The Medicaid Program provides health care to low-income individuals and families in the United States [i]. The Program is a joint federal and state program administered by The Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services (HHS). States run the program under federal guidelines and goals. The federal portion of the program spent $591.9 billion in the fiscal year 2022 and $615.6 billion in 2023 [ii].
States establish their eligibility standards for Medicaid coverage within federal guidelines, stipulating mandatory and optional eligibility groups. Individuals and families under 100% of the U.S. poverty threshold generally qualify for Medicaid. The Affordable Care Act (ACA) allowed states to expand the edibility to 138% of the poverty threshold starting in 2014, and 39 states have adopted the expansion (see history below). The graph to the left shows the number of people enrolled in Medicaid versus the number of Americans in poverty (people in households with income less than the poverty threshold) [iii]. In response to the Coronavirus Pandemic legislation passed in 2020 (see history below), enrollment expanded to 85 million in December 2023 and is expected to drop as states return to normal operations.
Medicaid Health Care Benefits
States establish and administer their own Medicaid programs and determine the type, amount, duration, and scope of services within broad federal guidelines. States are required to cover certain “mandatory benefits” and can choose to provide other “optional benefits” through the Medicaid program, as shown in the chart below [xiii].
Variability of Medicaid
The variability of Medicaid in each state is described by the CMS as follows [iv]:
“Within broad national guidelines established by Federal statutes, regulations, and policies, each state establishes its own eligibility standards; determines the type, amount, duration, and scope of services; sets the rate of payment for services; and administers its own program. Medicaid policies for eligibility, services, and payment are complex and vary considerably, even among states of similar size or geographic proximity. Thus, a person who is eligible for Medicaid in one state may not be eligible in another state, and the services provided by one state may differ considerably in amount, duration, or scope from services provided in a similar or neighboring state. In addition, State legislatures may change Medicaid eligibility, services, and/or reimbursement at any time.”
Federal Portion of Medicaid Expenses
The federal government pays 50% – 75% of the state expenditures for Medicaid based on the state’s per capita income compared to total U.S. per capita income. States with lower per capita income have a higher federal reimbursement rate. Beginning in 2014, states received a higher contribution for families and individuals entering the program based on the ACA expansion. The federal government reimbursed 100% of the ACA expansion Medicaid costs through 2016, then phased to 90% by 2020. The following table shows the federal and state expenses and the overall federal contribution rate for Medicaid over the past ten fiscal years [v]:
The American Recovery and Reinvestment Act (Stimulus Bill) provided $103 billion in additional Medicaid funding to states due to the 2008 recession. The funding covered the years 2009 – 2011 and resulted in an overall higher federal contribution rate for those years.
Entire Welfare System
In addition to Medicaid, there are thirteen welfare programs for low-income Americans. The Welfare Programs Page explains how Medicaid fits into the overall welfare system.
Affordable Care Act, Medicaid, and the Uninsured
In 2010, the Patient Protection and Affordable Care Act (ACA or Obamacare) passed Congress and was signed into law by President Obama. The law created a new market (“Exchanges”) for Americans who bought health insurance directly – meaning they did not get insurance through their employer. The law also allowed states to expand the Medicaid program as described above. The Exchanges under the law were fully operational as of January 1, 2014. The chart to the left shows the changes to health insurance coverage in the nation from 2013 through 2022 [vi].
The impact of the ACA over the six years through 2019 has been to increase the participation of Medicaid by about 8.4 million Americans, or a 15% increase. Uninsured Americans dropped from 45.2 million to 29.6 million, or 34%. Over the three years 2020 through 2022, during the COVID-19 pandemic, Medicaid enrollment increased by 5.6 million, or an additional 9% growth.
The number of Americans receiving health care from employers and Medicare still makes up the most significant portion of the insurance market in the nation, as shown in the pie chart to the right [vii].
One of the main goals of the ACA and the expansion of Medicaid during the COVID-19 pandemic was to reduce the number of uninsured in the nation. Over the nine years, the number of uninsured dropped by 19 million; the largest part, 14 million, resulted from Medicaid expansion. The balance of the reduction came from the impacts of the Exchanges. In 2022, there were still 26 million uninsured Americans.
The result of the ACA and Medicaid expansion during the COVID-19 pandemic has lowered uninsured Americans by about 40%, but 60% remain uninsured.
Improper Medicaid Payments and Fraud
The Office of Management and Budget estimates a 15.6% Improper Payment rate related to Medicaid, totaling $92 billion in Improper Payments. See more information on the Welfare Fraud Page.
History of Medicaid
The following history of Medicaid was adapted from The Henry J. Kaiser Family Foundation – Medicaid Timeline [viii] and Medicaid.gov.
Congress established Medicaid as Title 19 of the Social Security Act and signed into law by President Johnson on July 30, 1965. Medicare (health care for retired Americans) was created simultaneously, and both became key elements of the Great Society program.
States had the option of adopting Medicaid, and it took 18 years for all states to implement the program. Arizona was the last state to do so, joining in 1982.
In 1972, President Nixon signed into law the Supplemental Security Income (SSI) program. The program pays cash assistance to the elderly and individuals with disabilities and enables states to link SSI and Medicaid eligibility for them.
In 1977, the Health Care Financing Administration (HCFA) was established to administer both the Medicare and Medicaid programs under the arm of the Department of Health, Education, and Welfare, which later became the Health and Human Services Administration (HHS). About 1,500 employees were transferred to HCFA from the Social Security Administration. In 2001, the HCFA was renamed the Centers for Medicare and Medicaid Services (CMS), which administers today’s program.
In 1981, the Omnibus Reconciliation Act expanded freedom of choice waivers and home- and community-based service waivers to provide more choices and flexibility for healthcare providers.
In 1982, the Tax Equity and Fiscal Responsibility Act expanded the state’s ability to impose nominal cost-sharing on certain Medicaid beneficiaries and services.
In 1989 and 1990, The Omnibus Budget and Reconciliation Acts passed mandated coverage obligations to states. In 1989, states were required to provide Medicaid coverage to pregnant women and children under six years old in families at or below 133% of the poverty threshold. In 1990, states were required to cover children aged 6 – 18 in families with income at or below 100% of the poverty threshold.
In 1995, President Clinton vetoed a Congressional bill that would have converted Medicaid to a state block grant program.
In 2010, President Obama signed into law The Patient Protection and Affordable Care Act (ACA), which expanded Medicaid coverage to adults below 138% of the poverty threshold (Technically, the income limit is 133 percent of the Poverty Thresholds, but the Act also provides for a 5-percent income disregard) [ix]. The federal match rate for those newly eligible for the program was raised to 100% of the cost of care for three years and phased down through 2020 to 90%. In 2012, the Supreme Court ruled that states could adopt the expansion. As of April 2023, 39 states have adopted the Medicaid expansion [x].
In response to the COVID-19 pandemic in 2020, legislation required states to continuously cover anyone in Medicaid at the start of the Pandemic and encouraged new enrollment during the Pandemic. These provisions led to an enrollment expansion to 85 million in December 2022 from 62 million in 2020. In 2023, the states will return to normal operations as described below in Medicaid.gov [xiv]:
“The expiration of the continuous coverage requirement authorized by the Families First Coronavirus Response Act (FFCRA) presents the single largest health coverage transition event since the first open enrollment period of the Affordable Care Act. As a condition of receiving a temporary 6.2 percentage point Federal Medical Assistance Percentage (FMAP) increase under the FFCRA, states have been required to maintain enrollment of nearly all Medicaid enrollees. When the continuous coverage requirement expires, states will have up to 12 months to return to normal eligibility and enrollment operations. “
Medicaid expenditures over the years
The graph to the right shows federal Medicaid costs adjusted for inflation (stated in 2022 dollars) [xi]. Costs have risen over 300% over the last 30 years, from $143 billion in 1992 to $616 billion in 2023. They have increased dramatically over 2020 – 2023 due to the expansion of benefits and additional enrollment during the Coronavirus pandemic.
The graph below shows federal costs per Medicaid enrollee per year adjusted for the impacts of inflation (stated in 2022 dollars) [xii]. Costs per enrollee have more than doubled over the past 30 years from $4,455 enrollee in 1992 to $9,539 in 2022.
[i] See Medicaid.gov [Internet] for information and data on the Medicaid program. Data was retrieved on April 8, 2024. Available here.
[ii] USGovernmentSpending.com [Internet]. Total for Grants To State For Medicaid, the fiscal years 2022 and 2023. Retrieved March 15, 2024. Available here.
[iii] Medicaid totals by year:
For the years 2017 to 2022 – U.S. Census Bureau. Health Insurance Historical Tables – HHI Series. HHI-02 Health Insurance Coverage Status and Type of Coverage – All Persons by Age and Sex: 2017 to 2021. [Internet]. Retrieved September 12, 2023. Available here.
For years 2013 to 2016 – U.S. Census Bureau. Table HI-02 Health Insurance Coverage Status and Type of Coverage by Selected Characteristics for People in the Poverty Universe. Note that expenditures at the state and local level, as reported to the federal government, are revised over a several-year period. [Internet]. Retrieved September 12,, 2023. Available here.
For years 1999 to 2012 – U.S. Census Bureau. Health Insurance Historical Tables – HIB Series. HIB-2 – Health Insurance Coverage Status and Type of Coverage–All Persons by Sex, Race and Hispanic Origin: 1999 to 2012. [Internet]. Retrieved September 12, 2023. Available here.
For years 1987 to 1998 – U.S. Census Bureau. Health Insurance Historical Tables – Original Series. HI-1. Health Insurance Coverage Status and Type of Coverage–All Persons by Sex, Race and Hispanic Origin: 1987 to 2005. [Internet] Retrieved September 12, 2023. Available here.
For U.S. people in poverty, see Poverty and Spending Over the Years.
[iv] Centers for Medicare and Medicaid Services (CMS). Brief Summaries of Medicare and Medicaid. As of November 21, 2023. Page 25. Available Here.
[v] Calculated from USGovernmentSpending.com. Totals for Medicaid Costs, Federal and totals for state health care, vendor payments (welfare) less Federal Transfer Payments. [Internet]. Retrieved August 17, 2023. Available here.
[vi] United States Census Bureau. Health Insurance Historical Tables – HIC ACS. Series. Table HIC-4_ACS. Health Insurance Coverage Status and Type of Coverage by State All Persons: 2008 to 2022. [Internet]. Retrieved October 6, 2023. Available here. Note – the year 2020 is unavailable. Note that Medicaid enrollment numbers in this ACS report are higher than in CPS reports, as in footnote iii, due to the different statistical means used to aggregate the numbers described in Medicaid.gov. This ACS report was used as a consistent report over the timeframe shown and the various sources of insurance.
[vii] Ibid.
[viii] The Henry J. Kaiser Family Foundation. Long Term Care in the United States: A Timeline [Internet]. Retrieved November 18, 2021. Available here.
[ix] Centers for Medicare and Medicaid Services (CMS). Brief Summaries of Medicare and Medicaid. October 18, 2018. Page 27. Available Here.
[x] Review of state data on Medicaid.gov. [Internet]. Retrieved April 4, 2022. Available here.
[xi] Spending data from USGovernmentSpending.com [Internet]. See methodology of inflation adjustment on the web page, Poverty and Spending Over the Years.
[xii] Calculated from data as described in footnotes [iii] and [xi].
[xiii] Medicaid.gov [Internet]. Mandatory and Optional Medicaid Benefits. Retrieved April 9, 2024. Available here.
[xiv] Medicaid.gov [Internet]. Unwinding and Returning to Regular Operations after COVID-19. Available here.