What Is Medicaid?

By

Updated on October 1, 2022

Fact checked by David Rubin

A doctor examines a child patient in a medical office — Photo:
Cavan Images / Getty Images

Definition

Medicaid is the United States’ public insurance program that provides medical coverage for qualifying low-income residents.

Key Takeaways

Medicaid is a needs-based program that provides medical coverage for low-income people.
The program is run jointly by the federal and state governments, and states are allowed to set their own guidelines for eligibility.
Medicaid coverage varies from state to state, but all states must provide certain mandatory items.

How Medicaid Works

Medicaid is a government-run health care program that provides free or low-cost medical coverage to qualifying individuals and families. The program is administered jointly by the federal and state governments, each of which contributes funds and sets eligibility requirements.

Medicaid is one of the most extensive social welfare programs in the United States, providing health care coverage to more than 80 million people nationwide. It’s a needs-based program, meaning that only low-income people are eligible for coverage.

Each state manages its own Medicaid program to determine the type, duration, amount, and scope of health services within the larger federal guidelines.

Note

Medicaid was signed into law in 1965 as part of Title XIX of the Social Security Act, which also established Medicare.

Medicaid eligibility qualifications vary by state, but most are based on your:

Household income
Family size and status
Disability status

In states with expanded Medicaid programs, you qualify based only on your income. For example, if you live in a state with expanded Medicaid and your income is below 133% of the federal poverty level, you’ll likely qualify for coverage.

Note

Immigrants who aren’t U.S. citizens may also be eligible for Medicaid coverage. However, there may be a five-year waiting period before you can apply.

When you apply for Medicaid, you'll be required to provide proof of your income and copies of legal documents such as your birth certificate and Social Security card. Requirements may vary from state to state.

Example of Medicaid Works

For example, let's say you apply for coverage in Georgia. You'll complete the application through the state’s website or apply by phone, mail, or in person. As a part of the application process, you'll submit any required paperwork. A Medicaid specialist then reviews your application and decides your eligibility. If you're approved for coverage, you'll get your Medicaid card in the mail and can begin receiving care.

Many states will enroll you in a privately managed care plan, through which you’ll have an assigned primary care provider (PCP) and must get a referral if you need specialist care. If you’re not enrolled in a managed care plan, your Medicaid will work on a fee-for-service (FFS) system. In this model, the state pays providers directly for your covered service instead of paying a fee to your managed care plan.

Medicaid vs. Medicare

Medicaid	Medicare
Available to U.S. citizens and qualified non-citizens of all ages who meet other eligibility guidelines	Available to U.S. citizens and lawfully present immigrants over the age of 65, and some younger people with qualifying disabilities
Patients typically don’t pay for covered medical expenses, but sometimes may pay a small amount out of pocket	Patients pay for part of their care out of pocket, including deductibles, copays, and coinsurance
Run by both state and federal governments, so coverage varies between states	Federal program that’s the same throughout the country
Accepts applications anytime	Accepts applications during specific enrollment periods

Medicaid and Medicare have similar names, and they’re both health insurance programs run by the government. However, these programs are quite different.

Medicare is designed to assist older U.S. citizens and qualified immigrants. In most cases, you must be at least 65 years old to qualify for Medicare coverage, although certain younger people may be eligible based on their disability status. In contrast, Medicaid provides coverage for U.S. citizens and qualified non-citizens of all ages, as long as they meet the eligibility guidelines.

Another key difference is the amount of money you’ll have to pay out of pocket. With Medicare, you’ll be responsible for copays, coinsurance, and deductibles. However, Medicaid participants often don’t have to pay anything. If there are fees, they’re kept to a nominal level.

Since Medicare is run at the federal level, it works the same, no matter where you live. Medicaid is managed by the federal and state governments, which means eligibility and coverage vary by state.

In addition, you can only apply for Medicare at certain times, beginning with your initial enrollment period. There are no limitations on when you can apply for Medicaid coverage.

What Does Medicaid Cover?

Medicaid coverage varies from state to state. However, all states must provide certain mandatory items, such as:

Inpatient and outpatient hospital care
Doctor visits
Family-planning services
Laboratory and X-ray services
Home health services
Transportation to medical appointments

States may decide to cover optional services such as:

Dental care
Vision care
Prescription drugs
Chiropractic services
Hospice care
Rehabilitative services

Note

You can find the full list of mandatory and optional benefits on the Medicaid website.

Medicaid expansion for adults covers the 10 essential health services defined by the Affordable Care Act. Long-term care and home and community-based services (HCBS) are also covered. These programs help patients stay active and independent in their homes and communities.

Frequently Asked Questions (FAQs)

Who qualifies for Medicaid?

Medicaid qualifications are determined by states. If you live in a state with expanded Medicaid coverage, then you qualify if your household income is below 133% of the federal poverty level. The federal government has an online tool to help you determine your eligibility based on details like where you live and how much you earn.

How is Medicaid funded?

Medicaid is jointly funded by both the federal government and state governments. There isn't a specific tax for Medicaid like there is for Medicare, so the funds instead come from a variety of taxes, including taxes on health care providers.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

Centers for Medicare & Medicaid Services. "June 2022 Medicaid & CHIP Enrollment Data Highlights."
Centers for Medicare & Medicaid Services. "Program History."
HealthCare.gov. “Medicaid Expansion and What It Means for You.”
HealthCare.gov. “Coverage for Lawfully Present Immigrants.”
State of Georgia. “Apply for Medicaid.”
U.S. Department of Health & Human Services. “What Is the Difference Between Medicare and Medicaid?”
U.S. Department of Health & Human Services. "What Is the Medicaid Program?"
Medicare.gov. “Costs.”
Social Security. "Medicare Benefits."
Medicaid.gov. “Mandatory and Optional Medicaid Benefits.”
Centers for Medicare and Medicaid Services. "What Marketplace Health Insurance Plans Cover."
Medicaid.gov. "Strengthening and Investing in Home and Community Based Services for Medicaid Beneficiaries: American Rescue Plan Act of 2021 Section 9817."
Medicaid.gov. "Financial Management."