An Introduction to Medicaid
Medicaid is a state-federal partnership that pays for health and long-term care services for certain low-income individuals, including children, the elderly, and people with disabilities. Each state administers its Medicaid program within the general requirements of federal law and regulations.
States and the federal government share the cost of the program. Beneficiaries must meet various restrictions (income or medical need). But Medicaid program content, application processes, and eligibility vary from state to state. Eligible beneficiaries include:
- Low-income families with children, as described in Section 1931 of the Social Security Act, who meet certain of the eligibility requirements in the state’s AFDC (Aid to Families with Dependent Children) plan in effect on July 16, 1996.
- Supplemental Security Income (SSI) recipients—or in states using more restrictive criteria, aged, blind, and disabled individuals who meet criteria that are more restrictive than those of the SSI program and that were in place in the state’s approved Medicaid plan as of Jan. 1, 1972.
- SSI and Medicaid automatic eligibility: In 39 states, everyone receiving SSI (and a state supplemental payment in states that supplement SSI benefits) is eligible for full Medicaid coverage (Social Security Act § 1902(a)(10) and 42 CFR § 435.232). In many of these states, SSI beneficiaries automatically receive Medicaid and do not have to complete a separate Medicaid application.
- Separate Medicaid application: In 11 states (called 209(b) states), SSI eligibility does not guarantee Medicaid eligibility. The following states use more restrictive eligibility criteria for Medicaid: Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma, and Virginia.
- Babies born to Medicaid-eligible pregnant women. Medicaid eligibility must continue throughout the first year of life as long as the infant remains in the mother’s household and she remains Medicaid eligible.
- Children under 6 and pregnant women whose family income is at or below 133 percent of the federal poverty level. (The minimum mandatory income level for pregnant women and infants in certain states may be higher than 133 percent. See the Uninsured page for the federal poverty guidelines.) States are required to extend Medicaid eligibility until age 19. Once eligibility is established, pregnant women remain eligible for Medicaid through the end of the calendar month that includes the 60th day after the end of the pregnancy.
- Recipients of adoption assistance and foster care under Title IV-E of the Social Security Act.
- Certain Medicare beneficiaries (described later).
- Members of special protected groups, who may keep Medicaid for a period of time. Examples are persons who lose SSI payments due to earnings from work or increased Social Security benefits and families who are provided 6 to 12 months of Medicaid coverage following loss of eligibility under Section 1931 due to earnings, or 4 months of Medicaid coverage following loss of eligibility under Section 1931 due to an increase in child or spousal support
Differences Among States
Categorically Needy Groups
States also have the option to provide Medicaid coverage for other “categorically needy groups.” These groups are similar to the mandatory groups. Examples of optional groups that states may cover as categorically needy (and for which they will receive federal matching funds) under the Medicaid program are:
- Infants younger than 1 and pregnant women not covered under the mandatory rules whose family income is below 185 percent of the federal poverty level (the percentage to be set by each state).
- Some low-income children
- Some aged, blind, or disabled adults who have incomes above those requiring mandatory coverage, but below the federal poverty level
- Children under 21 who meet income and resources requirements for AFDC, but who otherwise are not eligible for AFDC
- Institutionalized individuals with income and resources below specified limits
- Persons who would be eligible if institutionalized but who are receiving care under home- and community-based services waivers
- Recipients of state supplementary payments
Medically Needy Eligibility Groups
The option to have a “medically needy” program allows states to extend Medicaid eligibility to additional qualified persons who may have too much income to qualify under the mandatory or optional categorically needy groups. This option allows these qualified individuals to “spend down” (meaning they can spend money on medical expenses and therefore have lower income) to avoid having too much money to receive Medicaid.
This is very different than regular Medicaid, which on principle guarantees no cost to the patient. States may also allow families to establish eligibility as medically needy by paying monthly premiums to the state in an amount equal to the difference between family income (reduced by unpaid expenses, if any, incurred for medical care in previous months) and the income eligibility standard.
States that can afford to include the medically needy under their plans are required to include certain children under 18 and pregnant women who, except for income and resources, would be eligible as categorically needy. These states may choose to provide coverage to other medically needy persons as well.
Medicare beneficiaries who have low income and limited resources may get help paying for their out-of-pocket medical expenses from their state Medicaid program. There are various benefits available to “dual eligibles” (sometimes known as Medi/Medi) who are entitled to Medicare and are eligible for some type of Medicaid benefit.
For persons who are eligible for full Medicaid coverage, the Medicaid program supplements Medicare coverage by providing services and supplies that are available under their state’s Medicaid program. Services that are covered by both programs—unlike Medigap plans, which cover only Medicare services—will be paid first by Medicare and the difference by Medicaid, up to the state’s payment limit. This is a problem for many doctors, who are severely underpaid due to the fact that the patient's 20 percent is often not paid at all. For example, if you are a "Medi/Medi," your cancer doctor may not give your chemotherapy in his office, but will send you to the hospital. Medicaid also covers additional services that Medicare does not cover (e.g., nursing facility care beyond the 100-day limit covered by Medicare, eyeglasses, and hearing aids).
There are certain federally mandated services specified in law, along with a list of optional services for which a federal match is available. States dictate which additional services they will provide, and these vary from state to state.
Mandated services (must be covered): Mandated services are inpatient and outpatient hospital services; prenatal care; vaccines for children; physician services; nursing services for persons over 21; family planning; home health care for certain individuals; and early and periodic screening, diagnostic, and treatment (EPSDT) services for children under 21.
Durable medical equipment (DME): All medically necessary and nonexperimental DME must be provided; there can be no exclusive list of DME. Although a state may have list of preapproved DME, such a list is only for administrative convenience to eliminate a cumbersome application process for each DME request.
Optional services: Currently there are about 34 approved services at the state level for which federal funding is available. States can provide as many or as few as they would like. Also, they can provide services to their categorically needy population that they do not provide to other groups. The most common services include diagnostic services, clinic services, rehabilitation and physical therapy services, optometrist services and eyeglasses, intermediate-care services for the mentally retarded (ICFs/MR), and home- and community-based care to certain persons with chronic impairments.
Optional mental health services: These services include inpatient psychiatric services for patients 21 and younger; services provided by licensed nonphysician practitioners (e.g., psychologists and social workers); case management; diagnostic, screening, and preventive services; rehabilitative services; and clinic services furnished under the direction of a physician.
States may impose cost sharing (deductibles, coinsurance, and co-payments), provided the amount is nominal and that it is not applied to certain populations and services. For example, no cost sharing may be applied to pregnant women and children under 18. In addition, co-payments cannot be applied to emergency medical services or family planning services, regardless of a recipient’s category.
- Premiums are prohibited, with some exceptions
- “Nominal” cost sharing is allowed, with some exceptions
- No overall cap is specified
At or below 150 percent of the federal poverty level (see the Uninsured page for federal poverty guidelines/levels), current regulations on cost sharing for adults receiving Medicaid apply. States can impose the following:
- Premiums: $15 to $19 per family per month
- Deductibles: $2 per family per month
- Co-insurance: 5 percent of noninstitutional costs
- Co-payments: range from 50 cents to $3 per service
- Institutional care: 50 percent of the first day’s costs
Medicaid and Cancer
Medicaid is subject to your state cancer coverage laws and the laws governing clinical trials. Well, what this means is that, if your state covers "off-label" use of cancer drugs and/or clinical trials, you are covered as a Medicaid cancer patient. Generally, the Medicaid program is less problematic in terms of coverage than many other insurance plans. However, some private physicians will not provide chemotherapy in their offices to patients with Medicaid as primary or secondary insurance because of the low payment allowances. In most areas, they are under no obligation to treat Medicaid patients at all.
This content was last reviewed
August 15, 2010 by Dr. Reshma L. Mahtani.