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.
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:
Participating states may offer the following optional services and receive federal matching funds for them:
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.
Medicaid covers three major groups of low-income Americans:
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 2001, the federal poverty level (FPL) was determined to be $14,630 for a family of three on the mainland of the United States, but $16,830 in Hawaii and $18,290 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 is by far the government's most expensive general welfare program. In 1966, Medicaid accounted for 1.4% of the federal budget, but by 2001, its share had risen to nearly 9%. Combined federal and state spending for Medicaid takes approximately 20 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 2001, costs for Medicaid rose at an average annual rate of 7.9%. The federal government spent $107 billion on Medicaid in fiscal year (FY) 1999, a sum that is expected to rise to $159 billion in 2004. The states spent $81 billion to cover Medicaid costs in FY 1999. These costs are projected to increase to $120 billion by FY 2004.
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 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.
See also Medicare .
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Health Care Financing Administration. United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, D.C. 20201. http://www.hcfa.gov .
Kaiser Commission on Medicaid and the Uninsured. 1450 G Street NW, Suite 250, Washington, DC 20005. (202) 347-5270; Fax: (202) 347-5274. http://www.kff.org .
National Center for Policy Analysis. 655 15th Street NW, Suite 375, Washington, DC 20005. (202) 628-6671; Fax: (202) 628-6474. http://www.ncpa.org .
United States Department of Health and Human Services. 200 Independence Avenue SW, Washington, DC 20201. http://www.hhs.gov .
Centers for Medicare and Medicaid Services, US Department of Health and Human Services [cited March 14, 2003]. http://cms.hhs.gov/ .
National Association of State Medicaid Directors [cited March 14, 2003]. http://www.nasmd.org/ .
National Governor's Association [cited March 14, 2003]. http://www.nga.org/ .
Social Security Administration [cited March 14, 2003]. http://www.ssa.gov/ .
L. Fleming Fallon, Jr, MD, DrPH