Medicaid is a government health insurance program that covers medical costs for people with low incomes. It is jointly funded by the federal government and individual states, which means your tax dollars at both levels pay for it. Unlike private insurance you buy on your own or get through an employer, Medicaid is free or very low cost for people who qualify, and each state runs its own version of the program with different eligibility rules and benefits.
How Medicaid Works
The federal government sets minimum requirements that every state must follow, but states have significant flexibility in how they design their programs. They set their own eligibility standards, decide which benefits to offer beyond the federal minimum, determine how much to pay doctors and hospitals, and choose how to structure the program administratively. The result is effectively 56 different Medicaid programs across all states, territories, and the District of Columbia.
The federal government picks up a large share of the tab. The federal match rate ranges from 50 percent to 83 percent of a state’s Medicaid spending, depending on the state’s per capita income. Poorer states get a higher federal match. The remaining costs come from state budgets.
Who Qualifies for Medicaid
Eligibility is based primarily on income, measured as a percentage of the federal poverty level (FPL). Most states cover adults with incomes up to 138% of the FPL through the Affordable Care Act’s Medicaid expansion. Children typically qualify at higher income levels than adults, and pregnant women often qualify at even higher thresholds.
Beyond income, Medicaid serves specific groups: children and their parents or caretakers, pregnant women, elderly adults, and people with disabilities. Some states offer a Medicaid Buy-In program that lets working people with disabilities qualify at higher income levels, sometimes up to 250% of the FPL. Each state also has rules about resources like savings accounts and property, though many categories of applicants face no asset test at all.
If your income is slightly above your state’s limit, some states allow what’s called a “spend down.” You subtract qualifying medical expenses you’ve already paid from your income until the remaining amount falls below the Medicaid threshold. It works somewhat like a deductible: once your out-of-pocket medical costs are high enough, Medicaid kicks in.
One upcoming change: starting January 1, 2027 (or earlier in some states), certain adults will need to complete at least 80 hours per month of work or other approved activities to qualify for Medicaid and maintain coverage.
What Medicaid Covers
Federal law requires every state Medicaid program to cover a core set of services. These mandatory benefits include:
- Hospital care: both inpatient stays and outpatient visits
- Doctor visits: services from physicians, nurse practitioners, and nurse midwives
- Lab work and X-rays
- Nursing facility care: long-term stays in skilled nursing homes
- Home health services: medical care delivered in your home
- Family planning services
- Pediatric screening and treatment: a comprehensive benefit for children called Early and Periodic Screening, Diagnostic, and Treatment (EPSDT), which covers virtually any medically necessary service for kids under 21
- Transportation to medical appointments
- Medication-assisted treatment for substance use disorders
- Freestanding birth center services
States can add optional benefits on top of this list. Many cover prescription drugs, dental care, vision services, physical therapy, and mental health treatment. The exact package varies by state, so two people on Medicaid in different states may have noticeably different coverage.
How You Actually Receive Care
Most states deliver Medicaid benefits through managed care plans rather than paying doctors directly for each visit. Under managed care, the state pays a private health insurance company a fixed monthly amount for each person enrolled. That company then manages your care, maintains a network of doctors and hospitals, and covers whatever services you need within your benefits.
This setup works similarly to employer-sponsored insurance: you get an insurance card, choose from in-network providers, and your plan handles the billing. The difference is that you pay little to nothing out of pocket.
Some states still use a fee-for-service model for certain populations, where the state pays providers directly each time you receive care. A few use a hybrid called primary care case management, where you’re assigned a primary care doctor who coordinates your medical needs and receives a small monthly fee for doing so, while individual services are still billed separately to the state.
How Medicaid Differs From Medicare
People often confuse the two because the names sound similar, but they serve different populations. Medicare is health insurance for people 65 and older (and some younger people with disabilities), regardless of income. Medicaid is for people with limited income, regardless of age. Medicare is funded and run entirely at the federal level, while Medicaid is a state-federal partnership.
Medicaid also covers services that Medicare typically does not, most notably long-term nursing home care and personal care services. This makes Medicaid the largest payer for long-term care in the country.
Some people qualify for both programs at the same time. These “dually eligible” individuals get the best of both: Medicare covers most medical services first, and Medicaid fills in the gaps by paying Medicare premiums, deductibles, and copayments. Dual-eligible individuals also automatically receive Extra Help, a federal program that reduces prescription drug costs under Medicare Part D.
How to Apply
You can apply for Medicaid through your state’s Medicaid agency, often online, by phone, by mail, or in person. Many states also process Medicaid applications through the federal Health Insurance Marketplace at HealthCare.gov. If your income qualifies, you may be enrolled immediately rather than waiting for an open enrollment period. Medicaid coverage can start as early as the month you apply, and in some cases it covers bills from up to three months before your application date.
You’ll generally need to provide proof of income, proof of residency in your state, identification, and your Social Security number. If you’re applying based on a disability, additional documentation of your condition may be required. Eligibility is typically reviewed once a year, at which point your state will ask you to verify that you still qualify.