Medicaid: A Primer

In existence for 45 years, Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care to more than 68 million people in FY2010. The estimated annual cost to the federal and state governments was roughly $381 billion in FY2009. In comparison, the Medicare program, which provided health care benefits to 46 million seniors and certain persons with disabilities cost nearly $511 billion in FY2009.

Each state designs and administers its own version of Medicaid under broad federal rules. State variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. The new health reform law makes both mandatory and optional changes along these dimensions for the Medicaid program.

This report describes the basic elements of Medicaid, focusing on federal rules governing who is eligible, what services are covered, how the program is financed and how beneficiaries share in the cost of care, how providers are paid, and the role of special waivers in expanding eligibility and modifying benefits. Basic program statistics are also provided. Finally, recent legislative changes at the federal level that affect Medicaid in significant ways are also described.