Medicaid: A Primer

Elicia J. Herz
Specialist in Health Care Financing

In existence for 47 years, Medicaid is a means-tested entitlement program that financed the delivery of primary and acute medical services as well as long-term care to more than 69 million people in FY2011. The estimated annual cost to the federal and state governments was roughly $404 billion in FY2010. In comparison, the Medicare program provided health care benefits to nearly 48 million seniors and certain persons with disabilities, and cost roughly $523 billion in FY2010.

In its report The Budget and Economic Outlook: An Update, August 2011, the Congressional Budget Office (CBO) projects that Medicaid outlays will rise an average annual rate of 9.0% during the 2013-2021 period due to both demographic changes and an increase in enrollment beginning in 2014 as a result of significant program changes under the recent Patient Protection and Affordable Care Act (ACA). That enrollment increase is estimated to be roughly 17 million individuals by 2021. This legislation also increased the federal share of Medicaid program costs for selected groups of beneficiaries and particular services in future years. Because Medicaid represents a large component of federal mandatory spending, Congress is likely to continue its oversight of Medicaid’s eligibility, benefits, and costs.

Understanding the complex statutory and regulatory rules that govern Medicaid is further complicated by the fact that each state designs and administers its own version of the program 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 ACA makes both mandatory and optional changes to Medicaid along some of these dimensions.

This report describes the basic elements of Medicaid, focusing on the 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. Examples of both mandatory and optional eligibility groups and benefits as defined in the federal statute are described. Basic program statistics are also provided. Finally, selected legislative changes at the federal level via the ACA that affect Medicaid in significant ways are also described.


Date of Report: March 5, 2012
Number of Pages: 18
Order Number: RL33202
Price: $29.95

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