Medicaid was created and is overseen by the federal government but run by the states. The program pays some or all of the cost of health care services for qualifying individuals. Legislation establishing Medicaid was passed by Congress and signed into law by President Lyndon Johnson as Title XIX of the Social Security Act in 1965.

Eligibility and Benefits

Medicaid is a means-tested entitlement program, which means that any person who meets the eligibility criteria cannot be turned down for benefits. The federal government requires that state programs cover certain people and gives states the option to cover others. Children, pregnant women, adults with dependent children, and those who are blind, aged, or disabled are generally eligible for Medicaid if they fall below certain income levels.

States provide a baseline of health services and benefits to their participants including hospital services, laboratory services, physician services, X-ray services, pregnancy-related services, and home health services. States also have the option to offer additional benefits in their health care plans such as dental insurance, prescription drugs, and hospice services.

Funding

Medicaid is administered by state governments. The federal government reimburses a portion of each state’s Medicaid costs. The level of federal reimbursement funding varies based on each state’s per capita income relative to the per capita income of the United States. For example, the state of New York received a 50% match from the federal government for every state dollar spent on their Medicaid program while Oklahoma received nearly a 60% match for state Medicaid spending for fiscal year 2017.

This is a great deal for state politicians and other state government officials. The state politician gets a “match” for each state dollar spent. Federal officials get an even better deal, since federal dollars are matched by state funds and federal officials retain ultimate power over the program. The reality, however, is that all the money comes from taxpayers who pay both state and federal taxes.

Federal law does not require states to participate in Medicaid. The nature of the program, however, makes it practically impossible for a state to opt out. This is because a state’s residents would continue paying federal taxes—which, in part, pay for Medicaid—even if a state declined to participate. Thus, every state has participated in some form since 1982.

Administering Medicaid

Each state administers its own Medicaid plan, which includes determining participant’s eligibility income cap, setting provider reimbursement rates, and processing claims. The Oklahoma Health Care Authority (OHCA) administers Oklahoma’s Medicaid programs, known as SoonerCare and Insure Oklahoma. According to the OHCA’s Fiscal Year 2017 Annual Report, 1,014,983 Oklahomans were enrolled in SoonerCare and Insure Oklahoma. Insure Oklahoma is a subsidized state program that offers health care coverage to low-income workers. Under this plan, health insurance premiums are funded in part by the state, employers, and employees. Those who are self-employed or temporarily unemployed are also eligible to purchase this subsidized health care coverage directly from the state.

The Scope of Medicaid Costs

In 2017, the U.S. Department of Health and Human Services recorded that more than 71 million Americans were enrolled in Medicaid. This entitlement program accounts for a large portion of state and federal government expenditures. Medicaid programs cost states and the federal government approximately $553.8 billion in fiscal year 2015. The federal government funded 63% while states paid for 37%. The National Association of State Budget Officers reported Medicaid spending accounted for over 20% of states’ general fund expenditures in fiscal year 2017. According to the Oklahoma Health Care Authority Annual Report, total state and federal expenditures for Oklahoma’s Medicaid programs were $5.2 billion in fiscal year 2017.

Medicaid and the Affordable Care Act

In 2010, the U.S. Congress passed the Patient Protection and Affordable Care Act (ACA). One component of this legislation mandated states to extend Medicaid to adults with no dependents whose income was below 133% of the federal poverty level. Most state Medicaid programs did not already cover this group of people. If states did not comply, all federal reimbursement funding for their general Medicaid program would be cut.

This component of the ACA was ruled unconstitutional by the U.S. Supreme Court in National Federation of Independent Business v. Sebelius. States do not have to opt into this specific expansion of Medicaid under the ACA. As of September 2018, 33 states have accepted the expansion of Medicaid. Oklahoma is among 17 states that have not expanded Medicaid coverage under the ACA.