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What is Medicaid—and how is it different from Medicare?

You’ve definitely read about government-subsidized healthcare, but it can be hard to distinguish between multiple federally funded programs.


Brenden Gallagher


Posted on Jun 18, 2018   Updated on May 21, 2021, 1:19 pm CDT

You’ve definitely read about government-subsidized healthcare, but it can be hard to distinguish between multiple federally funded programs. What is Medicaid exactly, and how does it differ from Medicare? Created in 1965 alongside Medicare, Medicaid was a part of Lyndon Johnson’s Great Society program. Medicaid has since become an essential part of American life. Today, 74 percent of Americans have a favorable opinion of Medicaid and 20 percent of Americans have health insurance thanks to Medicaid. 

Whether you’re looking to enroll in Medicaid or just want to know more about how the Federal-State health insurance program is funded, here are all your Medicaid questions answered.

What is Medicaid?

What is the difference between Medicare and Medicaid?

Medicaid is “a jointly funded, Federal-State health insurance program for low-income and needy people. It covers children, the aged, blind, and/or disabled and other people who are eligible to receive federally assisted income maintenance payments.”

Unlike Medicare, Medicaid is administered by states, though states have to meet federal requirements set forth by the government. Both state and federal governments split funding responsibilities. 

Since everyone over 65 is entitled to Medicare, it’s confusing to hear that many elderly people are on Medicaid. Many of America’s elderly people are on both Medicaid and Medicare. Medicare requires premium, deductible and copay payments, and those who need significant assistance with those costs rely on Medicaid. Nearly two-thirds of nursing home residents are on Medicaid.

Since Medicaid programs are state-administered, each state’s program has a different name. Medicaid recipients may receive care under “Medi-Cal (CA),” “Buckeye Health Plan (OH),” or “Mountain Health Trust (PA).” At benefits.gov, you can review the programs provided by each state.

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Who is eligible for Medicaid?

Eligibility varies from state to state. So what are the income limits for Medicaid? When Obamacare was passed in 2014, provision of the ACA stipulated that states could expand Medicaid to include all people whose income is below 138 percent of the federal poverty level (200 percent for children, based on parental income). 32 states and the District of Columbia have taken advantage of Medicaid expansion.

18 states have declined to participate in Medicaid expansion. Medicaid requirements for parents are incredibly stringent in some states that have not opted to expand Medicaid. Alabama and Texas are the strictest, only allowing people at incomes 18 percent of the FPL to receive Medicaid (just 13 percent of the recommended levels under the ACA). Childless adults are not eligible for Medicaid in states these states, except for Wisconsin.

States that have participated in Medicaid expansion also have elected to extend the program to “medically needy” groups. This means that people that those with prohibitively high medical costs have more lenient Medicaid income requirements. 88 percent of spending on the medically needy goes to the elderly and those with disabilities. Pregnant women are another group that many states assist through this classification.

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What does Medicaid cover?

Despite the draconian measures still in place in some states, over 67 million people were enrolled in Medicaid in February of 2018. If you add the roughly 6.4 million children who qualify for CHIP, a Medicaid expansion for children, the total number is roughly 74 million. Since the ACA passed, Medicaid expansion has added 16.3 million people to Medicaid and CHIP rolls.

In total, children comprise roughly half of Medicaid recipients. 35.7 million children were enrolled in either Medicaid or CHIP at the beginning of 2018. This means that one-third of American children are on Medicaid, and half of all births in the country are paid for by the program.

Though states craft their own Medicaid programs, there is a list of mandatory benefits that must be provided by the state. These include health services like hospital care, x-rays, pediatric services, and transportation to medical care. Some optional benefits include items that most people view as essential like prescription drugs, respiratory care, physical therapy, and dental services.

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Who pays for Medicaid?

The federal government ultimately pays between 50 percent and 75 percent of every state’s Medicaid costs, averaging out to about two-thirds of total expenses. The federal government is set to shoulder 90 percent of all costs associated with Medicaid expansion.

Medicaid costs total about 10 percent of the federal budget. For a point of comparison, defense spending is roughly 16 percent. Total Medicaid spending was $565.5 billion in 2016, according to the Centers of Medicare and Medicaid Services.

Still, Congressional Republicans led by Rep. Paul Ryan (R-WI) have been trying aggressively to cut the program. While the GOP hasn’t been able to gut Medicaid as of yet, President Trump has signed orders allowing states to place strict work requirements on Medicaid recipients. As the pregnant, the elderly, and the disabled comprise the bulk of the program’s beneficiaries, many view the measure as excessively cruel.

Despite their best efforts, Medicaid may have grown in size by the time Republicans come out of the midterms. Three states have Medicaid expansion on the ballot this November: Utah, Idaho, and Nebraska. Medicaid expansion is extremely popular in states where it has been enacted.

Though Republicans control all three branches of government, it seems unlikely that they will be able to dismantle Medicaid. Research has found that people with Medicaid like it, and history proves that once Americans receive a benefit it is very difficult to take it away.

You can find out if you qualify for Medicaid at healthcare.gov.

Editor’s note: This article is regularly updated for relevance. 

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*First Published: Jun 18, 2018, 6:30 am CDT