Medicaid is the U.S. government’s public insurance program designed to offer medical coverage to eligible low-income residents.

How Medicaid Works

Medicaid is a government-run health care program that provides free or low-cost medical coverage to qualifying individuals and families. The program is administered jointly by the federal and state governments, each of which contributes funds and sets eligibility requirements.

Medicaid is one of the most extensive social welfare programs in the United States, providing health care coverage to more than 80 million people nationwide.

It’s a needs-based program, meaning that only low-income people are eligible for coverage.

Each state manages its own Medicaid program to determine the type, duration, amount, and scope of health services within the larger federal guidelines.

Medicaid eligibility qualifications vary by state, but most are based on your:

  • Household income
  • Family size and status
  • Disability status

In states with expanded Medicaid programs, you qualify based only on your income. For example, if you live in a state with expanded Medicaid and your income is below 133% of the federal poverty level, you’ll likely qualify for coverage.

When you apply for Medicaid, you’ll be required to provide proof of your income and copies of legal documents such as your birth certificate and Social Security card. Requirements may vary from state to state.

Example of Medicaid Works

For example, let’s say you apply for coverage in Georgia. You’ll complete the application through the state’s website or apply by phone, mail, or in person. As a part of the application process, you’ll submit any required paperwork. A Medicaid specialist then reviews your application and decides your eligibility. If you’re approved for coverage, you’ll get your Medicaid card in the mail and can begin receiving care.

Many states will enroll you in a privately managed care plan, through which you’ll have an assigned primary care provider (PCP) and must get a referral if you need specialist care. ​If you’re not enrolled in a managed care plan, your Medicaid will work on a fee-for-service (FFS) system. In this model, the state pays providers directly for your covered service instead of paying a fee to your managed care plan.

Medicaid vs. Medicare

Available to U.S. citizens and qualified non-citizens of all ages who meet other eligibility guidelinesAvailable to U.S. citizens and lawfully present immigrants over the age of 65, and some younger people with qualifying disabilities
Patients typically don’t pay for covered medical expenses, but sometimes may pay a small amount out of pocketPatients pay for part of their care out of pocket, including deductibles, copays, and coinsurance
Run by both state and federal governments, so coverage varies between statesFederal program that’s the same throughout the country
Accepts applications anytimeAccepts applications during specific enrollment periods

Medicaid and Medicare have similar names, and they’re both health insurance programs run by the government. However, these programs are quite different.

Medicare is designed to assist older U.S. citizens and qualified immigrants. In most cases, you must be at least 65 years old to qualify for Medicare coverage, although certain younger people may be eligible based on their disability status. In contrast, Medicaid provides coverage for U.S. citizens and qualified non-citizens of all ages, as long as they meet the eligibility guidelines.

Another key difference is the amount of money you’ll have to pay out of pocket. With Medicare, you’ll be responsible for copays, coinsurance, and deductibles. However, Medicaid participants often don’t have to pay anything. If there are fees, they’re kept to a nominal level.

Since Medicare is run at the federal level, it works the same, no matter where you live. Medicaid is managed by the federal and state governments, which means eligibility and coverage vary by state.

In addition, you can only apply for Medicare at certain times, beginning with your initial enrollment period.

There are no limitations on when you can apply for Medicaid coverage.

What Does Medicaid Cover?

Medicaid coverage varies from state to state. However, all states must provide certain mandatory items, such as:

  • Inpatient and outpatient hospital care
  • Doctor visits
  • Family-planning services
  • Laboratory and X-ray services
  • Home health services
  • Transportation to medical appointments

States may decide to cover optional services such as:

  • Dental care
  • Vision care
  • Prescription drugs
  • Chiropractic services
  • Hospice care
  • Rehabilitative services

Medicaid expansion for adults covers the 10 essential health services defined by the Affordable Care Act.

 Long-term care and home and community-based services (HCBS) are also covered. These programs help patients stay active and independent in their homes and communities.

Frequently Asked Questions (FAQs)

Who qualifies for Medicaid?

Medicaid qualifications are determined by states. If you live in a state with expanded Medicaid coverage, then you qualify if your household income is below 133% of the federal poverty level.

The federal government has an online tool to help you determine your eligibility based on details like where you live and how much you earn.

How is Medicaid funded?

Medicaid is jointly funded by both the federal government and state governments. There isn’t a specific tax for Medicaid like there is for Medicare, so the funds instead come from a variety of taxes, including taxes on health care providers.