Medicaid: What it is and how it works

Medicaid is a joint federal–state program that provides health coverage to low-income individuals and families in the United States. States administer their own programs within broad federal rules, and the federal government matches a portion of state spending.

Key points

  • Covers doctor visits, hospital stays, long-term care, custodial care and other health-related services.
  • Eligibility and benefits vary by state; the program is jointly funded by federal and state governments.
  • Expansion under the Affordable Care Act (ACA) extended eligibility in participating states to many adults with incomes up to about 138% of the federal poverty level (FPL).
  • Application is handled through state Medicaid agencies or the Health Insurance Marketplace.

How Medicaid is funded and administered

  • States design and operate their Medicaid programs; they decide covered services, provider payment rates and eligibility rules within federal guidelines.
  • The federal government reimburses states for a share of Medicaid costs. The federal matching rate (FMAP) varies by state, roughly from 50% to the low 80s, so the federal share differs across states.
  • Medicaid is the largest public payer for health-related services for low-income Americans.

Who Medicaid serves

Medicaid traditionally covers:
Low-income children and their parents or caregivers
 Pregnant women
People with disabilities
 Older adults in need of long-term care

After ACA expansion, many states cover additional adults with incomes up to about 138% of the FPL. Not all states adopted the ACA expansion; in non-expansion states, eligibility remains more limited.

Eligibility and income rules

  • Eligibility is primarily income-based and measured against the federal poverty level.
  • Income for most applicants is calculated using modified adjusted gross income (MAGI), which is taxable income with specific adjustments.
  • States may have other eligibility pathways tied to disability, pregnancy, age or caregiving responsibilities.
  • Apply through your state Medicaid agency or via the Health Insurance Marketplace.

Policy changes and special conditions

  • States can request waivers to test different eligibility rules or program features. Some states sought to add work or community engagement requirements for certain enrollees; courts and federal policy have limited the scope and implementation of such conditions.
  • Because rules vary by state and can change, applicants should consult their state Medicaid office or official Medicaid.gov for current eligibility and enrollment information.

Impact and advantages

  • Medicaid significantly reduces the number of uninsured people by providing coverage to individuals who cannot access or afford private insurance.
  • It improves access to preventive care, treatment, and long-term services that many low-income people otherwise could not obtain.
  • Children and people with disabilities are major components of enrollment; different groups can account for different shares of total costs.

How to apply

  • Visit your state Medicaid agency website or the Health Insurance Marketplace to apply and learn about available programs and documentation requirements.
  • If eligible, Medicaid enrollment may begin immediately or take effect the next month, depending on state procedures.

Sources: federal and state Medicaid program materials and public health agencies.