Medicaid Frequently Asked Questions
Question: Who is covered by Medicaid?
Answer: Medicaid is the nation's public health insurance program for low-income Americans, and is jointly financed by the Federal and State governments. The program finances health and long-term care services for children and adults in low-income working families and for the elderly and disabled. Individuals must meet both financial and categorical criteria to qualify and be either a U.S. citizen or have five years of legal residency. Federal law mandates eligibility for certain groups, and states have authority to expand eligibility beyond federal minimums through waivers or amendments to their State Medicaid Plans. According to Medicaid: A Primer, Kaiser Family Foundation (2007), states cannot receive federal matching funds to extend Medicaid to adults under age 65 without children, unless they are pregnant or disabled. As a result, over 40% of low-income adults without children are uninsured.
According to Medicaid: An Overview of Spending on “Mandatory” vs. “Optional” Populations and Services, Kaiser Commission on Medicaid and the Uninsured (2007), there are two broad categories of Medicaid eligibility: Mandatory and Optional populations, which are described below.
Mandatory Populations include:
- Children age six and older below 100% Federal poverty level (FPL)
- Children under age six below 133% FPL
- Parents below state’s Aid to Families with Dependent Children (AFDC) cutoffs from July 1996
- Pregnant women ≤133% FPL
- Elderly and disabled Supplemental Security Income (SSI) beneficiaries with income ≤ 74% FPL
- Certain working disabled
- Medicare Buy-In groups (Qualified Medicare Beneficiary, Specified Low-Income Medicare Beneficiary, Qualifying Individuals)
Optional Populations can include:
- Low-income children above 100% FPL who are not mandatory by age
- Low-Income parents with income above state’s 1996 AFDC level
- Pregnant women >133% FPL
- Disabled and elderly below 100% FPL ($9,310 a year for an individual), but above SSI level
- Nursing home residents above SSI levels, but below 300% of SSI ($1,692 a month)
- Individuals at risk of needing nursing facility or intermediate care facilities for the mentally retarded (ICF-MR) care
- Certain working disabled (>SSI levels)
- Medically needy
Immigrants who have entered the U.S. illegally cannot qualify for basic Medicaid benefits, although they are eligible for Medicaid coverage for emergency medical care (if they meet all other financial and non-financial requirements). Most categories of immigrants who are legally residing in the U.S. and who meet all other financial and non-financial requirements are eligible for Medicaid coverage for emergency care, but, depending on the year in which they entered the country, they may or may not be eligible for the full range of Medicaid services.
Question: What services does Medicaid cover?
Answer: State Medicaid programs provide a range of mandatory services, but can also provide an array of “optional” services. Children are entitled to all medically necessary Medicaid benefits, whether mandatory or optional under federal law also known as Early and Periodic Screening, Diagnostic and Treatment (EPSDT) services. States are not able to vary benefits by geographic area or by eligibility category without a Federally-approved waiver.
According to Medicaid: A Primer, Kaiser Family Foundation (2007), state Medicaid programs are generally required to cover:
- Inpatient and outpatient hospital services
- Physician, midwife, and certified nurse practitioner services
- Laboratory and x-ray services
- Nursing home and home health care for individuals aged 21 years and older
- Early and periodic screening, diagnosis, and treatment (EPSDT) for children under age 21
- Family planning services and supplies
- Rural health clinic/ federally qualified health center services
Commonly covered optional services:
- Prescription drugs
- Clinic services
- Prosthetic devices
- Hearing aids
- Dental care
- Intermediate care facilities for individuals with mental retardation
Question: How is the majority of Medicaid money spent?
Answer: According to The Continuing Medicaid Budget Challenge: State Medicaid Spending Growth and Cost Containment in Fiscal Years 2004 and 2005, Kaiser Family Foundation (2004), low-income children and their parents represent three-fourths of Medicaid beneficiaries, but account for just 30% of Medicaid spending. Most of Medicaid’s costs are for persons with disabilities and the elderly. This group represents just one quarter of Medicaid enrollees, but account for 70% of Medicaid spending because of their intensive use of acute and long-term care services.
Question: Why is Medicaid at the center of state and federal budget debates?
Answer: Because of the shared financing structure of Medicaid, there has been tension between the states and the federal government. Fiscally, it is in the states’ best interest to maximize the federal matching funds using mechanisms available under the statute. However, some states have been creative in the way they have been using their matching dollars which has led to increased federal scrutiny.
Question: How are states using the Medicaid federal-matching money?
Answer: According to Medicaid Program at a Glance, Kaiser Commission on Medicaid and the Uninsured (2007), the federal matching rate, known as the federal medical assistance percentage (FMAP) varies from state to state, generally ranging between 50 to 76 percent. Federal Medicaid matching funds for the costs of these services are available to states that elect to participate in the program. As a condition of participation, states must cover certain populations (e.g., elderly poor receiving Supplemental Security Income) and certain services (e.g., hospital care).
At the federal level, eligibility policy choices are reflected in the way in which the Medicaid statute allows federal matching funds to be used. More specifically, federal Medicaid matching funds are available to states for the costs of covering some categories of low-income individuals, such as adults with disabilities and the elderly—but not other categories like childless, non-disabled adults under age 65.
The main strategies that states have used their matching dollars for fall into two categories. First, those that are designed to collect funds from county and local government entities and providers to be used as the source of the state’s Medicaid match. Second, those strategies that recycle and return funds to hospitals and county/local governments after states receive the federal Medicaid matching dollars. The first approach includes provider taxes and intergovernmental transfers (IGTs); the second approach includes disproportionate share hospital (DSH) payments and upper payment limit (UPL) programs.
Question: What are some rural implications of the Medicaid program?
Answer: As with Medicare, the demographics of rural America explain much of the significance of the Medicaid program for rural residents and providers. According to Medicaid and Its Importance to Rural Health, Rural Policy Research Institute (2006), rural populations experience higher rates of poverty than their urban counterparts, are less likely to have health insurance, have a greater proportion of elderly residents, and are more likely to have children in the household. Any changes in Medicaid benefits or eligibility that target children, elderly, or the disabled will therefore significantly affect rural communities.
In addition to Medicaid’s importance to rural residents in terms of providing access to care, the program plays a major role in the financial viability of rural providers. As with Medicare, some rural provider types, such as small independent pharmacies, are more dependent on Medicaid reimbursement than their urban counterparts. Because rural health care is heavily dependent on Medicaid, any change in Medicaid payments to providers (because of a change in eligibility, covered services or provider payment reductions) could have a disproportionate impact on the financial stability of rural providers. Rural safety-net providers such as small rural hospitals, Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs), and Critical Access Hospitals (CAHs) tend to operate on small financial margins and are therefore extremely susceptible to changes in reimbursement.
Question: What are some future challenges affecting Medicaid?
Answer: With the passage of the Deficit Reduction Act of 2005 (DRA), Medicaid spending is expected to decline. The DRA gives states new flexibility to limit benefits and impose premiums and cost sharing. This new law provides options focused on expanding community based long-term care, requires states to make changes to the asset transfer rules that affect eligibility for Medicaid nursing home services, and requires states to obtain proof of citizenship for Medicaid enrollees. Beyond this, some states are pursuing major and fundamental program reforms through Medicaid waivers.
The aging of the population can also be expected to increase demands on Medicaid, since the health care needs and costs for the elderly and people with disabilities are the most costly. Moreover, Medicaid covers long-term care for low-income Medicare beneficiaries, and is the single largest source of financing for long-term care. As demand increases, long-term care costs can be expected to rise.
Sources: Medicaid: A Primer, Kaiser Family Foundation (2007); Medicaid: An Overview of Spending on “Mandatory” vs. “Optional” Populations and Services, Kaiser Commission on Medicaid and the Uninsured (2007); The Continuing Medicaid Budget Challenge: State Medicaid Spending Growth and Cost Containment in Fiscal Years 2004 and 2005, Kaiser Family Foundation (2004); Medicaid Program at a Glance, Kaiser Commission on Medicaid and the Uninsured (2007); Medicaid and Its Importance to Rural Health, Rural Policy Research Institute (2006).
Credits
Developed by: Michelle Goodman, MAA, Public Health Analyst, Office of Rural Health Policy and Caroline L. Cochran, MPA, Policy Coordinator, Office of Rural Health Policy
Please send comments to: Alex McEllistrem-Evenson, alex@raconline.org
Last revised 08/19/2008
