The Basics of Medicaid

The Medicaid program was put in place in 1965 as an amendment to the Social Security Act of 1935, making state and federal funds available to help low-income individuals and families pay for certain types of basic medical care. Initially, the program was limited to individuals receiving monetary benefits through government welfare programs, but it is now available to more than 50 million low income Americans.

Medicaid is an optional program—the individual states do not have to participate. However, because the federal government assumes the bulk of costs for Medicaid, paying anywhere from 50% to 80% of a state’s costs, every state participates and administers its own Medicaid plan. A number of states have opted out of the Medicaid expansion under Obamacare, but every state has a Medicaid program.

The Types of Services Covered by Medicaid

Medicaid provides payment of or reimbursement for a wide range of costs, including inpatient and outpatient hospital services, skilled home nursing services, lab and x-ray services, physical therapy, rehabilitation, hospice care and doctor’s fees. Medicaid only pays for services rendered by approved physicians or health care providers, and typically does not reimburse a service provider for 100% of costs. As a consequence, most doctors and other service providers limit the number of Medicaid patients they treat.

Eligibility for Medicaid

Under federal law, a state may not reduce any other welfare benefits a person receives because of eligibility for Medicaid. Furthermore, states are prohibited from imposing or establishing citizenship or residency requirements, other than requiring residency within the state. Age and employment are also not allowed to be restrictions on access to Medicaid.

Medicaid Fraud

Because of significant instances of fraud, by both care providers and patients, Congress enacted legislation in 1996 imposing criminal penalties for Medicaid fraud.