverty provided by the federal government, used as the reference point to determine Medicaid eligibility for certain groups of beneficiaries. The FPL is adjusted every year to allow for inflation.

Health Care Financing Administration (HCFA)— A federal agency that provides guidelines for the Medicaid program.

Medically needy— A term that describes a group whose coverage is optional with the states because of high medical expenses. These persons meet category requirements of Medicaid (they are children or parents or elderly or disabled) but their income is too high to qualify them for coverage as categorically needy.

Supplemental Security Income (SSI)— A federal entitlement program that provides cash assistance to low-income blind, disabled, and elderly people. In most states, people receiving SSI benefits are eligible for Medicaid.

• hospital care, both inpatient and outpatient
• nursing home care
• physician services
• laboratory and diagnostic x-ray services
• immunizations and other screening, diagnostic, and treatment services for children
• family planning
• health center and rural health clinic services
• nurse midwife and nurse practitioner services
• physician assistant services

Participating states may offer the following optional services and receive federal matching funds for them:

• prescription medications
• institutional care for the mentally retarded
• home- or community-based care for the elderly, including case management
• personal care for the disabled
• dental and vision care for eligible adults

Because participating states are allowed to design their own benefits packages as long as they meet federal minimum requirements, Medicaid benefits vary considerably from state to state. About half of all Medicaid spending covers groups of people and services above the federal minimum.

Eligibility for Medicaid

Medicaid covers three major groups of low-income Americans:

• All recipients. In 2006, Medicaid covered an estimated 46.5 million low-income persons in the United States.
• Parents and children. In 2005, Medicaid covered approximately 25.2 million low-income children, approximately one-fifth of all children in the United States. It provided coverage to an estimated 10.2 million low-income adults in families with children; most of these low-income adults were women.
• The elderly. In 2006, Medicaid covered an estimated 5.8 million adults over the age of 65. Medicaid is the largest single purchaser of long-term and nursing home care in the United States.
• The disabled. About 17% of Medicaid recipients are blind or disabled. Most of these persons are eligible for Medicaid because they receive assistance through the Supplemental Security Income (SSI) program.

All Medicaid recipients must have incomes and resources below specified eligibility levels. These levels vary from state to state depending on the local cost of living and other factors. For example, in 2006, the federal poverty level (FPL) was determined to be $16,600 for a family of three on the mainland of the United States, but $24,900 in Hawaii and $29,050 in Alaska.

In most cases, persons must be citizens of the United States to be eligible for Medicaid, although legal immigrants may qualify in some circumstances depending on their date of entry. Illegal aliens are not eligible for Medicaid, except for emergency care.

Persons must fit into an eligibility category to receive Medicaid, even if their income is low. Childless couples and single childless adults who are not disabled or elderly are not eligible for Medicaid.

Medicaid costs

Medicaid is by far the government’s most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2006, its share had risen to nearly 9.1%. Combined federal and state spending for Medicaid takes approximately 21 cents of every tax dollar. The federal government covers about 56% of costs associated with Medicaid. The states pay for the remaining 44%.

As of 2006, costs for Medicaid continued to rise at an average annual rate of approximately 8%. The states spent $303 billion in FY 2006 to cover Medicaid costs. These costs are projected to continue to increase.

Although more than half (54%) of all Medicaid beneficiaries are children, most of the money (more than 70%) goes for services for the elderly and disabled. The single largest portion of Medicaid money pays for long-term care for the elderly. Only 18% of Medicaid funds are spent on services for children.

There are several factors involved in the steep rise of Medicaid costs:

• The rise in the number of eligible individuals. As the lifespan of most Americans continues to increase, the number of elderly individuals eligible for Medicaid also rises. The fastest-growing age group in the United States is people over 85.
• The price of medical and long-term care. Advances in medical technology, including expensive diagnostic imaging tests, cause these costs to rise.
• The increased use of services covered by Medicaid.
• The expansion of state coverage from the minimum benefits package to include optional groups and optional services.

Normal results

The need to contain Medicaid costs is considered one of the most problematic policy issues facing legislators. In addition, the complexity of the Medicaid system, its vulnerability to billing fraud and other abuses, the confusing variety of the benefits packages available in different states, and the time-consuming paperwork are other problems that disturb both taxpayers and legislators.

Medicaid has increased the demand for health care services in the United States without greatly impacting or improving the quality of health care for low-income Americans. Medicaid is the largest health insurer in the United States. As such, it affects the employment of several hundred thousand health care workers, including health care providers, administrators, and support staff. Participation in Medicaid is optional for physicians and nursing homes . Many do not participate in the program because the reimbursement rates are low. As a result, many low-income people who are dependent on Medicaid must go to overcrowded facilities where they often receive substandard health care.

Resources

BOOKS

Atlantic Publishing Company. The Complete Guide to Medicaid and Nursing Home Costs: How to Keep Your Family Assets Protected - Up to Date Medicaid Secrets You Need to Know. Ocala, FL: Atlantic Pub Co, 2008.

Engel, J. Poor People’s Medicine: Medicaid and American Charity Care since 1965. Durham, NC: Duke University Press, 2006.

Scott, S. W. The Medicaid Handbook 2007: Protecting Your Assets From Nursing Home Costs. 3rd ed. Largo, FL: Masveritas Publishing, 2007.

Smith, D., and J. D. Moore. Medicaid Politics and Policy. New Brunswick, NJ: Transaction Publishers, 2007.

PERIODICALS

Bhuridej, P., KR. A. Kuthy, S. D. Flach, K. E. Keller, D. V. Dawson, M. J. Kanellis, and P. C. Damiano. “Four-year cost-utility analyses of sealed and nonsealed first permanent molars in Iowa Medicaid-enrolled children.” Journal of Public Health Dentistry 67, no. 4 (2007): 191–198.

Churchill, S. S., B. J. Williams, and N. L. Villareale. “Characteristics of publicly insured children with high dental expenses.” Journal of Public Health Dentistry 67, no. 4 (2007): 199–207.

Goetzel, R. Z., D. Schecter, R. J. Ozminkowski, D. C. Stapleton, P. J. Lapin, J. M. McGinnis, C. R. Gordon, and L. Breslow. “Can health promotion programs save Medicare money?.” Clinical Interventions in Aging 2, no. 1(2007): 117–122.

Grabowski, D. C. “Medicare and Medicaid: conflicting incentives for long-term care.” Milbank Quaterly 85, no. 4 (2007): 579–610.

Perry, C. D., and G. M. Kenney. “Preventive care for children in low-income families: how well do Medicaid and state children’s health insurance programs do?” Pediatrics 120, no. 6 (2007): e1393–e1401.

ORGANIZATIONS

Kaiser Family Foundation. 2400 Sand Hill Road, Menlo Park, CA 94025, Phone: (650) 854-9400, Fax: (650) 854-4800 http://www.kff.org/.

National Center for Policy Analysis. 12770 Coit Rd., Suite 800, Dallas, TX 75251-1339, Phone: (972) 386-6272, Fax: (972) 386-0924. http://www.ncpa.org.

National Library of Medicine. http://www.nlm.nih.gov/medlineplus/medicaid.html.

United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. http://www.hhs.gov.

OTHER

Centers for Medicare and Medicaid Services, US Department of Health and Human Services. Information about Medicaid. 2007 [cited December 26, 2007]. http://cms.hhs.gov/.

National Association of State Medicaid Directors. Information about Medicaid. 2007 [cited December 26, 2007]. http://www.nasmd.org/Home/home_news.asp.

National Governor’s Association. Information about Medicaid. 2007 [cited December 26, 2007]. http://www.nga.org/portal/site/nga.

Social Security Administration. Information about Medicaid. 2007 [cited December 26, 2007]. http://www.ssa.gov/.

L. Fleming Fallon, Jr, MD, DrPH