By skyforbes 
Medicaid is a means-tested public insurance program that provides health coverage for low income families and individuals, established by Lyndon B. Johnson in 1965 as part of the Social Security Act. Medicaid covers low income individuals and pregnant women, blind and/or disabled individuals, individuals who need long-term care or nursing home care, and Americans who are 65 years and older. The program is funded by both the federal and state governments, but is administered on a state level.
Who can receive Medicaid?
There are federal guidelines that each state’s Medicaid program must follow, but each state’s Medicaid program can differ by offering different benefits, and/or having different eligibility guidelines. According to the Center on Budget and Policy Priorities, states must cover mandatory populations in order to receive federal funding for Medicaid expenditures. These populations include:
- children through age 18 in families that have income below 138 percent of the federal poverty line,
- pregnant women who have incomes under 138 percent of the federal poverty line,
- and seniors and disabled individuals who receive cash assistance through Supplemental Security Income (SSI) program.
The poverty level is established annually by the federal government based on census data to determine who is poor and therefore eligible for federal subsidies or aid, which include programs such as food stamps and Medicaid. The 2017 federal poverty level is $12,060 for individuals and $24,600 for a family of four.
How is Medicaid Financed?
As previously mentioned, Medicaid is an entitlement program financed by both federal and state funds. The federal government matches each state’s Medicaid expenditures at a set rate, called the Federal Medical Assistance Percentage (FMAP), and this rate varies from state to state. However, the FMAP cannot legally be less than 50 percent in any state.
The FMAP is designed so that states with per capita incomes below the national average receive a higher percentage of federal funds. Ultimately, poorer states are able to receive more federal funds. The average state FMAP is 57 percent, but ranges up to 75 percent in poorer states. So in Missouri, with 2017’s FMAP at 64.61 percent, this means the federal government must fund 64.61 percent of all incurred Medicaid expenditures, while Missouri’s state government is responsible for the remaining costs. Each state government can use its revenue from state income or payroll taxes, for example, to fund its remaining Medicaid expenses.
Since Medicaid is an entitlement program, this means it is legally required to serve all Americans who are eligible for it. Therefore, Medicaid does not have a fixed cost. Medicaid spending is thus determined by the number of those it covers, the benefits they use, and how much the program pays for these benefits.
Total Medicaid spending in fiscal year 2016 was $574.2 billion.
68,965,776 people were enrolled in Medicaid as of March 2017. 97 million Americans were covered by Medicaid in fiscal year 2015.
Medicaid is an extremely efficient and cost-effective program compared to private insurance because it is not operated with a profit motive. For this reason, Medicaid spending per person will almost always be less than that of private insurers: adults on Medicaid cost about 22 percent less than if they were privately insured. Furthermore, medical costs per person rose at a much slower rate than that of private insurers. Out of pocket medical fees are estimated to be 6 times lower than that of private insurance.
Medicaid’s reimbursement rates to health providers, such as hospitals and doctors, are lower than Medicare’s, which means providers may be less inclined to accept Medicaid patients compared to patients on Medicare or with private insurance. Since America’s health care system is for-profit, this means providers would rather accept Medicare or private insurance so they can make a bigger profit.
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