Program established in 1965 and jointly funded by the state
and federal governments to pay for medical care for eligible
needy people to improve the health of this population.
Congress established Medicaid in 1965 through an
amendment to the Social Security Act of 1935; it is part of the
same legislation that created Medicare. The Medicaid legislation called for the federal government to establish guidelines
that specify the minimum amounts of medical services covered by each state’s Medicaid program and that may include
inpatient and outpatient hospital services, physician services,
laboratory tests, and X-rays. States may choose to cover additional services and to set the fees for the services they cover.
Because states can limit the amount and duration of services
offered, Medicaid benefits vary by state. Thus, citizens of one
state may receive coverage for more days of inpatient hospitalization, doctor visits, and other services than citizens of an
adjoining state.
Federal guidelines also specify minimum eligibility requirements for Medicaid benefits. States must cover pregnant
women whose family income is below 133 percent of the federal poverty level (for instance, $13,874 for a family of three
in 2000), individuals who would have qualified in July 1996
for a previous federal welfare program called Aid to Families
with Dependent Children, recipients of a federal welfare program called Supplemental Security Income, and, as of 2002,
all children under the age of 19 who are living in families
whose incomes fall below the federal poverty level. Because
states may elect to expand Medicaid coverage to other groups
of financially or medically needy individuals, citizens of one
state are sometimes eligible for Medicaid whereas similar citizens of an adjoining state remain ineligible. Under different
eligibility guidelines that prevail nationally, in 2000 Medicaid
covers about half of the nation’s poverty-level population.
The federal government determines the share of each
state’s Medicaid expenses by comparing each state’s average
per-person income level with the national average. States with
the highest average income levels may have 50 percent of their
Medicaid costs paid for by the federal government, and states
with the lowest average income levels may have up to 83 percent of their Medicaid outlays covered at the federal level.
Medicaid spends disproportionately more on some
groups of beneficiaries. Spending on children, who make up
51 percent of all beneficiaries, averaged $1,150 per child in
1998. Beneficiaries in nursing homes and other facilities who
are receiving long-term care receive 8.2 percent of Medicaid
averaged at $12,375 per person in 1998.
—Saranna R. Thornton