Medicaid Research Paper

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The U.S. Medicaid program was enacted in 1965 as Title XIX of the Social Security Act. It is a federal-state program of health-care coverage for some low-income Americans, administered at the federal level by the Centers for Medicare and Medicaid Services. There are distinct Medicaid programs in every state, the District of Columbia, and the U.S. territories, but every program operates within guidelines set at the federal level. Medicaid is financed through federal and state general revenue funds using a formula (based on a state’s per capita income) whereby federal dollars are matched to state dollars at a rate of between 50 and 77 percent. In fiscal year 2004, Medicaid served approximately fifty-two million recipients at a cost of $288 billion.

Medicaid is a highly complex program, in part because there is considerable variation among states. Federal law requires states to cover some populations, referred to as categorically needy, and some services, referred to as mandatory. States may also cover medically needy and special populations and optional services and still receive federal matching funds. The major categorically needy groups are pregnant women and children under age six with family income at or below 133 percent of the federal poverty level (FPL); children ages six to nineteen with family income up to 100 percent of the FPL; and aged or disabled people who meet the income eligibility standards for the Supplemental Security Income program. Although there are many more recipients in the first two categories, the largest share of Medicaid dollars is spent on behalf of the third. Aged and disabled Medicaid recipients may also be eligible for Medicare, in which case Medicaid covers what Medicare does not.

Mandatory services for the categorically needy population comprise a comprehensive medical benefit, including inpatient and outpatient hospital, physician, prenatal, and postpartum care, as well as laboratory and x-ray, home-health, and nursing-facility services. Because Medicaid is a means-tested program vying with other state programs for general revenue funds, however, Medicaid reimbursement rates are typically substantially lower than those paid by Medicare and private insurers. Consequently, many Medicaid recipients have difficulty finding providers who will treat them for what the program will pay. Some states have addressed the access problem by requiring that Medicaid enroll recipients in managed-care organizations that contract to serve the program population in return for a yearly per capita payment. Managed care is also viewed as a cost-containment strategy.

Medicaid pays for almost half of all nursing-home care, compared with approximately 12 percent by Medicare and 8 percent by private insurers. Although Medicaid coverage is limited to low-income elders, program rules allow residents to qualify for nursing-home benefits by “spending down” their resources first and then turning to the program for assistance. Because Medicare covers only short-term and medically involved nursinghome stays and because private long-term care insurance is costly and time-limited, even middle-class elderly seek Medicaid benefits in a nursing home. In recent years, states have received federal waivers of some program requirements in order to provide comprehensive longterm care in recipients’ homes.


  1. Centers for Medicare and Medicaid Services Medicaid-At-a-Glance 2005: A Medicaid Information Source.
  2. Grogan, Colleen, and Eric P 2003. Between Welfare Medicine and Mainstream Entitlement: Medicaid at the Political Crossroads. Journal of Health Politics, Policy, and Law 28 (5): 821–858.

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