5 Things to Know About Medicaid

You may know that while Medicare offers health insurance for older people, Medicaid offers health coverage for low-income folks. As you get older, you may occasionally run across information on Medicare and increasingly pay attention, as it will be important come age 65.

But it's worth learning more about Medicaid, too -- because it might be quite valuable to you right now, or to someone you care about. It's more interesting than you might have thought, as well.

Smiling medical professionals in a hallway.

Image source: Getty Images.

Here are five things to know about Medicaid -- see how many surprise you.

1. Medicaid is different from Medicare in many ways

The two programs' names are similar, but they're actually quite different.

Medicare

Medicaid

Serves people aged 65 or older, those with certain disabilities, and those with end-stage renal disease

Serves low-income adults and children, the pregnant, the elderly, and people with certain disabilities

Has 65.7 million enrollees as of 2023

Has 80.2 million enrollees as of 2023, including tens of millions of children

Is administered by the federal government

Is administered by each state

Does not typically cover nursing home care

Covers nursing home care

Is funded in part via payroll taxes we pay

Is funded by the federal government and the states

Data source: HHS.gov, MedicaidAdvocacy.org, and Medicaid.gov.

One thing the two programs have in common is that they're rather critical for the people they serve. We all need healthcare, after all, and people with low incomes or retired people often wouldn't be able to secure it without Medicaid or Medicare.

2. Medicaid is a joint project of the federal government and the 50 states

As you might have deduced from the chart above, Medicaid is brought to you by the federal government and each of the 50 states. The federal government pays close to 70% of the total cost of the program, with states making up the difference from their own budgets.

Each state runs its own Medicaid program, often with its own unique name. Each state also sets its own eligibility requirements and determines what coverage it will offer -- but each state must also follow federal guidelines for minimum coverage and eligibility. Each state also sets payment rates. Medicaid programs are required to cover physician and hospital services, lab work and X-rays, nurse midwife services, home health services, and even transportation to medical care, among other things.

Interestingly, when Medicaid debuted in 1965, states were not required to provide it. But within its first few years, almost all states had signed on, and by the 1980s, all states were participating.

3. Medicaid costs a lot

We all know that healthcare in America is extremely costly. Indeed, in fiscal 2023, the federal government spent $6.4 trillion, and fully $1.9 trillion, or 29%, was for health programs and services. That's just government spending. In total, the U.S. was expected to lay out $4.7 trillion for healthcare in 2023, per the Peter G. Peterson Foundation.

Given all that, know that Medicaid represents $1 out of every $6 spent on healthcare in America. Yikes! Specifically, Medicaid cost a total of $824 billion in fiscal 2022.

The program costs each state a lot, too -- ranging from about 12% to 15% of the state budget (for, respectively, Wyoming and Hawaii) to 39% (Ohio) and 40% (Pennsylvania and Texas). The average percentage nationally was roughly 29%.

4. Medicaid is mostly free for participants

It makes sense that Medicaid is free or costs extremely little for the people it serves. After all, most have very low incomes, among other challenges. Specifically, most covered services cost enrollees nothing, with certain services or products costing a modest co-payment.

This low cost to enrollees partly explains the high cost to each state and the federal government.

5. Medicaid is a vital social safety net

Perhaps the best thing about Medicaid is that it's a social safety net -- and the "payer of last resort." If you fall on hard times and can't afford healthcare, at some point you will likely be eligible for Medicaid. That effect occurs nationally, too -- during a recession, for example, if millions lose jobs, then the ranks of Medicaid will grow as the program steps in to cover those folks.

Since it's a government program, it can also be used as a tool for promoting and protecting public health. For example, during the early years of the COVID-19 pandemic, Congress passed the Families First Coronavirus Response Act that boosted the Medicaid dollars available to states in exchange for the program not disenrolling enrollees during the Public Health Emergency phase of the crisis.

Keep this information in mind -- because at some point in your life, you might need Medicaid, and you should know that it exists for those in need. You might even know a loved one right now who isn't enrolled in, but could qualify for and greatly benefit from, Medicaid.

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