Congressional Research Service Report: 'Medicaid – Overview'
The report was co-authored by health care financing specialists
Summary
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports (LTSS) to an estimated 75 million people at a cost to states and the federal government of
Participation in Medicaid is voluntary for states; all states, the
Historically, Medicaid eligibility generally has been limited to low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, since 2014, states have had the option to cover nonelderly adults with income up to 133% of the federal poverty level (FPL) under the Patient Protection and Affordable Care Act (ACA; P.L. 111148, as amended) Medicaid expansion.
Medicaid coverage includes a variety of primary and acute-care services as well as LTSS. Not all Medicaid enrollees have access to the same set of services. An enrollee's eligibility pathway determines the available services within a benefit package. Federal law provides two primary types of benefit packages for state Medicaid programs: (1) traditional benefits and (2) alternative benefit plans (ABPs). Beneficiary cost sharing (e.g., premiums and co-payments) is limited under the Medicaid program.
Medicaid enrollees generally receive benefits via one of two service delivery systems: fee-for-service (FFS) or managed care. Under FFS, health care providers are paid by the state Medicaid program for each service provided to a Medicaid enrollee. Under managed care, Medicaid enrollees get some or all of their services through an organization under contract with the state. Most states use a combination of FFS and managed care by using FFS for some populations and managed care for other populations.
The federal government and the states jointly finance Medicaid. The federal government reimburses states for a portion of each state's Medicaid program costs. Federal Medicaid funding is an open-ended entitlement to states, which means there is no upper limit or cap on the amount of federal Medicaid funds a state may receive.
Medicaid provider payment rates are set by states within federal rules. In some cases, states make supplemental payments to Medicaid providers that are separate from, and in addition to, the payment rates for services rendered to Medicaid enrollees. Also, Medicaid program integrity initiatives are designed to combat fraud, waste, and abuse in the Medicaid program.
Introduction
Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports (LTSS), to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older.
State participation in Medicaid is voluntary; all states, the
The federal government and the states jointly finance the Medicaid program. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and use of services by enrollees. Medicaid is an entitlement for both states and individuals. The Medicaid entitlement to states ensures that, so long as states operate their programs within the federal requirements, states are entitled to federal Medicaid matching funds. Medicaid also is an individual entitlement, which means that anyone eligible and enrolled in Medicaid under his or her state's eligibility standards is guaranteed Medicaid coverage.
In FY2019, Medicaid is estimated to have provided health care services to an estimated 75 million individuals at a total cost of
In comparison, the Medicare program provided health care benefits to nearly 61 million individuals in that same year at a cost of roughly
Medicaid provides a health care safety net for low-income populations, /4 with approximately 20% of the total
Medicaid plays a more significant role for other certain subpopulations. For example, in 2019, Medicaid provided health coverage for 38% of all children in
The percentage of individuals covered by Medicaid varies by race, ethnicity, or both, with Medicaid providing coverage as shown in Figure 1. Among the nonelderly population (i.e., individuals under 65 years of age), Medicaid provided coverage for 15% of White individuals, 33% of Black individuals, 15% of Asians/Native Hawaiians and Pacific Islanders, 34% of
Content omitted: Figure 1. Percent of Medicaid Coverage of the Nonelderly Population by Race/Ethnicity
For some types of services, Medicaid is a significant payer. For instance, in 2018, Medicaid accounted for about 44% of national spending on LTSS./9
Medicaid paid for 42% of all births in
In FY2015, Medicaid accounted for 75% of public family planning expenditures (including federal, state, and local government spending). /11
Medicaid was enacted in 1965 as part of the same law that created the Medicare program (the Social Security Amendments of 1965; P.L. 89-97). Medicaid was designed to provide coverage to groups with a wide range of health care needs that historically were excluded from the private health insurance market (e.g., individuals with disabilities who require LTSS or indigent populations in geographic locations where access to providers is limited). Because of the diversity of the populations that Medicaid serves, Medicaid offers some benefits that typically are not covered by major insurance plans offered in the private market (e.g., institutional and home and community-based LTSS or early and periodic screening, diagnosis, and treatment [EPSDT] services).
Medicaid also pays for Medicare premiums and/or cost sharing for low-income seniors and individuals with disabilities, who are eligible for both programs and referred to as dual-eligible beneficiaries. For other Medicaid enrollees, cost sharing (e.g., premiums and co-payments) generally are nominal, which may not be the case with coverage available through the private health insurance market. The Medicaid program pays for services provided by special classes of providers, such as federally qualified health centers (FQHCs), rural health clinics (RHCs), and
This report describes the basic elements of Medicaid, focusing on who is eligible, what services are covered, how enrollees share in the cost of care, and how the program is financed. The report also explains waivers, provider payments, and program integrity activities. At the end of the report is a section with additional Medicaid resources.
Eligibility
Eligibility for Medicaid is determined by both federal and state law, whereby states set individual eligibility criteria within federal minimum standards. As a result, there is substantial variability in Medicaid eligibility across states. Therefore, the ways that an individual might qualify for Medicaid are largely reflective of state policy decisions within broad federal requirements.
In general, individuals qualify for Medicaid coverage by meeting the requirements of a specific eligibility pathway offered by the state. Some eligibility pathways are mandatory, meaning all states with a Medicaid program must cover them; others are optional. Within this framework, states are afforded discretion in determining certain eligibility criteria for both mandatory and optional eligibility groups. In addition, states may apply to the
An eligibility pathway is the federal statutory reference(s) under SSA Title XIX that extends Medicaid coverage to one or more groups of individuals.12 Each eligibility pathway specifies the group of individuals covered by the pathway (i.e., categorical criteria), the financial requirements applicable to the group (i.e., financial criteria),/13 whether the pathway is mandatory or optional, and the extent of the state's discretion over the pathway's requirements. Individuals in need of Medicaid-covered LTSS must demonstrate the need for long-term care by meeting state-based eligibility criteria for services, and they also may be subject to a separate set of Medicaid financial eligibility rules in order to receive LTSS coverage. All Medicaid applicants regardless of their eligibility pathway must meet federal and state requirements regarding residency, immigration status, and documentation of
Often an applicant's eligibility pathway dictates the Medicaid state plan services that a given program enrollee is entitled to (e.g., women eligible due to their pregnancy status are entitled to Medicaid pregnancy-related services). When applying to Medicaid, an individual may be eligible for the program through more than one pathway. In this situation, an individual is generally permitted to choose the pathway that would be most beneficial in terms of the treatment of income and sometimes assets when determining Medicaid eligibility, but also in terms of the available benefits associated with each eligibility pathway.
Medicaid eligibility determinations generally apply for 12 months before an eligibility redetermination must occur. Individuals may be retroactively eligible for Medicaid up to three months prior to the month of application, if the individual received covered services and would have been eligible had he or she applied during that period./15
The following sections describe Medicaid's categorical and financial eligibility criteria as well as additional eligibility requirements for Medicaid covered-LTSS.
Categorical Eligibility
Medicaid categorical eligibility criteria are the characteristics that define the population qualifying for Medicaid coverage under a particular eligibility pathway; in other words, the nonfinancial requirements that an individual must meet to be considered eligible under an eligibility group. Medicaid covers several broad coverage groups, including children, pregnant women, adults, individuals with disabilities, and individuals 65 years of age and older (i.e., aged). There are a number of distinct Medicaid eligibility pathways within each of these broad coverage groups.
Historically, Medicaid eligibility was limited to poor families with dependent children who received cash assistance under the former Aid to Families with Dependent Children (AFDC) program, as well as poor aged, blind, or disabled individuals who received cash assistance under the Supplemental Security Income (SSI) program. Medicaid eligibility rules reflected these historical program linkages both in terms of the categories of individuals who were served and in that the financial eligibility rules were generally based on the most closely related social program for the group involved (e.g., AFDC program rules for low-income families with dependent children and pregnant women, and SSI program rules for aged, blind, or disabled)./16
Over time, Medicaid eligibility has expanded to allow states to extend Medicaid coverage to individuals beyond those who were eligible based on receipt of cash assistance, including the addition of the ACA Medicaid expansion population (i.e., nonelderly adults with income up to 133% of FPL)./17
Medicaid's financial eligibility rules also have been modified over time for certain groups./18
If a state participates in Medicaid, the following are examples of eligibility groups that must be provided Medicaid coverage:
* certain low-income families, including parents, that meet the financial requirements of the former AFDC cash assistance program;
* pregnant women with annual income at or below 133% of FPL;
* children with family income at or below 133% of FPL;
* aged, blind, or disabled individuals who receive cash assistance under the SSI program;/19
* children receiving foster care, adoption assistance, or kinship guardianship assistance under SSA Title IV-E;
* certain former foster care youth;/20
* individuals eligible for the Qualified Medicare Beneficiary program; /21 and
* certain groups of legal permanent resident immigrants./22
Examples of eligibility groups to which states may provide Medicaid include the following:
* pregnant women with annual income between 133% and 185% of FPL;
* infants with family income between 133% and 185% of FPL;
* certain individuals who require institutional care and have incomes up to 300% of the SSI federal benefit rate;
* certain medically needy individuals (e.g., children, pregnant women, aged, blind, or disabled) who are otherwise eligible for Medicaid but who have incomes too high to qualify and spend down their income on medical care;/23 and
* nonelderly adults with income at or below 133% of FPL (i.e., the ACA Medicaid expansion)./24
Some individuals who are eligible for Medicaid are also eligible for Medicare. Individuals enrolled in both Medicaid and Medicare are referred to as dual eligibles. For more information about this population, see the textbox entitled "Dual Eligibles."
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Dual Eligibles
Individuals eligible for both Medicare and Medicaid (dual eligibles) are an important Medicaid subgroup because, due to their substantial health care needs, they account for a disproportionate share of Medicaid expenditures. Dual eligibles experience high rates of chronic illnesses, many need LTSS, and they often have social risk factors; 60% of dual eligibles have multiple chronic conditions, 49% receive LTSS, and 41% have at least one mental health diagnosis./25
Dual eligible enrollment has increased from 2006 to 2019 by an annual average of 2.8%, growing from 8.6 million in 2006 to 12.3 million in 2019./26
Dual eligible beneficiaries generally are Medicare beneficiaries whose low-income makes them also eligible to receive Medicaid benefits. Depending on their income and resources, dual eligibles may be fully or partially eligible for Medicaid. Partial benefit dual eligibles receive full Medicare benefits plus state Medicaid program assistance with some or all Medicare premiums and cost sharing. Full benefit dual eligibles receive full Medicare coverage, full Medicaid benefits, and coverage of Medicare premiums and cost sharing. In 2019, about 8.8 million of dual eligibles were fully eligible for Medicaid, while about 3.6 million received partial Medicaid benefits./27
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Financial Eligibility
Medicaid is also a means-tested program that is limited to those with financial need. However, the criteria used to determine financial eligibility--income and sometimes resource (i.e., asset) tests--vary by eligibility group.
For most eligibility groups the criteria used to determine eligibility are based on modified adjusted gross income (MAGI) income counting rules. There is no resource or asset test used to determine Medicaid financial eligibility for MAGI-eligible individuals./28
While MAGI applies to most Medicaid-eligible populations, certain populations such as older adults and individuals with disabilities are statutorily exempt from MAGI income counting rules. Instead, Medicaid financial eligibility for MAGI-exempted populations is based on the income counting rules that match the most closely related social program for the group involved (e.g., SSI program rules for aged, blind, or disabled eligibility groups). For MAGI-exempt eligibility groups, income disregards and assets or resource tests may apply.
Additional Eligibility Requirements for LTSS Coverage
Medicaid enrollees, many of whom qualify based on aged or disabled categorical criteria, may also have long-term care needs. In general, individuals in need of Medicaid-covered LTSS must also meet state-based functional and/or disease or condition-specific eligibility criteria. In other words, they must demonstrate the need for long-term care. There are certain pathways that establish eligibility to Medicaid-covered LTSS either for individuals receiving institutional care or for those who need the level of care provided in an institution and receive Medicaid-covered home and community-based services (HCBS)./29
Most states offer HCBS under waiver programs that operate outside of Medicaid state plan requirements (see the "Medicaid Program Waivers" section for more information).
Applicants seeking certain Medicaid-covered LTSS are also subject to a separate set of Medicaid financial eligibility rules in order to receive such services (e.g., limits on the value of home equity, asset transfer rules). These additional financial rules attempt to ensure that program applicants apply their assets toward the cost of their care and do not divest them to gain eligibility sooner than would occur otherwise.
In addition, Medicaid specifies rules for equitably allocating income and assets to non-Medicaid-covered spouses for the purposes of determining LTSS coverage eligibility for nursing facility services and some HCBS. Commonly referred to as spousal impoverishment rules, these rules are intended to prevent the impoverishment of the spouse who does not need LTSS./30
Medicaid Enrollment
Figure 2 shows historical and projected Medicaid enrollment for FY2000 through FY2020. The figure shows steady enrollment growth, especially among nondisabled children and adults as a result of the recessions in the early and late 2000s./31
During periods of economic downturn, Medicaid programs face enrollment increases at a faster rate because job and income losses make more people eligible./32
Content omitted: Figure 2. Past and Projected Medicaid Enrollment, by Population (FY2000-FY2020)
The implementation of the ACA Medicaid expansion in 2014 contributed to Medicaid enrollment increasing by an estimated 8.8% in FY2014 and 7.2% in 2015, and since then, the growth in Medicaid enrollment is estimated to have slowed to 3.3% in FY2016, 1.7% in FY2017, and 0.7% in FY2018./33
Medicaid enrollment growth was projected to remain at 1.1% from FY2019 through FY2027 prior to the onset of the recession due to the Coronavirus Disease 2019 (COVID-19) pandemic in
The current recession has increased the rate of growth for Medicaid enrollment./34
From
The percent change in Medicaid enrollment has varied by state.
Share of Enrollment Versus Expenditures, by Population
Different Medicaid enrollment groups have very different service utilization patterns. Larger enrollment groups account for a smaller proportion of Medicaid expenditures, while some smaller enrollment groups are responsible for a larger proportion of Medicaid expenditures. As shown in Figure 3, for FY2017, together Medicaid enrollment for children, non-expansion adults, and expansion adults comprised 77% of Medicaid enrollment but accounted for only 46% of Medicaid's total benefit spending. In contrast, together the disabled and aged populations represented about 23% of Medicaid enrollment but accounted for a larger share of Medicaid benefit spending (54%). While these statistics vary somewhat from year to year and state to state, the patterns described above generally hold true across years.
Content omitted: Figure 3. Estimated Medicaid Enrollment and Expenditures for Benefits, by
Benefits
Medicaid coverage includes a wide variety of preventive, primary, and acute care services as well as LTSS./36
Not everyone enrolled in Medicaid has access to the same set of services. An enrollee's eligibility pathway determines the available services within a benefit package. Federal law provides two primary benefit packages for state Medicaid programs: (1) traditional benefits and (2) alternative benefit plans (ABPs). Each of these packages is summarized in Table 1. For the medically needy subgroup, states may offer a more restrictive benefit package than is available to other enrollees. In addition, states can use waiver authority (e.g., SSA Section 1115) to tailor benefit packages to specified Medicaid subgroups as well as offer services outside traditional or ABP coverage, such as LTSS (see "Medicaid Program Waivers" for more information about Section 1115 waivers).
Content omitted: Table 1. Examples of Medicaid Mandatory and Optional Benefits for Traditional Benefits and Alternative Benefit Plans (ABPs)
In general, when Medicaid enrollees have other sources of insurance/payment (including Medicare), Medicaid is the payer of last resort. States can provide Medicaid coverage to individuals whose existing health insurance is limited (sometimes referred to as underinsured). In these cases, Medicaid wraps around that coverage (i.e., additional coverage for services covered under Medicaid but not under the other source of coverage)./37
The following sections summarize Medicaid traditional benefits and ABPs. Then, there is a section comparing benefits included in traditional Medicaid coverage and those that are commonly included in ABPs.
Traditional Medicaid Benefits
Traditional Medicaid benefits include primary and acute care as well as LTSS. The traditional Medicaid program requires states to cover a wide array of mandatory services (e.g., inpatient hospital care, lab and x-ray services, physician care, nursing facility services for individuals aged 21 and older). In addition, states may provide optional services, some of which commonly are covered (e.g., personal care services, prescription drugs, clinic services, physical therapy, and prosthetic devices).
States define the specific features of each covered benefit within four broad federal guidelines:
* Each service must be sufficient in amount, duration, and scope to reasonably achieve its purpose. States may place appropriate limits on a service based on such criteria as medical necessity.
* Within a state, services available to the various population groups must be equal in amount, duration, and scope. This requirement is the comparability rule.
* With certain exceptions, the amount, duration, and scope of benefits must be the same statewide, referred to as the statewideness rule.
* With certain exceptions, enrollees must have freedom of choice among health care providers.
The breadth of coverage for a given benefit can, and does, vary from state to state, even for mandatory services. For example, states may place different limits on the amount of inpatient hospital services a beneficiary can receive in a year (e.g., up to 15 inpatient days per year in one state versus unlimited inpatient days in another state)--as long as applicable requirements are met regarding sufficiency of amount, duration, and scope; comparability; statewideness; and freedom of choice. Exceptions to state limits may be permitted under circumstances defined by the state.
Alternative Benefit Plans
As an alternative to providing all the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171) gave states the option to enroll state-specified groups in what was referred to as benchmark or benchmark-equivalent coverage but currently are called alternative benefit plans (ABPs)./38
Under ABPs, states must provide comprehensive benefit coverage that is based on a coverage benchmark rather than a list of discrete items and services as under traditional Medicaid.
ABPs must qualify as either benchmark or benchmark-equivalent coverage. Under benchmark coverage, ABP benefits are at least equal to one of the statutorily specified benchmark plans (i.e., one of three commercial health insurance products, or a fourth "Secretary-approved" coverage option)./39
Under benchmark-equivalent coverage, ABP benefits include certain specified services and the overall benefits are at least actuarially equivalent to one of the statutorily specified benchmark coverage packages.
Unlike traditional Medicaid benefit coverage, coverage under an ABP must include at least the essential health benefits (EHBs) that most plans in the private health insurance market are required to furnish./40
In addition, ABPs must include a variety of specific services, including services under Medicaid's EPSDT benefit; family planning services and supplies; and both emergency and nonemergency transportation to and from providers. In general, the EHBs do not include LTSS. However, states may choose to include LTSS in their ABPs.
Under ABPs, states are permitted to waive the statewideness and comparability requirements that apply to traditional Medicaid benefits. This flexibility permits the state to define populations that are served and the specific benefit packages that apply.
States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage to the individuals eligible for Medicaid through the expansion (with exceptions for selected special-needs subgroups). Specific populations are exempt from mandatory enrollment in ABPs (e.g., those with special health care needs such as disabling mental disorders or serious and complex medical conditions). These individuals must be offered the option of a benefit plan that includes traditional Medicaid state plan services, which may include LTSS.
Comparing Traditional Medicaid Benefits to ABPs
It is difficult to draw comparisons about the ways in which traditional Medicaid benefits are similar to and different from ABP benefits, because the scope of each type of benefit package varies from state to state. This variability is largely a reflection of state choices in covering optional benefits, in addition to the mandatory Medicaid state plan benefits, as well as state choices for the base-benchmark for the EHBs that must be covered under ABPs.
However, differences in the federal laws regarding the scope of required benefits under traditional Medicaid and those required under ABPs highlight some common differences between the two types of benefits packages. For example, care in a nursing facility for individuals over the age of 21 is a required benefit under traditional Medicaid, whereas nursing home care is not a required benefit under ABPs.
Conversely, rehabilitative and habilitative services and devices, preventive and wellness services, and mental health and substance use disorder services are all required benefits under ABPs. By contrast, these APB benefit categories do not correspond to specific benefit categories under traditional Medicaid. Rather, services in these benefit categories could be covered under different benefit categories, such as physician services or physical, occupational, and speech therapy services.
To further illustrate this point, behavioral health (or any similar term) is not explicitly included among the required benefit categories under traditional Medicaid. Instead, most types of behavioral health benefits (e.g., the services of clinical psychologists and licensed clinical social workers and prescription drugs) are optional. By contrast, behavioral health benefits are mandatory under ABPs because "mental health and substance use disorder services, including behavioral health treatment" are included among the EHBs.
Medicaid Service Spending
Figure 4 below shows the nationwide distribution of Medicaid expenditures across broad categories of service for FY2019. These data illustrate that 49% of benefit spending was for capitated payments under managed care arrangements (see "Service Delivery Systems" for information about managed care). The remaining 51% of benefit spending was FFS, and FFS spending on acute care services and LTSS each accounted for 20% of Medicaid benefit spending.
Content omitted: Figure 4. Medicaid Medical Assistance Expenditures, by Service Category (FY2019)
Beneficiary Cost Sharing
Federal statutes and regulations address the circumstances under which enrollees may share in the costs of Medicaid, both in terms of participation-related cost sharing (e.g., monthly premiums) and point-of-service cost sharing (e.g., co-payments [i.e., flat dollar amounts paid directly to providers for services rendered])./41
States can require certain beneficiaries to share in the cost of Medicaid services, but there are limits on (1) the amounts that states can impose, (2) the beneficiary groups that can be required to pay, and (3) the services for which cost sharing can be charged./42
In general, premiums and enrollment fees often are prohibited. However, premiums may be imposed on certain enrollees, such as individuals with incomes above 150% of FPL, certain working individuals with disabilities, and certain children with disabilities.
States can impose cost sharing at the point of service, such as co-payments,/43 coinsurance,/44 deductibles,/45 and other similar charges, on most Medicaid-covered benefits up to federal limits that vary by income. Some subgroups of beneficiaries are exempt from cost sharing (e.g., children under 18 years of age and pregnant women).
The aggregate cap on participation-related cost sharing (e.g., monthly premiums) and point-of-service cost sharing (e.g., co-payments) is generally up to 5% of monthly or quarterly household income./46
In addition, beneficiaries receiving certain Medicaid-covered LTSS are required to apply their income exceeding specified amounts toward the cost of their care. These reductions from a beneficiary's income are referred to as post-eligibility treatment of income and are not subject to the 5% aggregate cost-sharing cap described above./47 The amounts a beneficiary may retain for their personal use vary by care setting (i.e., nursing facility versus home and community-based).
Service Delivery Systems
In general, most benefits to Medicaid enrollees are delivered and paid for via two service delivery systems: fee-for-service (FFS) or managed care. Under the FFS delivery system, health care providers are paid by the state Medicaid program for each service provided to a Medicaid enrollee. Under the managed care delivery system, Medicaid enrollees get some or all of their services through an organization under contract with the state.
States traditionally have used the FFS service delivery model for Medicaid, but since the 1990s, the share of Medicaid enrollees covered by the managed care model has increased dramatically. Initially, states used managed care to deliver health care services to the healthiest Medicaid populations, including children and parents. However, recently, more states are turning to managed care for their aged and disabled populations.
There are three main types of Medicaid managed care:
* Comprehensive risk-based managed care--states contract with managed care organizations (MCOs) to provide a comprehensive package of benefits to certain Medicaid enrollees. States usually pay the MCOs on a capitated basis, which means the states prospectively pay the MCOs a fixed monthly rate per enrollee to provide or arrange for most health care services. MCOs then pay providers for services to enrollees.
* Primary care case management (PCCM)--states contract with primary care providers to provide case management services to Medicaid enrollees. Typically, under PCCM, the primary care provider receives a monthly case management fee per enrollee for coordination of care, but the provider continues to receive fee-for-service payments for the medical care services utilized by Medicaid enrollees.
* Limited benefit plans--these plans look like MCOs in that states usually contract with a plan and pay it on a capitated basis. The difference is that limited benefit plans provide only one or two Medicaid services (e.g., behavioral health or dental services).
As of
Two states (
The most prevalent type of managed care is the comprehensive risk-based managed care that is provided through MCOs, with 70% of Medicaid enrollees with comprehensive risk-based managed care as of
States' use of comprehensive risk-based managed care varies significantly, as shown in Figure 5.
Content omitted: Figure 5. Percentage of Medicaid Enrollees with Comprehensive Risk-Based Managed Care, by State
Financing
The federal government and the states jointly finance Medicaid./51
The federal government reimburses states for a portion (i.e., the federal share) of each state's Medicaid program costs. Because federal Medicaid funding is an open-ended entitlement to states, there is no upper limit or cap on the amount of federal Medicaid funds a state may receive. In FY2019, Medicaid expenditures totaled
Federal Share
The federal government's share of most Medicaid expenditures is established by the federal medical assistance percentage (FMAP) rate, which generally is determined annually and varies by state according to each state's per capita income relative to the
The formula provides higher FMAP rates, or federal reimbursement rates, to states with lower per capita incomes, and it provides lower FMAP rates to states with higher per capita incomes.
FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%. /54
For a state with an FMAP of 60%, the state gets
During the COVID-19 public health emergency period, the Family First Coronavirus Response Act (FFCRA; P.L. 116-127) provides a 6.2-percentage-point increase to the regular FMAP rates for all states, the
The FFCRA FMAP increase began on
The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures, but exceptions to the regular FMAP rate have been made for certain states (e.g., the
While most federal Medicaid funding is provided on an open-ended basis, certain types of federal Medicaid funding are capped. For instance, federal disproportionate share hospital (DSH)/58 funding to states cannot exceed a state-specific annual allotment. Also, Medicaid programs in the territories (i.e.,
State Share
The federal government provides broad guidelines to states regarding allowable funding sources for the state share (also referred to as the nonfederal share) of Medicaid expenditures. However, to a large extent, states are free to determine how to fund their share of Medicaid expenditures. As a result, there is significant variation from state to state in funding sources.
States can use state general funds (i.e., personal income, sales, and corporate income taxes) and other state funds (e.g., provider taxes,/60 local government funds, tobacco settlement funds, etc.) to finance the state share of Medicaid. Federal statute allows as much as 60% of the state share to come from local government funding./61
Federal regulations also stipulate that the state share not be funded with federal funds (Medicaid or otherwise)./62
In state fiscal year 2019, on average, 73% of the state share of Medicaid expenditures was financed by state general funds, and the remaining 27% was financed by other state funds./63
Expenditures
Enrollment increases due to expansions of eligibility and economic downturns account for much of Medicaid's expenditure growth over time. However, Medicaid expenditures are influenced by economic, demographic, and programmatic factors. Economic factors include health care prices, unemployment rates,/64 and individuals' wages. Demographic factors include population growth and the age distribution of the population. Programmatic factors include state decisions regarding optional eligibility groups, optional services, and provider payment rates. Other factors include the number of eligible individuals who enroll, utilization of covered services, and enrollment in other health insurance programs (including Medicare and private health insurance).
Figure 6 shows actual Medicaid expenditures from FY1997 to FY2019 and projected Medicaid expenditures from FY2020 through FY2027 broken down by state and federal expenditures. In FY2019, Medicaid spending on services and administrative activities in the 50 states, the
Medicaid expenditures are estimated to grow to
Content omitted: Figure 6. Federal and State Actual and Projected Medicaid Expenditures (FY1997-FY2027)
Historically, in a typical year, the average federal share of Medicaid expenditures was about 57%, which means the average state share was about 43%. However, the federal government's share of Medicaid expenditures increased with the implementation of the ACA Medicaid expansion, because the federal government is funding a vast majority of the cost of the expansion through the enhanced federal matching rates./67
In FY2019, the average federal share of Medicaid is estimated to have been 65%./68
The federal share of Medicaid expenditures were projected to decrease to 62% for FY2020 through FY2027./69
However, these estimates were prepared prior to the COVID-19 public health emergency. With the FFCRA 6.2-percentage-point increase to the FMAP rates, the federal share of Medicaid is expected to be higher than previously estimated.
Medicaid Program Waivers
The Social Security Act authorizes several waiver and demonstration authorities to provide states with the flexibility to operate their Medicaid programs. Waiver authorities permit states to disregard certain requirements and operate their programs outside of Medicaid rules. Each waiver authority has a distinct purpose and specific requirements. Under the various waiver authorities, states may try new or different approaches to the delivery of health care services or adapt their programs to the special needs of particular geographic areas or groups of Medicaid enrollees. The primary Medicaid waiver authorities include the following:
* Section 1115 Research and Demonstration Projects--SSA Section 1115 authorizes the HHS Secretary to waive Medicaid requirements contained in SSA Section 1902 (including but not limited to rules regarding freedom of choice of provider, comparability of services, and statewideness) and/or provide expenditure authority for expenditures that do not otherwise qualify for federal financial participation under SSA Section 1903 (referred to as costs not otherwise matchable) in order to permit states to conduct experimental, pilot, or demonstration projects that, in the judgment of the Secretary of HHS, are likely to assist in promoting the objectives of the Medicaid program. States use this waiver authority in a variety of ways, for example, to change eligibility criteria to offer coverage to new groups of people; to condition Medicaid eligibility on an enrollee's ability to meet work or other community engagement requirements; to provide services that are not otherwise covered, to offer different service packages or a combination of services in different parts of the state (e.g., coverage of nonelderly adults who are patients in institutions for mental disease); /70 to cap program enrollment, and to implement innovative service delivery systems.
* Section 1915(b) Managed Care/Freedom of Choice Waivers--SSA Section 1915(b) authorizes the HHS Secretary to waive the freedom of choice of provider requirement to establish mandatory managed care programs or otherwise limit enrollees' choice of providers./71
* Section 1915(c) Home and Community-Based Services Waivers--SSA Section 1915(c) authorizes the HHS Secretary to waive requirements regarding comparability of services and state wideness in covering a broad range of HCBS (including services not available under the Medicaid state plan) for certain persons with LTSS needs. States also may waive certain income and resource rules applicable to persons in the community, which means that a spouse's or parent's income and, to some extent, resources are not considered available to the applicant for the purposes of determining Medicaid financial eligibility. States may use Section 1915(c) concurrently with other waiver authorities. For example, states may combine Sections 1915(b) and 1915(c) authorities to offer mandatory managed care for HCBS.
During public health emergencies, additional waiver authorities are available under the Medicaid program (see textbox "Emergency-Related Authorities").
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Emergency-Related Authorities
Medicaid plays a critical role in helping states respond to public health emergencies (e.g., the COVID-19 public health emergency), as well as natural and human-made disasters. The
Key emergency statutory and waiver authorities include the following:/73
Disaster Relief State Plan Amendments. State plan amendments allow states to revise Medicaid eligibility, enrollment, and benefit requirements in their state plan for the duration of a disaster or emergency.
Disaster-Related Section 1115 Waivers. In an emergency, Section 1115 waivers may be approved without regard to normal process-related requirements and do not need to be budget neutral to the federal government.
Section 1915(c) Appendix K Waivers. Appendix K is a stand-alone appendix that states may use during emergency situations to request amendments to existing 1915(c) Home and Community Based waivers.
Section 1135 Waivers. When certain emergency conditions are met, Section 1135 waivers allow the
* * *
States often operate multiple waiver programs with their state plans. Key characteristics of these primary Medicaid waiver authorities compared with state plan requirements are summarized in Table 2. The statutory requirements that may be waived under each type of waiver are different, but all types of waivers are time limited and approvals are subject to reporting and evaluation requirements. In addition, all types of waivers must comply with various financing requirements (e.g., budget neutrality,/74 cost-effectiveness,/75 or cost-neutrality/76).
Content omitted: Table 2. Key Characteristics of the Primary Medicaid Waiver Authorities Compared to State Plan Requirements
Provider Payments
For the most part, states establish their own payment rates for Medicaid providers. Federal statute requires that these rates be consistent with efficiency, economy, and quality of care and sufficient to enlist enough providers so that covered benefits are available to Medicaid enrollees at least to the same extent they are available to the general population in the same geographic area. /77
This is known as the equal access provision.
Reducing Medicaid provider rates has been an option states have favored in the past to manage Medicaid program costs because the reduction does not directly impact Medicaid enrollees, and the savings from provider rate reductions impact the state budget relatively quickly./78
However, during the current recession, some Medicaid providers, such as physicians or clinics, have experienced revenue losses due to lower utilization of services (e.g., preventive services) during the COVID-19 pandemic, as other providers, such as certain hospitals and nursing homes, have experienced increased costs during the pandemic. Reductions to Medicaid provider rates might put additional financial stress on both types of providers.
In some cases, states make supplemental payments to Medicaid providers that are separate from, and in addition to, the payment rates for services rendered to Medicaid enrollees. Medicaid DSH payments are one type of supplemental payment, and federal statute requires that states make Medicaid DSH payments to hospitals treating large numbers of low-income patients./79
States also are permitted to make non-DSH supplemental payments to providers, but these payments must adhere to upper payment limits (UPLs) for certain institutional providers./80
The institutions subject to the UPL requirement are hospitals (separated into inpatient services and outpatient services), nursing facilities, intermediate care facilities for individuals with intellectual disabilities, and freestanding nonhospital clinics./81
Program Integrity
State Medicaid programs are required to conduct a number of program integrity activities to prevent improper payments resulting from waste, fraud, and abuse./82
Some federal requirements, such as screening providers and suppliers before they enroll in state Medicaid programs, are intended to prevent improper payments from occurring,/83 while other requirements ensure states identify and recover overpayments made to providers and suppliers. /84
State Medicaid programs have primary responsibility for preventing and, when necessary, recovering improper payments due to fraud, waste, abuse. State Medicaid agencies operate program integrity units. In addition, states operate Medicaid Fraud Control Units (MFCUs), generally through state attorney general offices. MFCUs are responsible for investigating fraud as well as patient abuse and neglect in facilities that receive state Medicaid payments. /85
Federal agencies responsible for Medicaid program integrity include CMS and the
OIG has broad program integrity enforcement authority for all federal health care programs, including Medicaid./87
The federal government and states contribute equally to fund most state-based Medicaid program integrity activities, although for some activities, the federal government provides additional funds through enhanced FMAP rates. As mentioned earlier, all states receive the same FMAP rate for administrative expenditures, including most program integrity activities, which generally is 50%. States receive higher FMAP rates for selected administrative activities, such as 90% for the startup of MFCUs and 75% for ongoing MFCU operation.
Additional Medicaid Resources
This section provides links to a number of Medicaid resources grouped by selected
Selected CRS Products
Overview
* CRS In Focus IF10322, Medicaid Primer
Eligibility
* CRS In Focus IF10399, Overview of the ACA Medicaid Expansion
* CRS Report R46111, Medicaid Eligibility: Older Adults and Individuals with Disabilities
* CRS In Focus IF11010, Medicaid Coverage for Former Foster Youth Up to Age 26
Benefits
* CRS Report R45412, Medicaid Alternative Benefit Plan Coverage: Frequently Asked Questions
* CRS Report R43328, Medicaid Coverage of Long-Term Services and Supports
* CRS In Focus IF11545, Overview of Federally Certified Long-Term Care Facilities
* CRS Report R43778, Medicaid Prescription Drug Pricing and Policy
* CRS In Focus IF10222, Medicaid's Institutions for Mental Disease (IMD) Exclusion
* CRS In Focus IF11664, Medicaid Telehealth Policies in Response to COVID-19
Financing
* CRS Report R42640, Medicaid Financing and Expenditures
* CRS Report R43847, Medicaid's Federal Medical Assistance Percentage (FMAP)
* CRS Report R46346, Medicaid Recession-Related FMAP Increases
* CRS In Focus IF11012, Medicaid Financing for the Territories
* CRS Report R42865, Medicaid Disproportionate Share Hospital Payments
* CRS In Focus IF10422,
* CRS Report R45432, Medicaid Supplemental Payments
COVID-19
* CRS In Focus IF11664, Medicaid Telehealth Policies in Response to COVID-19
* CRS Report R46346, Medicaid Recession-Related FMAP Increases
* CRS In Focus IF11686, Impact of the Recession on Medicaid
* CRS Legal Sidebar LSB10430, Section 1135 Waivers and COVID-19: An Overview
* CRS Report R46481, COVID-19 Testing: Frequently Asked Questions
* CRS In Focus IF11523, Health Insurance Options Following Loss of Employment
Other CRS reports on Medicaid are available at https://www.crs.gov/search/#/?termsToSearch= medicaid.
Laws
Most federal Medicaid law is in SSA Title XIX (as amended): https://www.govinfo.gov/content/pkg/COMPS-8765/pdf/COMPS-8765.pdf
SSA Title XIX is codified in the
SSA Title XI has several general provisions relevant to Medicaid, including, for example, provisions on demonstration projects, the
SSA Title XI is codified in the
The entire SSA, as amended, is also available in a compilation from the
Reference Guide to Federal Medicaid Statute and Regulations (Medicaid and
Regulations
Most federal Medicaid regulations are in Title 42 of the Code of Federal Regulations (42 C.F.R. Sec.Sec.430.0 to 456.725): https://ecfr.federalregister.gov/current/title-42/chapter-IV/subchapter-C
Reference Guide to Federal Medicaid Statute and Regulations (Medicaid and
In addition to federal laws and regulations, CMS issues sub-regulatory program guidance through publications such as
* informational bulletins and letters to State Medicaid Directors https://www.medicaid.gov/federal-policy-guidance/index.html
* the State Medicaid Manual https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/PaperBased-Manuals-Items/CMS021927.html
* frequently asked questions https://www.medicaid.gov/faq/index.html
More Information
* Medicaid is administered at the federal level by CMS in HHS: https://www.cms.gov/
*
* The federal Medicaid and
* MACPAC, Medicaid 101: https://www.macpac.gov/medicaid-101/
* CMS, "Medicaid": https://www.medicaid.gov/medicaid/index.html
* MACPAC's "MACStats" compiles key national and state statistics from a variety of sources: https://www.macpac.gov/macstats/
* CMS Fast Facts has national statistics on beneficiaries, expenditures, and services: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trendsand-Reports/CMS-Fast-Facts/index.html Each state operates its own Medicaid programs within federal guidelines.
* Links to information on each state's Medicaid program: https://www.medicaid.gov/state-overviews/index.html
* Links to each state's Medicaid website and contact information; scroll to "2. Through your state Medicaid agency": https://www.healthcare.gov/medicaid-chip/
* * *
View report, figures and footnotes at https://crsreports.congress.gov/product/pdf/R/R43357
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