What is Medicaid?

The Health Insurance Association of America defines Medicaid as "a government health insurance program for the health coverage of the Medicaid enrollees of all ages whose income and resources are insufficient to pay for health care." Medicaid was launched in 1965 for the benefit of the less privileged. Medicaid is financed by the Federal and State governments. However, the Federal government makes sure its budget is never short of funds and the States ensure its benefits and care are spread across all the individuals and families but especially the low-income group  Medicaid recipients. During 2017, the total annual expenditure on Medicaid spending was around $600 billion which was contributed to the extent of $375 billion by the Federal government and $230 billion by the State governments. The Medicaid beneficiaries of Medicaid apply to US citizens, qualified non-citizens, legal immigrants, children, and the disabled. It is administered by the U.S. Centers for Medicare and Medicaid Services. 

File:Medicaid helps People banner.png
CC-BY-SA-4.0 ǀ Image Credits: https://commons.wikimedia.org | Yomosa


As of 2018, Medicaid covered around 97 million Americans. Medicaid services are available across the United States subject to some Medicaid eligibility requirements:

  • ACA income test standardization: The Medicaid eligibility criteria prescribe a certain level of Adjusted Gross income ceiling irrespective of state variations and the restricted assets test.
  • Five years “Lookback”: Any sale of assets by the applicant except for Fair Market Value during the past 5 years is penalizable.
  • Immigration status: The residential status of the immigrants must be Legally Permanent Residents (LPRs) with an elaborate history of work extending to a minimum of 10 years. The children and pregnant women are subject to benefits from state decisions regarding eligibility for Medicaid benefits.
  • Children are separately eligible: The eligibility of a child shall stand independent of the eligibility status of the parents. The rate of children ineligible was brought down to 6% years ago and a further reduction in the ratio of children uncovered is on the cards.
  • HIV: A large portion of the Medicaid recipients suffering from HIV/AIDS are provided a benefit by medicated drugs and are encouraged to apply resources to undergo antiretroviral treatment. Two other programs are also the provider of health care benefits for HIV/AIDS patients in the United States – Social Security Disability Insurance (SSDI) and Supplemental Security Income programs.

The state government receives Federal funds for Medicaid spending for the senior citizens and people with disabilities under the Social Security Disability Insurance. The non-disabled patients having income below 138% of the poverty line are also included under this funding. However, 15 states have restricted individuals of the age of above 21 from the Medicaid benefits. The lawfully permanent residential status holders cannot benefit from Medicaid eligibility until the first 5 years. Some of the low-income adults of age 65 or above are the Medicaid beneficiaries as well as Medicare beneficiaries.

Affordable Care Act

The Medicaid expansion has been mainly attributed as the provider of health care benefits by applying the coverage for the poor and low-income adults having income below 138% of the poverty line. This act is expected to yield health care benefits for more than 14 million new people other than the existing ones by 2029 which is very likely owing to the Covid-19 recession. The Federal government has been supporting the provision of health care benefits through Medicaid spending coverage of over 90% for the expected Medicaid expansion. 

Affordable Care Act File:Insurance.jpg
 CC-BY-SA-4.0 ǀ Image Credits: https://commons.wikimedia.org | Unsplash

Coverage of health care services by Medicaid

The Federal and State government have provided health coverage to certain medical services such as Hospital and Physician care, Laboratory and Testing, Home visits, EPSDT, and nursing facilities for the Medicaid enrollees of the age below 21. Medicaid coverage expands to around 60% of all nursing home residents and 50% of the costs of long-term care services. The child health care plans have also been given importance by the health plan providers. The provider and the social workers have put in efforts towards ensuring that child health is taken care of in the best possible ways so that the future of the nation is healthy. Medicaid expansion has been effective in reaching the desired goals altogether.

Effectiveness of Medicaid

The health plans underlying Medicaid have helped reduce the number of uncovered people from 45 million to 29 million. The low-income adults, the children, the pregnant, the low-income group have provided resources for ensuring access to health care plans which otherwise would not have been possible for the individuals to buy in the market. This has led to an overall sense of security to the citizens of the country and a healthy, treatment-aided population which will directly add to the overall economic growth of the country. The studies have been believed to reveal that Medicaid expansion has reduced the number of younger population being diagnosed with mental illness, diabetes, over-reactive crisis, better child health data. It has also been observed that the volume of medical debt and the instances of default in health loans have reduced over the years and are expected to improve abundantly over the next decade. Medicaid as a health insurance program has worked wonders in the American history of health care along with the effectiveness of Affordable Care Act upgrades. The status of population health especially in terms of common avoidable illness has been qualitatively positive after 2014. The health coverage facilities which apply to the human resource in corporations are now affordable by the public. If it had not been the case, there would have been a nationwide issue for Medicaid.

Medicaid v/s Medicare

  • Medicare is financed by the Federal government solely whereas Medicaid is financed jointly by the Federal and State governments. 
  • Medicare is focused on the population of age 65 above whereas that is not the case with Medicaid.
  • Medicaid covers a diverse range of long-term care services which is not the case with Medicare.

Context and Applications

This topic is significant in the professional exams for both undergraduate and graduate courses, especially for:

  • Bachelors in Economics
  • Bachelors in Healthcare Management
  • Bachelors in Public Administration
  • Masters in Public Administration
  • Masters in Healthcare Management
  • Masters in Economics

Practice Problems

Question 1: What is the percentile of income below the poverty line is eligible under Medicaid?

    1. 100%
    2. 50%
    3. 95%
    4. 138%

Answer: d

Explanation: 138% is the cut-off for being eligible for Medicaid.

Question 2: What is the name of the medical insurance program which aims to include low-income adults above age 65?

    1. Medicaid
    2. Medicare
    3. Social Security Disability Insurance (SSDI)
    4. Supplemental Security Income Program

Answer: b

Explanation: Medicare covers the health programs for individuals above age 65.

Question 3: Which statement is correct regarding the eligibility status of a child for Medicaid when the parent has recently got the Lawful Permanent Residential status 2 years ago?

    1. Depends on the state’s decision.
    2. The eligibility of the child will be independent of that of the parents.
    3. Depends if the child is disabled.
    4. All of the above

Answer: d

Explanation: All of the above statements are correct regarding the child’s eligibility.

Question 4: Which act has extended Medicaid to low-income adults?

    1. Affordable Care Act
    2. Omnibus Budget Reconciliation Act of 1993
    3. Social Security Act
    4. Deficit Reduction Act of 2005

Answer: a

Explanation: Affordable Care Act has expanded Medicaid significantly among low-income adults.

Question 5: Which of the following is/are not eligible for Medicaid?

    1. Illegal immigrants
    2. American citizens
    3. Legal permanent residents
    4. Individuals above age 65

Answer: a

Explanation: Illegal immigrants are not covered under Medicaid in any case.

Common Mistakes

The students often misunderstand Medicaid and Medicare to be the same which is not so. The students need to pay close attention to the reliability criteria and the services covered by Medicaid.

While studying Utilization management, it is important to read the following topics to get a better knowledge:

  • Life insurance
  • Other insurance policies
  • Medicare
  • Affordable Care Act

Want more help with your finance homework?

We've got you covered with step-by-step solutions to millions of textbook problems, subject matter experts on standby 24/7 when you're stumped, and more.
Check out a sample finance Q&A solution here!

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Search. Solve. Succeed!

Study smarter access to millions of step-by step textbook solutions, our Q&A library, and AI powered Math Solver. Plus, you get 30 questions to ask an expert each month.

Tagged in


Medical Insurance


Medicaid Homework Questions from Fellow Students

Browse our recently answered Medicaid homework questions.

Search. Solve. Succeed!

Study smarter access to millions of step-by step textbook solutions, our Q&A library, and AI powered Math Solver. Plus, you get 30 questions to ask an expert each month.

Tagged in


Medical Insurance