Medicaid

What Medicaid is

Medicaid is the medical assistance program created by Title XIX of the Social Security Act. It pays for health care for people with limited income and resources. That makes it need-based public assistance, and that is the single most important contrast with Medicare:

• Medicare is social insurance. People earn it through a work record and qualify by age,

disability, or end-stage renal disease, no matter how much money they have.

• Medicaid is based on financial need. No work history or payroll-tax record is

required, and a wealthy person cannot qualify.

A federal-state partnership

Medicaid is jointly funded and run by the states. Each state writes a state plan for medical assistance. Once the federal government approves the plan, it pays a matching share of the state's Medicaid spending. The federal share differs by state (states with lower per-capita income get a larger share) and is never less than half.

Federal law sets the floor:

• Mandatory eligibility groups that every state must cover
• Mandatory benefits that every state must provide
• Rules every state plan must follow, such as providing, to the extent federal regulations

require, for residents who are temporarily out of the state

Above that floor, each state chooses optional groups and optional benefits, and most states deliver care through managed care plans they contract with. That is why income limits and covered services differ from state to state even though the Title XIX framework is the same everywhere.

Who qualifies

An applicant generally has to pass two tests:

1. Category. The person must fit a covered group, such as low-income children, pregnant

women, parents and caretaker relatives, or people who are aged, blind, or disabled. Under the Affordable Care Act, a state may also cover low-income adults under 65 regardless of category (the "expansion" group); that coverage is a state option.

1. Financial need. Income must be under the state's limit, and for many groups, especially

the aged, blind, disabled, and anyone seeking long-term care, countable resources (assets) must be under a limit too.

Many states also cover the medically needy. A person whose income is too high can spend down: once medical bills use up the excess, Medicaid covers the rest.

Children and CHIP. The Children's Health Insurance Program (CHIP, Title XXI) covers uninsured children in families that earn too much for Medicaid but too little for private coverage. Under Express Lane eligibility, a state may rely on findings another public agency has already made, such as TANF, SNAP food assistance, school lunch, or Head Start, to enroll a child. The family must be told what information will be shared and may choose not to share it. A state may even enroll a child automatically from such data, but only with the family's affirmative consent.

Verifying citizenship. When an applicant declares U.S. citizenship, the state may check the name and Social Security number with Social Security. If they do not match and the mismatch is not cleared up, the state must notify the person and give them 90 days to provide documents or fix the record, continuing coverage during that time. If it is still unresolved, the person is disenrolled within 30 days after the 90 days end. Newer rules also require states to keep enrollee addresses current and, by October 2029, to check a federal system monthly so no one is enrolled in two states at once.

What Medicaid covers

Benefits are broad and cost sharing is minimal or none: inpatient and outpatient hospital care, physician services, lab and X-ray, nursing facility care, home health, and early and periodic screening, diagnostic, and treatment (EPSDT) services for children. It also pays for nonemergency transportation to medical care; states must ensure those drivers are not excluded from federal health programs and hold a valid driver's license.

The standout is long-term custodial care, in a nursing facility or through home and community-based services. Medicare pays only for short-term skilled nursing after a hospital stay; Medicaid pays for the long stay. That is why Medicaid is the largest payer of nursing home care, and why long-term care insurance exists as a way to avoid depending on it.

Medicaid is the payer of last resort: private insurance, Medicare, and any other coverage pay first.

Medicaid, Medicare, and the producer

A low-income Medicare beneficiary can have both programs: a dual eligible. Medicaid may pay the person's Medicare premiums, deductibles, and coinsurance (through the Medicare Savings Programs) and cover services Medicare does not, such as custodial care.

Federal law makes it unlawful to sell a Medicare supplement (Medigap) policy to someone the seller knows is entitled to Medicaid, apart from narrow exceptions. The policy would duplicate benefits the person already has. A Medigap policyholder who becomes entitled to Medicaid can ask to suspend the policy for up to 24 months instead of dropping it.

Asset rules that drive planning

• Look-back period. For long-term care Medicaid, the state reviews asset transfers made in

the 60 months (5 years) before the application. Giving assets away or selling them for less than fair market value triggers a penalty period of ineligibility, roughly the value given away divided by the average monthly private-pay cost of a nursing home.

• Spousal impoverishment protection. When one spouse enters a nursing home, the spouse

still living at home (the community spouse) keeps a protected share of the couple's assets and a minimum monthly income.

• Estate recovery. After a recipient age 55 or older dies, the state must seek repayment

from the estate for long-term care Medicaid paid for.

These rules are why a client with savings to protect may prefer insurance over spending down into Medicaid.