Medicaid helps more than 90 million low-income people in the U.S. get health care and long-term services.

The COVID-19 pandemic changed Medicaid spending and enrollment. In 2023, Medicaid programs faced new problems. Many enrollees could lose coverage as states end the continuous enrollment rule. 

States introduced the rule early in the pandemic to keep coverage stable. The pandemic also pushed policymakers to focus on reducing health gaps, expanding telehealth, improving behavioral health services, and solving workforce shortages. 

The Biden Administration is working to keep coverage steady, increase access, and close the coverage gap in states that did not expand Medicaid under the Affordable Care Act (ACA).

Congressional Republicans proposed reducing the deficit, limiting federal Medicaid spending, and adding work rules. 

A divided government and the recent bipartisan budget deal make major Medicaid changes unlikely soon.

States manage Medicaid with federal funding.

The federal and state governments split Medicaid expenses. States run their programs while following federal guidelines. They determine eligibility, covered services, care methods, and provider payments.

Some states request Section 1115 waivers to test new approaches if the Secretary of Health and Human Services (HHS) approves them. State flexibility leads to differences in Medicaid programs and coverage rates nationwide.

The federal government matches state spending on qualified services. The match rate depends on state income levels, starting at 50%. Some services and groups receive higher match rates. 

The ACA funds Medicaid expansion with a 90% federal match and the American Rescue Plan Act offers extra funds for states expanding Medicaid for the first time. In 2021, Medicaid spending reached $728 billion, with 69% from the federal government. 

Spending rises during economic downturns as more people enroll. Because of continuous enrollment policies, Medicaid costs grew after the ACA and during the pandemic.

Medicaid takes up a large portion of state budgets. However, state spending on Medicaid remains lower than that on elementary and secondary education. 

Medicaid also serves as the most significant federal funding source for states. In 2021, Medicaid accounted for 27% of total state spending, 15% from state funds, and 45% from federal funds.

Medicaid funds care for many groups and services.

Medicaid provides public health insurance for low-income people. Coverage includes more than one in five Americans, including those with high medical needs. Medicaid serves as the leading provider of long-term care in the U.S. 

The program also helps low-income Medicare beneficiaries by covering premiums, cost-sharing, and services not included in Medicare.

Federal and state Medicaid spending is nearly one-fifth of all personal health care spending. Medicaid significantly funds hospitals, community health centers, doctors, nursing homes, and long-term services.

Medicaid has changed over time.

Title XIX of the Social Security Act and federal rules govern Medicaid. The Centers for Medicare and Medicaid Services (CMS) oversees the program at the federal level.

States choose whether to participate, but those that do must follow federal rules. Some states delayed joining after Medicaid launched in 1965. 

By the 1980s, all states had joined. Medicaid originally linked eligibility to cash assistance programs such as Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI).

Over time, Congress expanded federal coverage rules, especially for children, pregnant women, and people with disabilities.

In 1996 AFDC ended and was replaced by Temporary Assistance for Needy Families (TANF). Medicaid eligibility for children, pregnant women, and low-income parents no longer depended on cash assistance.

The Children’s Health Insurance Program (CHIP) began in 1997 to cover children in low-income families who did not qualify for Medicaid.

The ACA expanded Medicaid in 2010 to cover nearly all adults earning up to 138% of the federal poverty level. A 2012 Supreme Court ruling made expansion optional for states. 

By April 2023, 41 states, including Washington, D.C., had expanded Medicaid. States that expand Medicaid receive a higher federal match rate. The ACA also required all states to modernize and streamline Medicaid enrollment.

During the COVID-19 pandemic, Congress required states to cover enrollees in exchange for extra federal funding. Enrollment increased by 23 million, reaching nearly 95 million by March 31, 2023. 

States that resumed disenrollments put millions at risk of losing Medicaid. Studies show that nearly two-thirds of people experienced a period without insurance after losing Medicaid. Policies that connect people to other coverage could lower that rate.

Medicaid plays a key role for specific groups.

Medicaid guarantees coverage to all who qualify. One in five people in the U.S. rely on Medicaid. Certain groups depend on Medicaid more than others.

In 2021, the program covered four in ten children, eight in ten children in poverty, one in six adults, and nearly half of adults in poverty. 

Black, Hispanic, and American Indian/Alaska Native (AIAN) children and adults enroll in Medicaid at higher rates than White individuals. Medicaid covers 43% of non-elderly adults with disabilities.

Medicaid pays for 41% of births, almost half of children with special health needs, five in eight nursing home residents, 23% of non-elderly adults with mental illness, and 40% of non-elderly adults with HIV.

The program also helps nearly one in five Medicare beneficiaries by covering premiums and services Medicare does not include, such as long-term care.

Among enrollees under 65, half are children. Most enrollees are people of color, 57% are female, and 70% belong to families with a worker. Many working adults in Medicaid do not receive employer health coverage or cannot afford it.

Medicaid covers health and long-term care services not included in other insurance.

Medicaid pays for a wide range of health services. Federal law requires states to cover some services, but states can add more. Every state covers prescription drugs. Most states also provide physical therapy, eyeglasses, and dental care. 

Medicaid offers comprehensive benefits for children through Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services. These benefits are essential for children with disabilities, offering more coverage than private insurance.

Unlike Medicare and private insurance, Medicaid funds non-emergency medical transportation to help enrollees reach appointments. 

Medicaid covers nursing home care and many home and community-based services (HCBS). Nursing home coverage remains mandatory, while most HCBS coverage remains optional.

Many states have expanded Medicaid benefits in recent years. Efforts include adding more behavioral health services and addressing social needs such as housing and nutrition assistance.

Medicaid’s High Costs Focus on Seniors and Disabled Individuals

Medicaid uses most of its money for people who qualify because they are 65 or older or have a disability.

They are only 20% of those in the program but make up more than half of the costs. Their higher medical needs and regular long-term care use cause this.

Medicaid spending varies across states. In 2019, Nevada spent the least per full-benefit enrollee at $4,873, while North Dakota spent the most at $10,573. These differences come from state-level decisions on benefits, provider payment rates, and program design. 

Costs also fluctuate based on each state’s population health and demographics. Even within states, per-person expenses vary widely, especially among people with disabilities, who often have the highest healthcare costs (Figure 6, tab 2).

Medicaid Expands Healthcare Access and Improves Outcomes

Studies confirm that Medicaid enrollees receive better healthcare than uninsured individuals. Many uninsured people skip or delay medical care due to high costs. 

Medicaid coverage reduces this barrier, and enrollees report access and satisfaction levels similar to private insurance (Figure 7). Federal laws also limit out-of-pocket costs, making care more affordable for low-income individuals.

Research links childhood Medicaid coverage to lifelong health benefits and higher educational achievement.

Expanding Medicaid for adults has also led to better access to care, improved self-reported health, lower death rates, and greater financial security.

Despite these benefits, challenges remain. Certain providers, such as psychiatrists and dentists, are less accessible.

While healthcare access issues exist across all insurance types, Medicaid faces additional hurdles due to lower provider payment rates and shortages in low-income areas. 

In 2021, only 74% of physicians accepted new Medicaid patients, compared to 88% for Medicare and 96% for private insurance. However, acceptance rates were higher in community health centers, mental health clinics, and government-run facilities.

Most Medicaid recipients receive care through managed care plans. By 2020, 70% of enrollees were in such plans, which must ensure provider availability under state contracts. In May 2023, the Biden Administration proposed new regulations to improve Medicaid service access, funding, and quality.

States Use 1115 Waivers to Test Medicaid Policy Changes

Medicaid’s Section 1115 waivers allow states to implement policy changes that do not follow federal rules. The Centers for Medicare & Medicaid Services (CMS) approves these waivers if they align with Medicaid’s objectives. 

States have used them to expand coverage, adjust healthcare delivery, and change financing methods. Most states have at least one active waiver, with many waiting for CMS approval (Figure 8).

The use of waivers has shifted under different administrations. During the Trump presidency, waivers focused on work requirements, behavioral health funding, and cost caps. 

The Biden Administration reversed work requirements, ended premium mandates, and encouraged waivers that expand coverage, reduce health disparities, and address social factors affecting health.

Some states have also requested extended Medicaid coverage for children and confident adults beyond the standard one-year limit.

Medicaid Plays a Key Role in Economic Crises and Public Emergencies

Medicaid enrollment rises during economic downturns, leading to increased spending when state tax revenues decline. To help cover costs, Congress has provided temporary federal funding increases, including during the COVID-19 pandemic. 

States that accepted extra funding had to pause Medicaid disenrollments, but this requirement ended on March 31, 2023. A gradual reduction of the financing now applies if states meet specific conditions (Figure 9).

States can also adjust Medicaid policies during public emergencies. Federal emergency powers allow states to expand services, add providers, and target resources where needed most. 

During COVID-19, all 50 states and Washington, D.C., received emergency approvals to improve healthcare access. States expanded telehealth, eligibility, and benefits while addressing workforce shortages in home and community-based services.

The end of the COVID-19 Public Health Emergency in May 2023 has long-term effects on coverage, costs, and access.

Many emergency policies will end, but some changes—such as expanded telehealth access, better coordination between state agencies, and improved data collection—are expected to remain in place.

Medicaid Receives Strong Public Support

Surveys show most Americans view Medicaid positively. Two-thirds of adults have some personal connection to the program.

Medicaid expansion is widely supported, with seven states approving it through ballot measures. In states that have not expanded Medicaid, two-thirds of residents favor expansion (Figure 10).

Public opinion on Medicaid varies by political affiliation. Most Democrats (79%) and independents (60%) consider it a government health insurance program, while 54% of Republicans see it as a welfare program.

However, Republicans with direct Medicaid experience are more likely to view it as a health insurance program.