Medicaid: An Overview
Updated February 22, 2021
Congressional Research Service
https://crsreports.congress.gov
R43357

Medicaid: An Overview

Summary
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute
medical services as wel as long-term services and supports (LTSS) to an estimated 75 mil ion
people at a cost to states and the federal government of $627 bil ion in FY2019. Medicaid is one
of the largest payers in the U.S. health care system, representing 16% of national health care
spending in CY2019; in that year, private health insurance and Medicare accounted for 31% and
21% of national health care spending, respectively.
Participation in Medicaid is voluntary for states; al states, the District of Columbia, and the
territories choose to participate. The federal government requires states to cover certain
mandatory populations and services, but the federal government also al ows states to cover other
optional populations and services. The Social Security Act authorizes several waiver (e.g.,
Section 1115, Section 1915(b), and Section 1915(c)) and demonstration authorities that al ow
states to operate their Medicaid programs outside of federal rules. Due to these flexibilities, there
is substantial variation among the states in terms of factors such as Medicaid eligibility, covered
benefits, and provider payment rates.
Historical y, Medicaid eligibility general y has been limited to low -income children, pregnant
women, parents of dependent children, the elderly, and individuals with disabilities; however,
since 2014, states have had the option to cover nonelderly adults with income up to 133% of the
federal poverty level (FPL) under the Patient Protection and Affordable Care Act (ACA; P.L. 111-
148, as amended) Medicaid expansion.
Medicaid coverage includes a variety of primary and acute-care services as wel as LTSS. Not al
Medicaid enrollees have access to the same set of services. An enrollee’s eligibility pathway
determines the available services within a benefit package. Federal law provides two primary
types of benefit packages for state Medicaid programs: (1) traditional benefits and (2) alternative
benefit plans (ABPs). Beneficiary cost sharing (e.g., premiums and co-payments) is limited under
the Medicaid program.
Medicaid enrollees general y receive benefits via one of two service delivery systems: fee-for-
service (FFS) or managed care. Under FFS, health care providers are paid by the state Medicaid
program for each service provided to a Medicaid enrollee. Under managed care, Medicaid
enrollees get some or al of their services through an organization under contract with the state.
Most states use a combination of FFS and managed care by using FFS for some populations and
managed care for other populations.
The federal government and the states jointly finance Medicaid. The federal government
reimburses states for a portion of each state’s Medicaid program costs. Federal Medicaid funding
is an open-ended entitlement to states, which means there is no upper limit or cap on the amount
of federal Medicaid funds a state may receive.
Medicaid provider payment rates are set by states within federal rules. In some cases, states make
supplemental payments to Medicaid providers that are separate from, and in addition to, the
payment rates for services rendered to Medicaid enrollees. Also, Medicaid program integrity
initiatives are designed to combat fraud, waste, and abuse in the Medicaid program.

Congressional Research Service

Medicaid: An Overview

Introduction
Medicaid is a joint federal-state program that finances the delivery of primary and acute medical
services, as wel as long-term services and supports (LTSS), to a diverse low-income population,
including children, pregnant women, adults, individuals with disabilities, and people aged 65 and
older.
State participation in Medicaid is voluntary; al states, the District of Columbia, and the
territories1 choose to participate. States must fol ow broad federal rules to receive federal
matching funds, but they have flexibility to design their own versions of Medicaid within the
federal statute’s basic framework. The Social Security Act (SSA) authorizes several waiver (e.g.,
Section 1115, Section 1915(b), and Section 1915(c)) and demonstration authorities that al ow
states to operate their Medicaid programs outside of federal rules. These flexibilities result in
variability across state Medicaid programs.
The federal government and the states jointly finance the Medicaid program. Federal Medicaid
spending is an entitlement, with total expenditures dependent on state policy decisions and use of
services by enrollees. Medicaid is an entitlement for both states and individuals. The Medicaid
entitlement to states ensures that, so long as states operate their programs within the federal
requirements, states are entitled to federal Medicaid matching funds. Medicaid also is an
individual entitlement, which means that anyone eligible and enrolled in Medicaid under his or
her state’s eligibility standards is guaranteed Medicaid coverage.
In FY2019, Medicaid is estimated to have provided health care services to an estimated 75
mil ion individuals at a total cost of $627 bil ion, with the federal government paying $405 bil ion
of that total.2 In comparison, the Medicare program provided health care benefits to nearly 61
mil ion individuals in that same year at a cost of roughly $782 bil ion.3
Medicaid provides a health care safety net for low-income populations,4 with approximately 20%
of the total U.S. population with Medicaid coverage in 2019.5 Medicaid plays a more significant
role for other certain subpopulations. For example, in 2019, Medicaid provided health coverage

1 T he five territories are American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico,
and the U.S. Virgin Islands.
2 T his enrollment figure is from Christopher J. T ruffer et. al., 2018 Actuarial Report on the Financial Outlook for
Medicaid, Office of the Actuary, Centers for Medicare & Medicaid Services (CMS), U.S. Department of Health &
Human Services (HHS), 2020, at https://www.cms.gov/files/document/2018-report.pdf. T he expenditures figures are
from CMS, CMS-64 data as of September 15, 2020.
3 T his enrollment figure is from HHS, FY 2020 Budget in Brief, March 19, 2019. T he expenditures figures are from
Boards of T rustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance T rust Funds, 2020
Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplem entary Medical
Insurance Trust Funds, Figure V.H4, April 22, 2020.
4 T he health care safety net consists of those organizations and programs, in both the public and private sectors, with a
legal obligation or a commitment to provide direct health care services to uninsured and underinsured populations.
5 U.S. Census Bureau, American Community Survey T ables for Health Insurance Coverage, T able HI -05, Health
Insurance Coverage Status and T ype of Coverage by State and Age for All People: 2019, at https://www.census.gov/
data/tables/time-series/demo/health-insurance/acs-hi.html.
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Medicaid: An Overview

for 38% of al children in the United States;6 in the same year, it provided health coverage for
58% of al nonelderly individuals with income below 100% of the federal poverty level (FPL).7
The percentage of individuals covered by Medicaid varies by race, ethnicity, or both, with
Medicaid providing coverage as shown in Figure 1. Among the nonelderly population (i.e.,
individuals under 65 years of age), Medicaid provided coverage for 15% of White individuals,
33% of Black individuals, 15% of Asians/Native Hawai ans and Pacific Islanders, 34% of
American Indians/Alaska Natives, 28% of individuals with multiple races, and 30% of Hispanic
individuals (who may be of any race) in 2019.8
Figure 1. Percent of Medicaid Coverage of the Nonelderly Population by
Race/Ethnicity
(2019)

Source: Henry J. Kaiser Family Foundation (KFF), Medicaid Coverage Rates for the Nonelderly by Race/Ethnicity,
State Health Facts, at https://www.kff.org/medicaid/state-indicator/nonelderly-medicaid-rate-by-raceethnicity/.
Notes: KFF estimates based on the 2019 American Community Survey (ACS), 1-Year Estimates. Includes those
covered by Medicaid, Medical Assistance, Children’s Health Insurance Plan (CHIP), or any kind of government-
assistance plan for those with low incomes or a disability, as wel as those who have both Medicaid and another
type of coverage, such as dual eligibles who are also covered by Medicare. Persons in the multiple race category
provided two or more of the fol owing race categories: White, Black, Asian, Native Hawai an or Other Pacific
Islander, or some other race. Persons of Hispanic origin may be of any race; al other racial/ethnic groups are
non-Hispanic.

6 U.S. Census Bureau, 2019 American Community Survey 1-Year Estimates, “Public Health Insurance Coverage by
T ype and Selected Characteristics,” T able S2704, at https://data.census.gov/cedsci/table?q=S2704&tid=
ACSST 1Y2019.S2704.
7 Henry J. Kaiser Family Foundation, Health Insurance Coverage of the Nonelderly (0-64) with Incomes below 100%
Federal Poverty Level (FPL), State Health Facts, at https://www.kff.org/other/state-indicator/nonelderly-up-to-100-fpl/.
8 Persons in the multiple race category provided two or more races in their response to the 2019 American Community
Survey. Persons of Hispanic origin may be of any race; all other racial/ethnic groups are non -Hispanic. (Henry J.
Kaiser Family Foundation (KFF), Medicaid Coverage Rates for the Nonelderly by Race/Ethnicity, State Health Facts,
at https://www.kff.org/medicaid/state-indicator/nonelderly-medicaid-rate-by-raceethnicity/.)
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For some types of services, Medicaid is a significant payer. For instance, in 2018, Medicaid
accounted for about 44% of national spending on LTSS.9 Medicaid paid for 42% of al births in
the United States in 2019.10 In FY2015, Medicaid accounted for 75% of public family planning
expenditures (including federal, state, and local government spending).11
Medicaid was enacted in 1965 as part of the same law that created the Medicare program (the
Social Security Amendments of 1965; P.L. 89-97). Medicaid was designed to provide coverage to
groups with a wide range of health care needs that historical y were excluded from the private
health insurance market (e.g., individuals with disabilities who require LTSS or indigent
populations in geographic locations where access to providers is limited). Because of the diversity
of the populations that Medicaid serves, Medicaid offers some benefits that typical y are not
covered by major insurance plans offered in the private market (e.g., institutional and home and
community-based LTSS or early and periodic screening, diagnosis, and treatment [EPSDT]
services).
Medicaid also pays for Medicare premiums and/or cost sharing for low -income seniors and
individuals with disabilities, who are eligible for both programs and referred to as dual-eligible
beneficiaries. For other Medicaid enrollees, cost sharing (e.g., premiums and co-payments)
general y are nominal, which may not be the case with coverage available through the private
health insurance market. The Medicaid program pays for services provided by special classes of
providers, such as federal y qualified health centers (FQHCs), rural health clinics (RHCs), and
Indian Health Service (IHS) facilities that provide health care services to populations in areas
where access to traditional physician care may be limited.
This report describes the basic elements of Medicaid, focusing on who is eligible, what services
are covered, how enrollees share in the cost of care, and how the program is financed. The report
also explains waivers, provider payments, and program integrity activities. At the end of the
report is a section with additional Medicaid resources.
Eligibility
Eligibility for Medicaid is determined by both federal and state law, whereby states set individual
eligibility criteria within federal minimum standards. As a result, there is substantial variability in
Medicaid eligibility across states. Therefore, the ways that an individual might qualify for
Medicaid are largely reflective of state policy decisions within broad federal requirements.
In general, individuals qualify for Medicaid coverage by meeting the requirements of a specific
eligibility pathway offered by the state. Some eligibility pathways are mandatory, meaning al
states with a Medicaid program must cover them; others are optional. Within this framework,
states are afforded discretion in determining certain eligibility criteria for both mandatory and
optional eligibility groups. In addition, states may apply to the Centers for Medicare & Medicaid
Services (CMS) for a waiver of federal law to expand health coverage beyond the mandatory and
optional eligibility groups specified in federal statute (see the “Medicaid Program Waivers”
section for more information).

9 Based on CRS analysis of National Health Expenditure Account (NHEA) data obtained from CMS, Office of the
Actuary, prepared December 2019.
10 Joyce A. Martin, Brady E. Hamilton, and Michelle J. K. Osterman, Births in the United States, 2019, National Center
for Health Statistics, Data Brief no. 387, October 2020, at https://www.cdc.gov/nchs/products/databriefs/db387.htm.
11 Guttmacher Institute, Publicly Supported Family Planning Services in the United States, Fact Sheet, October 2019, at
https://www.guttmacher.org/fact -sheet/publicly-supported-FP-services-US.
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Medicaid: An Overview

An eligibility pathway is the federal statutory reference(s) under SSA Title XIX that extends
Medicaid coverage to one or more groups of individuals.12 Each eligibility pathway specifies the
group of individuals covered by the pathway (i.e., categorical criteria), the financial requirements
applicable to the group (i.e., financial criteria),13 whether the pathway is mandatory or optional,
and the extent of the state’s discretion over the pathway’s requirements. Individuals in need of
Medicaid-covered LTSS must demonstrate the need for long-term care by meeting state-based
eligibility criteria for services, and they also may be subject to a separate set of Medicaid
financial eligibility rules in order to receive LTSS coverage. Al Medicaid applicants regardless of
their eligibility pathway must meet federal and state requirements regarding residency,
immigration status, and documentation of U.S. citizenship.14
Often an applicant’s eligibility pathway dictates the Medicaid state plan services that a given
program enrollee is entitled to (e.g., women eligible due to their pregnancy status are entitled to
Medicaid pregnancy-related services). When applying to Medicaid, an individual may be eligible
for the program through more than one pathway. In this situation, an individual is general y
permitted to choose the pathway that would be most beneficial in terms of the treatment of
income and sometimes assets when determining Medicaid eligibility, but also in terms of the
available benefits associated with each eligibility pathway.
Medicaid eligibility determinations general y apply for 12 months before an eligibility
redetermination must occur. Individuals may be retroactively eligible for Medicaid up to three
months prior to the month of application, if the individual received covered services and would
have been eligible had he or she applied during that period.15
The following sections describe Medicaid’s categorical and financial eligibility criteria as wel as
additional eligibility requirements for Medicaid covered-LTSS.
Categorical Eligibility
Medicaid categorical eligibility criteria are the characteristics that define the population
qualifying for Medicaid coverage under a particular eligibility pathway; in other words, the
nonfinancial requirements that an individual must meet to be considered eligible under an
eligibility group. Medicaid covers several broad coverage groups, including children, pregnant
women, adults, individuals with disabilities, and individuals 65 years of age and older (i.e., aged).
There are a number of distinct Medicaid eligibility pathways within each of these broad coverage
groups.
Historical y, Medicaid eligibility was limited to poor families with dependent children who
received cash assistance under the former Aid to Families with Dependent Children (AFDC)
program, as wel as poor aged, blind, or disabled individuals who received cash assistance under

12 Although most eligibility pathways are specified in T itle XIX of the Social Security Act (SSA), some pathways are
specified in other parts of the SSA, in other federal laws, or in regulations prescribed by CMS pursuant to authority
provided in the SSA. See SSA §1939.
13 Some groups, such as young people under the age of 26 who have aged out of foster care and individuals eligible
through the breast and cervical cancer treatment pathway, are eligible for Medicaid coverage without regard to income
and assets.
14 Federal Medicaid residency requirements can be found at SSA §§1902(a)(16), 1902(a) and 1902(b)(2). Federal
Medicaid eligibility requirements for non-citizens generally can be found at SSA §§401, 402(b), 403, 1137, and §421
of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA; P.L. 104-193). Federal Medicaid
citizenship documentation requirements can be found at SSA §§1902(a)(46), 1902(ee), 1903(x), and 1903(a)(3)(H).
15 SSA §1902(a)(34); 42 C.F.R. §435.916.
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Medicaid: An Overview

the Supplemental Security Income (SSI) program. Medicaid eligibility rules reflected these
historical program linkages both in terms of the categories of individuals who were served and in
that the financial eligibility rules were general y based on the most closely related social program
for the group involved (e.g., AFDC program rules for low-income families with dependent
children and pregnant women, and SSI program rules for aged, blind, or disabled).16 Over time,
Medicaid eligibility has expanded to al ow states to extend Medicaid coverage to individuals
beyond those who were eligible based on receipt of cash assistance, including the addition of the
ACA Medicaid expansion population (i.e., nonelderly adults with income up to 133% of FPL).17
Medicaid’s financial eligibility rules also have been modified over time for certain groups.18
If a state participates in Medicaid, the following are examples of eligibility groups that must be
provided Medicaid coverage:
 certain low-income families, including parents, that meet the financial requirements
of the former AFDC cash assistance program;
 pregnant women with annual income at or below 133% of FPL;
 children with family income at or below 133% of FPL;
 aged, blind, or disabled individuals who receive cash assistance under the SSI
program;19
 children receiving foster care, adoption assistance, or kinship guardianship
assistance under SSA Title IV–E;
 certain former foster care youth;20
 individuals eligible for the Qualified Medicare Beneficiary program;21 and
 certain groups of legal permanent resident immigrants.22

16 42 C.F.R. §435.601.
17 T he poverty guidelines (also referred to as the federal poverty level) are issued each year in the Federal Register by
HHS. T he guidelines, which are a simplification of the U.S. Census Bureau’s poverty thresholds, are used for
administrative purposes—for instance, determining financial eligibility for certain federal programs. T he 20 21 poverty
guidelines for an individual are $12,880 in the 48 contiguous states; $16,090 in Alaska; and $14,820 in Hawaii. For
more information, see HHS, ASPE, “ Poverty Guidelines,” as of January 15, 2021, at https://aspe.hhs.gov/poverty-
guidelines.
18 For more information, see CRS Report R43861, The Use of Modified Adjusted Gross Income (MAGI) in Federal
Health Program s.
19 For SSI recipients, states have the option to use certain eligibility criteria for Medicaid that are more restrictive than
SSI but no more restrictive than those criteria in effect on January 1, 1972. In these states, SSI receipt does not
automatically extend Medicaid eligibility. States that use this alternative to SSI program rules typically are referred to
as 209(b) states, which is the section of the Social Security Amendment s of 1972 (SSA 72; P.L. 92-603) that provided
this authority. In 2020, eight states provide Medicaid to SSI recipients using this method: Connecticut, Hawaii, Illinois,
Minnesota, Missouri, New Hampshire, North Dakota, and Virginia. (Medicaid and CHIP Payment and Access
Commission [MACPAC], MACStats: Medicaid and CHIP Data Book, Exhibit 37, December 20 20, at
https://www.macpac.gov/wp-content/uploads/2020/12/MACStats-Medicaid-and-CHIP-Data-Book-December-
2020.pdf.)
20 For more information, see CRS In Focus IF11010, Medicaid Coverage for Former Foster Youth Up to Age 26 .
21 Under the Qualified Medicare Beneficiary (QMB) program, Medicaid helps pay premiums, deductibles, coinsurance,
and co-payments for Medicare Part A, Medicare Part B, or both for dual-eligible individuals (i.e., individuals eligible
for both Medicare and Medicaid) with annual income less than 100% of the federal poverty level.
22 T hese groups also must meet all other Medicaid eligibility requirements and include refugees for the first seven years
after entry into the United States; asylees for the first seven years after asylum is granted; lawful permanent aliens with
40 quarters of creditable coverage under Social Security; and immigrants who are honorably discharged U.S. military
veterans.
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Medicaid: An Overview

Examples of eligibility groups to which states may provide Medicaid include the following:
 pregnant women with annual income between 133% and 185% of FPL;
 infants with family income between 133% and 185% of FPL;
 certain individuals who require institutional care and have incomes up to 300% of
the SSI federal benefit rate;
 certain medically needy individuals (e.g., children, pregnant women, aged, blind, or
disabled) who are otherwise eligible for Medicaid but who have incomes too high
to qualify and spend down their income on medical care;23 and
 nonelderly adults with income at or below 133% of FPL (i.e., the ACA Medicaid
expansion).24
Some individuals who are eligible for
Dual Eligibles
Medicaid are also eligible for Medicare.
Individuals eligible for both Medicare and Medicaid
Individuals enrolled in both Medicaid and
(dual eligibles) are an important Medicaid subgroup
Medicare are referred to as dual eligibles. For
because, due to their substantial health care needs,
they account for a disproportionate share of Medicaid
more information about this population, see
expenditures. Dual eligibles experience high rates of
the textbox entitled “Dual Eligibles.”
chronic il nesses, many need LTSS, and they often have
social risk factors; 60% of dual eligibles have multiple
chronic conditions, 49% receive LTSS, and 41% have at
Financial Eligibility
least one mental health diagnosis.25 Dual eligible
enrol ment has increased from 2006 to 2019 by an
Medicaid is also a means-tested program that
annual average of 2.8%, growing from 8.6 mil ion in
is limited to those with financial need.
2006 to 12.3 mil ion in 2019.26
However, the criteria used to determine
Dual eligible beneficiaries general y are Medicare
financial eligibility—income and sometimes
beneficiaries whose low-income makes them also
resource (i.e., asset) tests—vary by eligibility
eligible to receive Medicaid benefits. Depending on
group.
their income and resources, dual eligibles may be ful y

or partial y eligible for Medicaid. Partial benefit dual
For most eligibility groups the criteria used to
eligibles receive ful Medicare benefits plus state
determine eligibility are based on modified
Medicaid program assistance with some or al Medicare
premiums and cost sharing. Ful benefit dual eligibles
adjusted gross income (MAGI) income
receive ful Medicare coverage, ful Medicaid benefits,
counting rules. There is no resource or asset
and coverage of Medicare premiums and cost sharing.
test used to determine Medicaid financial
In 2019, about 8.8 mil ion of dual eligibles were ful y
eligibility for MAGI-eligible individuals.28
eligible for Medicaid, while about 3.6 mil ion received
partial Medicaid benefits.27
While MAGI applies to most Medicaid-
eligible populations, certain populations such as older adults and individuals with disabilities are

23 For these groups, individuals may qualify for Medicaid by meeting the medically needy income standard or spend
down to the medically needy income standard by incurring and paying for medical expenses.
24 For more information about the ACA Medicaid expansion, see CRS In Focus IF10399, Overview of the ACA
Medicaid Expansion.
25 CMS, MMCO, Fact Sheet: People Dually Eligible for Medicare and Medicaid , March 2020, at
https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-
Coordination-Office/Downloads/MMCO_Factsheet.pdf.
26 CMS, MMCO, Data Analysis Brief: Medicare-Medicaid Dual Enrollment, 2006-2019, November 2020, at
https://www.cms.gov/files/document/medicaremedicaiddualenrollmenteverenrolledtrendsdatabrief.pdf.
27 CMS, MMCO, Data Analysis Brief: Medicare-Medicaid Dual Enrollment, 2006-2019, November 2020, at
https://www.cms.gov/files/document/medicaremedicaiddualenrollmenteverenrolledtrendsdatabrief.pdf.
28 In addition, for some groups such as former foster care youth who aged out of foster care, no income eligibility test is
applied. For more information on the use of modified adjusted gross income (MAGI) as well as MAGI-exempt groups,
see CRS Report R43861, The Use of Modified Adjusted Gross Incom e (MAGI) in Federal Health Program s.
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statutorily exempt from MAGI income counting rules. Instead, Medicaid financial eligibility for
MAGI-exempted populations is based on the income counting rules that match the most closely
related social program for the group involved (e.g., SSI program rules for aged, blind, or disabled
eligibility groups). For MAGI-exempt eligibility groups, income disregards and assets or resource
tests may apply.
Additional Eligibility Requirements for LTSS Coverage
Medicaid enrollees, many of whom qualify based on aged or disabled categorical criteria, may
also have long-term care needs. In general, individuals in need of Medicaid-covered LTSS must
also meet state-based functional and/or disease or condition-specific eligibility criteria. In other
words, they must demonstrate the need for long-term care. There are certain pathways that
establish eligibility to Medicaid-covered LTSS either for individuals receiving institutional care
or for those who need the level of care provided in an institution and receive Medicaid-covered
home and community-based services (HCBS).29 Most states offer HCBS under waiver programs
that operate outside of Medicaid state plan requirements (see the “Medicaid Program Waivers”
section for more information).
Applicants seeking certain Medicaid-covered LTSS are also subject to a separate set of Medicaid
financial eligibility rules in order to receive such services (e.g., limits on the value of home
equity, asset transfer rules). These additional financial rules attempt to ensure that program
applicants apply their assets toward the cost of their care and do not divest them to gain eligibility
sooner than would occur otherwise.
In addition, Medicaid specifies rules for equitably al ocating income and assets to non-Medicaid-
covered spouses for the purposes of determining LTSS coverage eligibility for nursing facility
services and some HCBS. Commonly referred to as spousal impoverishment rules, these rules are
intended to prevent the impoverishment of the spouse who does not need LTSS.30
Medicaid Enrollment
Figure 2 shows historical and projected Medicaid enrollment for FY2000 through FY2020. The
figure shows steady enrollment growth, especial y among nondisabled children and adults as a
result of the recessions in the early and late 2000s.31 During periods of economic downturn,
Medicaid programs face enrollment increases at a faster rate because job and income losses make
more people eligible.32

29 T here are certain optional eligibility pathways for older adults and individuals with disabilities—Special Income
Level, Special Home and Community-Based Waiver Group, Home and Community-Based Services (HCBS) State
Plan, and Katie Beckett —that establish eligibility to Medicaid-covered long-term services and supports (LT SS) either
for individuals receiving institutional care or those who need the level of care provided in an institution and receive
Medicaid-covered HCBS.
30 Historically, these rules have applied to the spouse of participants receiving institutional care. However, under ACA
§2404, these rules were extended for a limited time to the spouse of participants receiving certain home and
community-based services and are scheduled to sunset on September 30, 20 23. CRS Report R43506, Medicaid
Financial Eligibility for Long-Term Services and Supports.
31 According to the National Bureau of Economic Research (NBER), the United States was in recession from March
2001 through November 2001 and December 2007 through June 2009. See NBER, “ Business Cycle Dating,” at
https://www.nber.org/cycles.html.
32 For information about recessions and Medicaid, see CRS In Focus IF11686, Impact of the Recession on Medicaid
and CRS Report R46346, Medicaid Recession-Related FMAP Increases.
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Medicaid: An Overview

Figure 2. Past and Projected Medicaid Enrollment, by Population
(FY2000–FY2020)

Source: Christopher J. Truffer et al., 2018 Actuarial Report on the Financial Outlook for Medicaid, Office of the
Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/
ActuarialStudies/MedicaidReport.
Notes: Enrol ment is measured by person-year equivalents, which is the average enrol ment over the course of
the year. This figure excludes enrol ment for Medicaid enrol ees in the territories. FY2013 is the last year for
actual enrol ment data by population due to data quality issues with the discontinued Medicaid Statistical
Information System (MSIS); the replacement Transformed Medicaid Statistical Information System (T-MSIS) data
are not yet available for use.
For purposes of this figure, Expansion Adults are adult enrol ees who are newly eligible in 2014 and later as a
result of the expanded eligibility criteria in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148,
as amended). Other eligible adults who become enrol ed as a result of the publicity and outreach efforts
associated with the ACA are included with Non-Expansion Adults, and their dependent children are included with
Children in this figure.
The implementation of the ACA Medicaid expansion in 2014 contributed to Medicaid enrollment
increasing by an estimated 8.8% in FY2014 and 7.2% in 2015, and since then, the growth in
Medicaid enrollment is estimated to have slowed to 3.3% in FY2016, 1.7% in FY2017, and 0.7%
in FY2018.33 Medicaid enrollment growth was projected to remain at 1.1% from FY2019 through
FY2027 prior to the onset of the recession due to the Coronavirus Disease 2019 (COVID-19)
pandemic in February 2020.
The current recession has increased the rate of growth for Medicaid enrollment.34 From February
2020 through September 2020, Medicaid enrollment has increased by 10.3%, national y.35 The
percent change in Medicaid enrollment has varied by state.

33 Christopher J. T ruffer et al., 2018 Actuarial Report on the Financial Outlook for Medicaid , Office of the Actuary,
CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/
MedicaidReport .
34 For more information about Medicaid and recessions, see CRS In Focus IF11686, Impact of the Recession on
Medicaid.
35 CMS, Medicaid and CHIP Enrollment Trends Snapshot through September 2020, January 15, 2021, at
https://www.medicaid.gov/medicaid/national-medicaid-chip-program-information/downloads/september-medicaid-
chip-enrollment -trend-snapshot.pdf.
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Medicaid: An Overview

Share of Enrollment Versus Expenditures, by Population
Different Medicaid enrollment groups have very different service utilization patterns. Larger
enrollment groups account for a smal er proportion of Medicaid expenditures, while some smal er
enrollment groups are responsible for a larger proportion of Medicaid expenditures. As shown in
Figure 3, for FY2017, together Medicaid enrollment for children, non-expansion adults, and
expansion adults comprised 77% of Medicaid enrollment but accounted for only 46% of
Medicaid’s total benefit spending. In contrast, together the disabled and aged populations
represented about 23% of Medicaid enrollment but accounted for a larger share of Medicaid
benefit spending (54%). While these statistics vary somewhat from year to year and state to state,
the patterns described above general y hold true across years.
Figure 3. Estimated Medicaid Enrollment and Expenditures for Benefits, by
Enrollment Group as a Share of Total
(FY2017)

Source: Christopher J. Truffer et al., 2018 Actuarial Report on the Financial Outlook for Medicaid, Office of the
Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/
ActuarialStudies/MedicaidReport.
Notes: Totals and components exclude disproportionate share hospital expenditures (i.e., payments to hospitals
treating large numbers of low-income patients), territory enrol ees and expenditures, and other adjustments.
May not sum to totals due to rounding.
Benefits
Medicaid coverage includes a wide variety of preventive, primary, and acute care services as wel
as LTSS.36 Not everyone enrolled in Medicaid has access to the same set of services. An
enrollee’s eligibility pathway determines the available services within a benefit package. Federal
law provides two primary benefit packages for state Medicaid programs: (1) traditional benefits
and (2) alternative benefit plans (ABPs). Each of these packages is summarized in Table 1. For
the medical y needy subgroup, states may offer a more restrictive benefit package than is
available to other enrollees. In addition, states can use waiver authority (e.g., SSA Section 1115)

36 LT SS benefits are available in institutional and home and community-based (HCBS) settings, and they include
nursing facility services, home health, case management services, personal care services, and private duty nursing,
among others.
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to tailor benefit packages to specified Medicaid subgroups as wel as offer services outside
traditional or ABP coverage, such as LTSS (see “Medicaid Program Waivers” for more
information about Section 1115 waivers).
Table 1. Examples of Medicaid Mandatory and Optional Benefits for Traditional
Benefits and Alternative Benefit Plans (ABPs)
Type of Benefit
Traditional Benefits
ABPs
Mandatory

Inpatient hospital services

Hospitalization services

EPSDT (< the age of 21)

EPSDT (< the age of 21)

FQHC services

FQHC services

Family planning services

Family planning services

Emergency and nonemergency medical

Emergency and nonemergency medical
transportation
transportation

Pregnancy-related services

Maternity and newborn care

Nursing facility care (aged 21+)

Preventive services

Physician services

Prescription drugs

Home health

Rehabilitative services

Mental health and substance use disorder
services
Optional

Clinic services
For special-needs subgroups, option to

receive traditional benefits or enrol in an

Prescription drugs
ABP plan.

Physical, occupational, and speech
therapy services

Dental services for adults

Personal care
Sources: Title XIX of the Social Security Act and related federal guidance.
Notes: ABP = alternative benefit plan; EPSDT = early and periodic screening, diagnostic, and treatment services;
FQHC = federal y qualified health center.
In general, when Medicaid enrollees have other sources of insurance/payment (including
Medicare), Medicaid is the payer of last resort. States can provide Medicaid coverage to
individuals whose existing health insurance is limited (sometimes referred to as underinsured). In
these cases, Medicaid wraps around that coverage (i.e., additional coverage for services covered
under Medicaid but not under the other source of coverage).37
The following sections summarize Medicaid traditional benefits and ABPs. Then, there is a
section comparing benefits included in traditional Medicaid coverage and those that are
commonly included in ABPs.
Traditional Medicaid Benefits
Traditional Medicaid benefits include primary and acute care as wel as LTSS. The traditional
Medicaid program requires states to cover a wide array of mandatory services (e.g., inpatient
hospital care, lab and x-ray services, physician care, nursing facility services for individuals aged
21 and older). In addition, states may provide optional services, some of which commonly are

37 For related details, see federal regulations at 42 C.F.R. 433.135, 433.138, and 433.152.
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covered (e.g., personal care services, prescription drugs, clinic services, physical therapy, and
prosthetic devices).
States define the specific features of each covered benefit within four broad federal guidelines:
 Each service must be sufficient in amount, duration, and scope to reasonably
achieve its purpose. States may place appropriate limits on a service based on such
criteria as medical necessity.
 Within a state, services available to the various population groups must be equal in
amount, duration, and scope. This requirement is the comparability rule.
 With certain exceptions, the amount, duration, and scope of benefits must be the
same statewide, referred to as the statewideness rule.
 With certain exceptions, enrollees must have freedom of choice among health care
providers.
The breadth of coverage for a given benefit can, and does, vary from state to state, even for
mandatory services. For example, states may place different limits on the amount of inpatient
hospital services a beneficiary can receive in a year (e.g., up to 15 inpatient days per year in one
state versus unlimited inpatient days in another state)—as long as applicable requirements are met
regarding sufficiency of amount, duration, and scope; comparability; statewideness; and freedom
of choice. Exceptions to state limits may be permitted under circumstances defined by the state.
Alternative Benefit Plans
As an alternative to providing al the mandatory and selected optional benefits under traditional
Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171) gave states the option to enroll
state-specified groups in what was referred to as benchmark or benchmark-equivalent coverage
but currently are cal ed alternative benefit plans (ABPs).38 Under ABPs, states must provide
comprehensive benefit coverage that is based on a coverage benchmark rather than a list of
discrete items and services as under traditional Medicaid.
ABPs must qualify as either benchmark or benchmark-equivalent coverage. Under benchmark
coverage, ABP benefits are at least equal to one of the statutorily specified benchmark plans (i.e.,
one of three commercial health insurance products, or a fourth “Secretary-approved” coverage
option).39 Under benchmark-equivalent coverage, ABP benefits include certain specified services
and the overal benefits are at least actuarial y equivalent to one of the statutorily specified
benchmark coverage packages.
Unlike traditional Medicaid benefit coverage, coverage under an ABP must include at least the
essential health benefits (EHBs) that most plans in the private health insurance market are
required to furnish.40 In addition, ABPs must include a variety of specific services, including

38 For more information on Medicaid Alternative Benefit Plan Coverage, see CRS Report R45412, Medicaid
Alternative Benefit Plan Coverage: Frequently Asked Questions.
39 T he three ABP benchmark commercial insurance products include (1) the standard Blue Cross/Blue Shield preferred
provider option service plan offered through the Federal Employees Health Benefit Program-equivalent health
insurance coverage; (2) the health benefits coverage plan offered to state employees; and (3) the commercial health
maintenance organization with the largest insured commercial, non -Medicaid enrollment in the state.
40 T he 10 essential health benefits required under the ACA include (1) ambulatory patient services, (2) emergency
services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services
(including behavioral health treatment), (6) prescription drugs, (7) rehabilitative and habilitative services and devices,
(8) laboratory services, (9) preventive and wellness services and chronic disease management, and (10) pediatric
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services under Medicaid’s EPSDT benefit; family planning services and supplies; and both
emergency and nonemergency transportation to and from providers. In general, the EHBs do not
include LTSS. However, states may choose to include LTSS in their ABPs.
Under ABPs, states are permitted to waive the statewideness and comparability requirements that
apply to traditional Medicaid benefits. This flexibility permits the state to define populations that
are served and the specific benefit packages that apply.
States that choose to implement the ACA Medicaid expansion are required to provide ABP
coverage to the individuals eligible for Medicaid through the expansion (with exceptions for
selected special-needs subgroups). Specific populations are exempt from mandatory enrollment in
ABPs (e.g., those with special health care needs such as disabling mental disorders or serious and
complex medical conditions). These individuals must be offered the option of a benefit plan that
includes traditional Medicaid state plan services, which may include LTSS.
Comparing Traditional Medicaid Benefits to ABPs
It is difficult to draw comparisons about the ways in which traditional Medicaid benefits are
similar to and different from ABP benefits, because the scope of each type of benefit package
varies from state to state. This variability is largely a reflection of state choices in covering
optional benefits, in addition to the mandatory Medicaid state plan benefits, as wel as state
choices for the base-benchmark for the EHBs that must be covered under ABPs.
However, differences in the federal laws regarding the scope of required benefits under traditional
Medicaid and those required under ABPs highlight some common differences between the two
types of benefits packages. For example, care in a nursing facility for individuals over the age of
21 is a required benefit under traditional Medicaid, whereas nursing home care is not a required
benefit under ABPs.
Conversely, rehabilitative and habilitative services and devices, preventive and wel ness services,
and mental health and substance use disorder services are al required benefits under ABPs. By
contrast, these APB benefit categories do not correspond to specific benefit categories under
traditional Medicaid. Rather, services in these benefit categories could be covered under different
benefit categories, such as physician services or physical, occupational, and speech therapy
services.
To further il ustrate this point, behavioral health (or any similar term) is not explicitly included
among the required benefit categories under traditional Medicaid. Instead, most types of
behavioral health benefits (e.g., the services of clinical psychologists and licensed clinical social
workers and prescription drugs) are optional. By contrast, behavioral health benefits are
mandatory under ABPs because “mental health and substance use disorder services, including
behavioral health treatment” are included among the EHBs.
Medicaid Service Spending
Figure 4 below shows the nationwide distribution of Medicaid expenditures across broad
categories of service for FY2019. These data il ustrate that 49% of benefit spending was for
capitated payments under managed care arrangements (see “Service Delivery Systems” for

services, including oral and vision care. For more information about EHBs, see CRS In Focus IF10287, The Essential
Health Benefits (EHB).
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information about managed care). The remaining 51% of benefit spending was FFS, and FFS
spending on acute care services and LTSS each accounted for 20% of Medicaid benefit spending.
Figure 4. Medicaid Medical Assistance Expenditures, by Service Category
(FY2019)

Source: CRS analysis of CMS, CMS-64 Data (base expenditures), FY2019, as of September 15, 2020.
Notes: DSH = disproportionate share hospital.
Medical assistance expenditures exclude Medicaid expenditures for administrative activities. Managed care
includes capitated payments under which Medicaid enrol ees get most or al of their services through an
organization under contract with the state (see “Service Delivery Systems” for information about managed care).
Supplemental payments are Medicaid payments made to providers that are separate from and in addition to the
standard payment rates for services rendered to Medicaid enrol ees, and DSH payments are one type of
supplemental payment. Acute care services include prescription drugs.
Beneficiary Cost Sharing
Federal statutes and regulations address the circumstances under which enrollees may share in the
costs of Medicaid, both in terms of participation-related cost sharing (e.g., monthly premiums)
and point-of-service cost sharing (e.g., co-payments [i.e., flat dollar amounts paid directly to
providers for services rendered]).41 States can require certain beneficiaries to share in the cost of
Medicaid services, but there are limits on (1) the amounts that states can impose, (2) the
beneficiary groups that can be required to pay, and (3) the services for which cost sharing can be
charged.42
In general, premiums and enrollment fees often are prohibited. However, premiums may be
imposed on certain enrollees, such as individuals with incomes above 150% of FPL, certain
working individuals with disabilities, and certain children with disabilities.

41 For more information about Medicaid cost sharing, see CRS Report R43850, Out-of-Pocket Costs for Medicaid
Beneficiaries: In Brief.
42 For more information about these limits, see CMS, Cost Sharing Out of Pocket Costs, at https://www.medicaid.gov/
medicaid/cost -sharing/out -of-pocket -costs/index.html.
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States can impose cost sharing at the point of service, such as co-payments,43 coinsurance,44
deductibles,45 and other similar charges, on most Medicaid-covered benefits up to federal limits
that vary by income. Some subgroups of beneficiaries are exempt from cost sharing (e.g., children
under 18 years of age and pregnant women).
The aggregate cap on participation-related cost sharing (e.g., monthly premiums) and point-of-
service cost sharing (e.g., co-payments) is general y up to 5% of monthly or quarterly household
income.46
In addition, beneficiaries receiving certain Medicaid-covered LTSS are required to apply their
income exceeding specified amounts toward the cost of their care. These reductions from a
beneficiary’s income are referred to as post-eligibility treatment of income and are not subject to
the 5% aggregate cost-sharing cap described above.47 The amounts a beneficiary may retain for
their personal use vary by care setting (i.e., nursing facility versus home and community-based).
Service Delivery Systems
In general, most benefits to Medicaid enrollees are delivered and paid for via two service delivery
systems: fee-for-service (FFS) or managed care. Under the FFS delivery system, health care
providers are paid by the state Medicaid program for each service provided to a Medicaid
enrollee. Under the managed care delivery system, Medicaid enrollees get some or al of their
services through an organization under contract with the state.
States traditional y have used the FFS service delivery model for Medicaid, but since the 1990s,
the share of Medicaid enrollees covered by the managed care model has increased dramatical y.
Initial y, states used managed care to deliver health care services to the healthiest Medicaid
populations, including children and parents. However, recently, more states are turning to
managed care for their aged and disabled populations.
There are three main types of Medicaid managed care:
 Comprehensive risk-based managed care—states contract with managed care
organizations (MCOs) to provide a comprehensive package of benefits to certain
Medicaid enrollees. States usual y pay the MCOs on a capitated basis, which
means the states prospectively pay the MCOs a fixed monthly rate per enrollee to
provide or arrange for most health care services. MCOs then pay providers for
services to enrollees.
 Primary care case management (PCCM)—states contract with primary care
providers to provide case management services to Medicaid enrollees. Typical y,
under PCCM, the primary care provider receives a monthly case management fee
per enrollee for coordination of care, but the provider continues to receive fee-for-
service payments for the medical care services utilized by Medicaid enrollees.

43 A co-payment is a specified dollar amount for each item or service delivered.
44 Coinsurance is a specified percentage of the cost or charge for a specific service delivered.
45 A deductible is a specified dollar amount paid for certain services rendered during a specific time period (e.g., per
month or quarter) before health coverage (e.g., Medicaid) begins to pay for care.
46 SSA §1916A.
47 For further information on these Post -Eligibility T reatment of Income rules, see CRS Report R43506, Medicaid
Financial Eligibility for Long-Term Services and Supports.
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 Limited benefit plans—these plans look like MCOs in that states usual y contract
with a plan and pay it on a capitated basis. The difference is that limited benefit
plans provide only one or two Medicaid services (e.g., behavioral health or dental
services).
As of July 1, 2018, about 83% of Medicaid enrollees were covered by some form of managed
care.48 Two states (South Carolina and Washington) covered al Medicaid enrollees under
managed care, and two states (Alaska and Connecticut) did not have any managed care coverage.
The rest of the states use some combination of managed care and FFS coverage.49
The most prevalent type of managed care is the comprehensive risk-based managed care that is
provided through MCOs, with 70% of Medicaid enrollees with comprehensive risk-based
managed care as of July 1, 2018.50 States’ use of comprehensive risk-based managed care varies
significantly, as shown in Figure 5.
Figure 5. Percentage of Medicaid Enrollees with Comprehensive Risk-Based
Managed Care, by State
(As of July 1, 2018)

Source: CMS, Medicaid Managed Care Enrol ment and Program Characteristics, 2018, Table 4, Winter 2020.

48 T his figure excludes Medicaid enrollment in the territories. (CMS, Medicaid Managed Care Enrollment and
Program Characteristics, 2018, T able 4, Winter 2020, at https://www.medicaid.gov/Medicaid/downloads/me dicaid-
mc-enrollment -report.pdf.)
49 Ibid.
50 T his figure excludes Medicaid enrollment in the territories. (CMS, Medicaid Managed Care Enrollment and
Program Characteristics, 2018, T able 4, Winter 2020, at https://www.medicaid.gov/Medicaid/downloads/me dicaid-
mc-enrollment -report.pdf.)
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Notes: Medicaid enrol ment in comprehensive managed care represents an unduplicated count of Medicaid
beneficiaries enrol ed in a managed care plan that provides comprehensive benefits (acute, primary care,
specialty, and any other), as wel as Programs for All-Inclusive Care for the Elderly (PACE). It excludes enrol ees
who are enrol ed in a Financial Alignment Initiative Medicare-Medicaid Plan as their only form of managed care.
Financing
The federal government and the states jointly finance Medicaid.51 The federal government
reimburses states for a portion (i.e., the federal share) of each state’s Medicaid program costs.
Because federal Medicaid funding is an open-ended entitlement to states, there is no upper limit
or cap on the amount of federal Medicaid funds a state may receive. In FY2019, Medicaid
expenditures totaled $627 bil ion. The federal share totaled $405 bil ion and the state share was
$222 bil ion.52
Federal Share
The federal government’s share of most Medicaid expenditures is established by the federal
medical assistance percentage (FMAP) rate, which general y is determined annual y and varies by
state according to each state’s per capita income relative to the U.S. per capita income.53 The
formula provides higher FMAP rates, or federal reimbursement rates, to states with lower per
capita incomes, and it provides lower FMAP rates to states with higher per capita incomes.
FMAP rates have a statutory minimum of 50% and a statutory maximum of 83%.54 For a state
with an FMAP of 60%, the state gets 60 cents back from the federal government for every dollar
the state spends on its Medicaid program. In FY2021, FMAP rates range from 50% (13 states) to
77.76% (Mississippi).55
During the COVID-19 public health emergency period, the Family First Coronavirus Response
Act (FFCRA; P.L. 116-127) provides a 6.2-percentage-point increase to the regular FMAP rates
for al states, the District of Columbia, and the territories that meet certain conditions.56 The
FFCRA FMAP increase began on January 1, 2020 (the first day of the calendar quarter in which
the COVID-19 public health emergency period began), and the FFCRA FMAP increase is set to
end on the last day of the calendar quarter in which the COVID-19 public health emergency
period ends.57

51 For more information about Medicaid financing and expenditures, see CRS Report R42640, Medicaid Financing and
Expenditures.
52 CMS, CMS-64 data as of September 15, 2020.
53 For more detail about the federal medical assistance percentage (FMAP) rate, see CRS Report R43847, Medicaid’s
Federal Medical Assistance Percentage (FMAP).
54 SSA §1905(b).
55 HHS, “Federal Financial Participation in State Assistance Exp enditures; Federal Matching Shares for Medicaid, the
Children’s Health Insurance Program, and Aid to Needy Aged, Blind, or Disabled Persons for October 1, 2020
T hrough September 30, 2021,” 84 Federal Register 66204, December 3, 2019.
56 For more information about the Family First Coronavirus Response Act (FFCRA; P.L. 116-127) FMAP increase and
the conditions for states to receive this increase, see CRS Report R46346, Medicaid Recession-Related FMAP
Increases.
57 T he public health emergency period is defined in paragraph (1)(B) of SSA §1135(g) as a public health emergency
declared by the HHS Secretary pursuant to §319 of the Public Health Service Act. T his refers to the public health
emergency declared by the HHS Secretary on January 31, 2020, with respect to the Coronavirus Disease 2019
(COVID-19) outbreak. T he determination was made retroactive to January 27, 2020.
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The FMAP rate is used to reimburse states for the federal share of most Medicaid expenditures,
but exceptions to the regular FMAP rate have been made for certain states (e.g., the District of
Columbia and the territories), situations (e.g., during economic downturns), populations (e.g., the
ACA Medicaid expansion population and certain women with breast or cervical cancer),
providers (e.g., Indian Health Service facilities), and services (e.g., family planning and home
health services). In addition, the federal share for most Medicaid administrative costs does not
vary by state and is general y 50%.
While most federal Medicaid funding is provided on an open-ended basis, certain types of federal
Medicaid funding are capped. For instance, federal disproportionate share hospital (DSH)58
funding to states cannot exceed a state-specific annual al otment. Also, Medicaid programs in the
territories (i.e., American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin
Islands) are subject to annual spending caps.59
State Share
The federal government provides broad guidelines to states regarding al owable funding sources
for the state share (also referred to as the nonfederal share) of Medicaid expenditures. However,
to a large extent, states are free to determine how to fund their share of Medicaid expenditures. As
a result, there is significant variation from state to state in funding sources.
States can use state general funds (i.e., personal income, sales, and corporate income taxes) and
other state funds (e.g., provider taxes,60 local government funds, tobacco settlement funds, etc.) to
finance the state share of Medicaid. Federal statute al ows as much as 60% of the state share to
come from local government funding.61 Federal regulations also stipulate that the state share not
be funded with federal funds (Medicaid or otherwise).62 In state fiscal year 2019, on average,
73% of the state share of Medicaid expenditures was financed by state general funds, and the
remaining 27% was financed by other state funds.63
Expenditures
Enrollment increases due to expansions of eligibility and economic downturns account for much
of Medicaid’s expenditure growth over time. However, Medicaid expenditures are influenced by
economic, demographic, and programmatic factors. Economic factors include health care prices,
unemployment rates,64 and individuals’ wages. Demographic factors include population growth
and the age distribution of the population. Programmatic factors include state decisions regarding
optional eligibility groups, optional services, and provider payment rates. Other factors include

58 For more information about Medicaid DSH payments, see CRS Report R42865, Medicaid Disproportionate Share
Hospital Paym ents.
59 For more information about Medicaid funding for the territories, see CRS In Focus IF11012, Medicaid Financing for
the Territories.
60 States are able to use revenues from health care provider taxes to help finance their share of Medicaid expenditures
as long as the provider tax is broad-based and uniform. For more information about provider taxes, see CRS Report
RS22843, Medicaid Provider Taxes.
61 SSA §1902(a)(2).
62 42 C.F.R. 433.51(c).
63 National Association of State Budget Officers, State Expenditure Report: 2020 State Expenditure Report Fiscal
Years 2018-2020, 2020, at https://www.nasbo.org/reports-data/state-expenditure-report.
64 For information about how the unemployment rate affects Medicaid enrollment, see CRS In Focus IF11686, Impact
of the Recession on Medicaid and CRS Report R46346, Medicaid Recession-Related FMAP Increases.
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the number of eligible individuals who enroll, utilization of covered services, and enrollment in
other health insurance programs (including Medicare and private health insurance).
Figure 6 shows actual Medicaid expenditures from FY1997 to FY2019 and projected Medicaid
expenditures from FY2020 through FY2027 broken down by state and federal expenditures. In
FY2019, Medicaid spending on services and administrative activities in the 50 states, the District
of Columbia, and the territories totaled $627 bil ion.65 Medicaid expenditures are estimated to
grow to $1,008 bil ion in FY2027, but these estimates were prepared prior to the COVID-19
public health emergency.66
Figure 6. Federal and State Actual and Projected Medicaid Expenditures
(FY1997-FY2027)

Sources: Actual expenditures are from Form CMS-64 Data as of September 15, 2020, and projected
expenditures are from Christopher J. Truffer et al., 2018 Actuarial Report on the Financial Outlook for Medicaid,
Office of the Actuary, CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/
ActuarialStudies/MedicaidReport.
Note: The expenditures shown in this figure are total Medicaid expenditures, which include both administrative
and benefit spending.
Historical y, in a typical year, the average federal share of Medicaid expenditures was about 57%,
which means the average state share was about 43%. However, the federal government’s share of
Medicaid expenditures increased with the implementation of the ACA Medicaid expansion,
because the federal government is funding a vast majority of the cost of the expansion through the
enhanced federal matching rates.67 In FY2019, the average federal share of Medicaid is estimated

65 CMS, CMS-64 Data, as of September 15, 2020.
66 Christopher J. T ruffer et al., 2018 Actuarial Report on the Financial Outlook for Medicaid , Office of the Actuary,
CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/
MedicaidReport .
67 For more information about the enhanced federal matching rates for the ACA Medicaid expansion, see CRS In Focus
IF10399, Overview of the ACA Medicaid Expansion.
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to have been 65%.68 The federal share of Medicaid expenditures were projected to decrease to
62% for FY2020 through FY2027.69 However, these estimates were prepared prior to the
COVID-19 public health emergency. With the FFCRA 6.2-percentage-point increase to the
FMAP rates, the federal share of Medicaid is expected to be higher than previously estimated.
Medicaid Program Waivers
The Social Security Act authorizes several waiver and demonstration authorities to provide states
with the flexibility to operate their Medicaid programs. Waiver authorities permit states to
disregard certain requirements and operate their programs outside of Medicaid rules. Each waiver
authority has a distinct purpose and specific requirements. Under the various waiver authorities,
states may try new or different approaches to the delivery of health care services or adapt their
programs to the special needs of particular geographic areas or groups of Medicaid enrollees. The
primary Medicaid waiver authorities include the following:
 Section 1115 Research and Demonstration Projects—SSA Section 1115
authorizes the HHS Secretary to waive Medicaid requirements contained in SSA
Section 1902 (including but not limited to rules regarding freedom of choice of
provider, comparability of services, and statewideness) and/or provide expenditure
authority for expenditures that do not otherwise qualify for federal financial
participation under SSA Section 1903 (referred to as costs not otherwise
matchable) in order to permit states to conduct experimental, pilot, or
demonstration projects that, in the judgment of the Secretary of HHS, are likely to
assist in promoting the objectives of the Medicaid program. States use this waiver
authority in a variety of ways, for example, to change eligibility criteria to offer
coverage to new groups of people; to condition Medicaid eligibility on an
enrollee’s ability to meet work or other community engagement requirements; to
provide services that are not otherwise covered, to offer different service packages
or a combination of services in different parts of the state (e.g., coverage of
nonelderly adults who are patients in institutions for mental disease);70 to cap
program enrollment, and to implement innovative service delivery systems.
 Section 1915(b) Managed Care/Freedom of Choice Waivers—SSA Section
1915(b) authorizes the HHS Secretary to waive the freedom of choice of provider
requirement to establish mandatory managed care programs or otherwise limit
enrollees’ choice of providers.71
 Section 1915(c) Home and Community-Based Services Waivers—SSA Section
1915(c) authorizes the HHS Secretary to waive requirements regarding
comparability of services and statewideness in covering a broad range of HCBS

68 CMS, Form CMS-64 data as of September 15, 2020.
69 Christopher J. T ruffer et al., 2018 Actuarial Report on the Financial Outlook for Medicaid , Office of the Actuary,
CMS, HHS, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/
MedicaidReport .
70 For information about the institutions for mental disease exclusion, see CRS In Focus IF10222, Medicaid’s
Institutions for Mental Disease (IMD) Exclusion .
71 T here are four types of authorities under §1915(b) that states may request: (b)(1) allows states to require Medicaid
beneficiaries to enroll in managed care; (b)(2) allows states to designate a “ central broker” to assist Medicaid
beneficiaries in choosing among competing health care plans; (b)(3) allows states to use cost savings made possible
through the recipients’ use of more cost -effective medical care to provide additional services; and (b)(4) allows states
to limit the beneficiaries’ choice of providers (except in emergency situations, for recipients residing in a long term
care facility, and with respect to family planning services).
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(including services not available under the Medicaid state plan) for certain persons
with LTSS needs. States also may waive certain income and resource rules
applicable to persons in the community, which means that a spouse’s or parent’s
income and, to some extent, resources are not considered available to the applicant
for the purposes of determining Medicaid financial eligibility. States may use
Section 1915(c) concurrently with other waiver authorities. For example, states
may combine Sections 1915(b) and 1915(c) authorities to offer mandatory
managed care for HCBS.
During public health emergencies, additional waiver authorities are available under the Medicaid
program (see textbox “Emergency-Related Authorities”).
Emergency-Related Authorities
Medicaid plays a critical role in helping states respond to public health emergencies (e.g., the COVID-19 public
health emergency), as wel as natural and human-made disasters. The Centers for Medicare & Medicaid Services
(CMS) and state Medicaid agencies rely on emergency-related authorities for additional flexibility to support
program operations and enrol ee health care needs during times of crises.72 Key emergency statutory and waiver
authorities include the fol owing:73
Disaster Relief State Plan Amendments. State plan amendments al ow states to revise Medicaid eligibility,
enrol ment, and benefit requirements in their state plan for the duration of a disaster or emergency.
Disaster-Related Section 1115 Waivers. In an emergency, Section 1115 waivers may be approved without
regard to normal process-related requirements and do not need to be budget neutral to the federal government.
Section 1915(c) Appendix K Waivers. Appendix K is a stand-alone appendix that states may use during
emergency situations to request amendments to existing1915(c) Home and Community Based waivers.
Section 1135 Waivers. When certain emergency conditions are met, Section 1135 waivers al ow the
Department of Health and Human Services (HHS) Secretary to temporarily waive Medicaid statutory
requirements, such as provider licensure, to ensure sufficient health care items and services are available to meet
the needs of enrol ees in an emergency area.
States often operate multiple waiver programs with their state plans. Key characteristics of these
primary Medicaid waiver authorities compared with state plan requirements are summarized in
Table 2. The statutory requirements that may be waived under each type of waiver are different,
but al types of waivers are time limited and approvals are subject to reporting and evaluation
requirements. In addition, al types of waivers must comply with various financing requirements
(e.g., budget neutrality,74 cost-effectiveness,75 or cost-neutrality76).

72 For more information, see CMS, Medicaid and CHIP Coverage Learning Collaborative, Inventory of Medicaid and
CHIP Flexibilities and Authorities in the Event of a Disaster, August 20, 2018, at https://www.medicaid.gov/state-
resource-center/downloads/mac-learning-collaboratives/medicaid-chip-inventory.pdf.
73 For more information about these emergency-related authorities during the COVID-19 public health emergency, see
Medicaid.gov, “Coronavirus Disease 2019 (COVID-19),” at https://www.medicaid.gov/resources-for-states/disaster-
response-toolkit/coronavirus-disease-2019-covid-19/index.html.
74 Budget neutrality means the estimated spending under the waiver cannot exceed the estimated cost of the state’s
Medicaid program without the waiver.
75 Cost-effectiveness means the cost of payments under managed care cannot exceed the cost of fee-for-service absent
the waiver.
76 Under the cost-neutrality test, expendit ures under the waiver may not exceed the cost of institutional care that would
have been provided to waiver recipients absent the waiver.
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Table 2. Key Characteristics of the Primary Medicaid Waiver Authorities Compared
to State Plan Requirements
§1915(c)
Home and
§1915(b)
Community-
§1115 Research
Managed
Based
and
Care/Freedom
Services
Demonstration
of Choice
(HCBS)
Medicaid
Key Characteristic
Waivers
Waivers
Waivers
State Plan
78 waivers
291 waivers
Number of Waivers
(in 47 states and
79 waivers (in 38
(in 47 states
(as of February 2021)
DC)a
states)b
and DC)b
N/A
Statewidenessc
√
√
√
N/A
Comparability of
√
√
√
N/A
Servicesd
Freedom of Choice
√
√
—
N/A
of Providere
Income and Resource
—
—
√
N/A
Rulesf
Federal Matching
√
√
√
N/A
Funds for Costs Not
Otherwise
Matchableg
Evaluations required
√
√
√
N/A
Duration
5 year initial,
2 year initial,
3 year initial,
Once approved
general y renewed
renewed for up
renewed for up
duration
for up to 3-year
to 2-year
to 5-year
indefinite
intervals (or up to
intervals
intervals
10 years for non-
complex waivers)
Financing
Budget neutral over
Must meet cost-
Must meet cost-
Open-ended
the life of the
effectiveness test neutrality test
mandatory
program
entitlement
Enrollment caps and
√
—
√
Individual
waiting lists permitted
entitlement
Source: Prepared by CRS based on program rules and regulations.
a. This waiver count identifies operational Section 1115 demonstration programs (including disaster-related
Section 1115 waivers) as posted on the Centers for Medicare & Medicaid (CMS) website, as of February 18,
2021. Operational waivers are defined as Section 1115 waivers that have been granted CMS approval (and
agreed upon by the state) for a current effective period as specified in the waiver Special Terms and
Conditions (STCs), or as otherwise specified through a CMS waiver approval letter (e.g., a CMS approval
letter that grants a temporary extension for al [or part] of the underlying demonstration waiver). This
count may include waivers that are pending implementation as long as there is official documentation to
show that the state has accepted the waiver conditions as outlined in the STCs and related documents
(extension letters, amendment letters, etc.). As of February 18, 2021, the CMS website shows that CMS
sent notification to 11 states that their operational Section 1115 waiver terms and conditions are under
review. For a list of operational Section 1115 waivers and official waiver-related correspondence, see
Medicaid.gov, “State Waivers List,” at https://www.medicaid.gov/medicaid/section-1115-demo/
demonstration-and-waiver-list/index.html.
b. The waiver counts for Section 1915(b) and (c) waiver programs are the number of waivers listed as “active”
on the CMS website as of February 18, 2021.
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Medicaid: An Overview

c. Waiving the statewideness requirement (as permitted under §1902[a][1] of the Social Security Act [SSA])
al ows states to target waivers to particular areas of the state where the need is greatest or where certain
types of providers are available, for example.
d. Waiving comparability of services (SSA §1902[a][10][B]) al ows states to target waiver services to particular
groups of individuals or to target services on the basis of disease or condition.
e. Waiving the freedom of choice requirement (SSA §1902[a][23]) al ows states to implement managed care
delivery systems or otherwise limit choice of provider.
f.
Waiving income and resource rules applicable to the community (SSA §1902[a][10][C][i][III])) means that a
spouse’s or parent’s income and, to some extent, resources are not considered available to the applicant
for the purposes of determining Medicaid financial eligibility.
g. States may seek CMS approval to provide expenditure authority for expenditures that do not otherwise
qualify for federal financial participation under SSA §1903.
Provider Payments
For the most part, states establish their own payment rates for Medicaid providers. Federal statute
requires that these rates be consistent with efficiency, economy, and quality of care and sufficient
to enlist enough providers so that covered benefits are available to Medicaid enrollees at least to
the same extent they are available to the general population in the same geographic area.77 This is
known as the equal access provision.
Reducing Medicaid provider rates has been an option states have favored in the past to manage
Medicaid program costs because the reduction does not directly impact Medicaid enrollees, and
the savings from provider rate reductions impact the state budget relatively quickly.78 However,
during the current recession, some Medicaid providers, such as physicians or clinics, have
experienced revenue losses due to lower utilization of services (e.g., preventive services) during
the COVID-19 pandemic, as other providers, such as certain hospitals and nursing homes, have
experienced increased costs during the pandemic. Reductions to Medicaid provider rates might
put additional financial stress on both types of providers.
In some cases, states make supplemental payments to Medicaid providers that are separate from,
and in addition to, the payment rates for services rendered to Medicaid enrollees. Medicaid DSH
payments are one type of supplemental payment, and federal statute requires that states make
Medicaid DSH payments to hospitals treating large numbers of low-income patients.79 States also
are permitted to make non-DSH supplemental payments to providers, but these payments must
adhere to upper payment limits (UPLs) for certain institutional providers.80 The institutions
subject to the UPL requirement are hospitals (separated into inpatient services and outpatient
services), nursing facilities, intermediate care facilities for individuals with intel ectual
disabilities, and freestanding nonhospital clinics.81

77 SSA §1902(a)(30)(A).
78 Vernon K. Smith, Robin Rudowitz, and Laura Snyder, Moving Ahead Amid Fiscal Challenges: A Look at Medicaid
Spending, Coverage and Policy T rends Results from a 50 -State Medicaid Budget Survey for State Fiscal Years 2011
and 2012, Kaiser Commission on Medicaid and the Uninsured, February 2012, at https://www.kff.org/wp-content/
uploads/2013/01/8248.pdf.
79 For more information about Medicaid DSH payments, see CRS Report R42865, Medicaid Disproportionate Share
Hospital Paym ents.
80 Under the upper payment limit (UPL), federal Medicaid funding is not available for Medicaid payments that are
more than Medicare would pay for the same or comparable services, and the UPL is an aggregate limit for each class of
providers rather than a limit for individual providers.
81 For more information about Medicaid supplemental payments, see CRS Report R45432, Medicaid Supplemental
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Medicaid: An Overview

Program Integrity
State Medicaid programs are required to conduct a number of program integrity activities to
prevent improper payments resulting from waste, fraud, and abuse.82 Some federal requirements,
such as screening providers and suppliers before they enroll in state Medicaid programs, are
intended to prevent improper payments from occurring,83 while other requirements ensure states
identify and recover overpayments made to providers and suppliers.84
State Medicaid programs have primary responsibility for preventing and, when necessary,
recovering improper payments due to fraud, waste, abuse. State Medicaid agencies operate
program integrity units. In addition, states operate Medicaid Fraud Control Units (MFCUs),
general y through state attorney general offices. MFCUs are responsible for investigating fraud as
wel as patient abuse and neglect in facilities that receive state Medicaid payments.85 Federal
agencies responsible for Medicaid program integrity include CMS and the HHS Office of
Inspector General (OIG). CMS administers the Medicaid Integrity Program, which audits and
monitors state Medicaid programs as wel as supports state program integrity efforts.86 OIG has
broad program integrity enforcement authority for al federal health care programs, including
Medicaid.87
The federal government and states contribute equal y to fund most state-based Medicaid program
integrity activities, although for some activities, the federal government provides additional funds
through enhanced FMAP rates. As mentioned earlier, al states receive the same FMAP rate for
administrative expenditures, including most program integrity activities, which general y is 50%.
States receive higher FMAP rates for selected administrative activities, such as 90% for the
startup of MFCUs and 75% for ongoing MFCU operation.
Additional Medicaid Resources
This section provides links to a number of Medicaid resources grouped by selected Congressional
Research Service (CRS) products, other background resources, laws, regulations, and other
information.
Selected CRS Products
Overview
 CRS In Focus IF10322, Medicaid Primer
Eligibility
 CRS In Focus IF10399, Overview of the ACA Medicaid Expansion

Paym ents.
82 SSA §1902(a)(64).
83 SSA §1902(a)(77).
84 SSA §1903(d)(2).
85 SSA §1902(a)(61) and SSA §1903(q).
86 SSA §1936.
87 SSA §1902(a)(69).
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Medicaid: An Overview

 CRS Report R46111, Medicaid Eligibility: Older Adults and Individuals with
Disabilities
 CRS In Focus IF11010, Medicaid Coverage for Former Foster Youth Up to Age
26
Benefits
 CRS Report R45412, Medicaid Alternative Benefit Plan Coverage: Frequently
Asked Questions
 CRS Report R43328, Medicaid Coverage of Long-Term Services and Supports
 CRS In Focus IF11545, Overview of Federally Certified Long-Term Care
Facilities
 CRS Report R43778, Medicaid Prescription Drug Pricing and Policy
 CRS In Focus IF10222, Medicaid’s Institutions for Mental Disease (IMD)
Exclusion
CRS In Focus IF11664, Medicaid Telehealth Policies in Response to COVID-19
Financing
 CRS Report R42640, Medicaid Financing and Expenditures
 CRS Report R43847, Medicaid’s Federal Medical Assistance Percentage
(FMAP)
 CRS Report R46346, Medicaid Recession-Related FMAP Increases
 CRS In Focus IF11012, Medicaid Financing for the Territories
 CRS Report R42865, Medicaid Disproportionate Share Hospital Payments
 CRS In Focus IF10422, Medicaid Disproportionate Share Hospital (DSH)
Reductions
CRS Report R45432, Medicaid Supplemental Payments
COVID-19
 CRS In Focus IF11664, Medicaid Telehealth Policies in Response to COVID-19
 CRS Report R46346, Medicaid Recession-Related FMAP Increases
 CRS In Focus IF11686, Impact of the Recession on Medicaid
 CRS Legal Sidebar LSB10430, Section 1135 Waivers and COVID-19: An
Overview
 CRS Report R46481, COVID-19 Testing: Frequently Asked Questions
 CRS In Focus IF11523, Health Insurance Options Following Loss of
Employment
Other CRS reports on Medicaid are available at https://www.crs.gov/search/#/?termsToSearch=
medicaid.
Laws
Most federal Medicaid law is in SSA Title XIX (as amended):
https://www.govinfo.gov/content/pkg/COMPS-8765/pdf/COMPS-8765.pdf
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Medicaid: An Overview

SSA Title XIX is codified in the U.S. Code (42 U.S.C. §1396 to 1396w-5):
http://uscode.house.gov/view.xhtml?path=/prelim@title42/chapter7/subchapter19&edition=
prelim
SSA Title XI has several general provisions relevant to Medicaid, including, for example,
provisions on demonstration projects, the Center for Medicare & Medicaid Innovation, quality
measures, and program integrity:
https://www.govinfo.gov/content/pkg/COMPS-8763/pdf/COMPS-8763.pdf
SSA Title XI is codified in the U.S. Code (42 U.S.C. §§1301 to 1320e-3):
http://uscode.house.gov/view.xhtml?path=/prelim@title42/chapter7/subchapter11&edition=
prelim
The entire SSA, as amended, is also available in a compilation from the House Office of
Legislative Counsel:
http://legcoun.house.gov/members/Comps/SSA-merged.pdf
Reference Guide to Federal Medicaid Statute and Regulations (Medicaid and CHIP Payment and
Access Commission, MACPAC) can help with locating specific Medicaid provisions within the
SSA:
https://www.macpac.gov/reference-guide-to-federal-medicaid-statute-and-regulations/
Regulations
Most federal Medicaid regulations are in Title 42 of the Code of Federal Regulations (42 C.F.R.
§§430.0 to 456.725):
https://ecfr.federalregister.gov/current/title-42/chapter-IV/subchapter-C
Reference Guide to Federal Medicaid Statute and Regulations (Medicaid and CHIP Payment and
Access Commission, MACPAC) can help with locating specific Medicaid provisions within the
Code of Federal Regulations:
https://www.macpac.gov/reference-guide-to-federal-medicaid-statute-and-regulations/
In addition to federal laws and regulations, CMS issues sub-regulatory program guidance through
publications such as
 informational bulletins and letters to State Medicaid Directors
https://www.medicaid.gov/federal-policy-guidance/index.html
 the State Medicaid Manual
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-
Based-Manuals-Items/CMS021927.html
 frequently asked questions
https://www.medicaid.gov/faq/index.html
More Information
 Medicaid is administered at the federal level by CMS in HHS:
https://www.cms.gov/
 CMS Office of the Actuary, “Medicaid: A Brief Summary,” in Brief Summaries
of Medicare & Medicaid:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-
and-Reports/MedicareProgramRatesStats/SummaryMedicareMedicaid.html
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Medicaid: An Overview

 The federal Medicaid and CHIP Payment and Access Commission (MACPAC)
publishes data and policy analysis and makes recommendations to Congress, the
HHS Secretary, and states:
https://www.macpac.gov/
 MACPAC, Medicaid 101:
https://www.macpac.gov/medicaid-101/
 CMS, “Medicaid”:
https://www.medicaid.gov/medicaid/index.html
 MACPAC’s “MACStats” compiles key national and state statistics from a variety
of sources:
https://www.macpac.gov/macstats/
 CMS Fast Facts has national statistics on beneficiaries, expenditures, and
services:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-
and-Reports/CMS-Fast-Facts/index.html
Each state operates its own Medicaid programs within federal guidelines.
 Links to information on each state’s Medicaid program:
https://www.medicaid.gov/state-overviews/index.html
 Links to each state’s Medicaid website and contact information; scrol to “2.
Through your state Medicaid agency”:
https://www.healthcare.gov/medicaid-chip/

Author Information

Alison Mitchell, Coordinator
Angela Napili
Specialist in Health Care Financing
Senior Research Librarian

Evelyne P. Baumrucker
Cliff Binder
Specialist in Health Care Financing
Analyst in Health Care Financing

Kirsten J. Colello
Julia A. Keyser
Specialist in Health and Aging Policy
Analyst in Health Care Financing

Key Policy Staff
Area of Expertise
Name
Eligibility, benefits, cost sharing, waiver authorities, premium assistance models, and
Evelyne Baumrucker
interaction with other federal programs
Prescription drugs, administration, program integrity, and dual-eligible beneficiaries
Cliff Binder
Long-term services and supports
Kirsten Colel o
Telehealth, behavioral health, and Medicaid coverage of incarcerated individuals
Julia Keyser
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Medicaid: An Overview

Financing, ACA Medicaid expansion, managed care, FMAP, DSH, provider taxes,
Alison Mitchel
provider payments, and territories

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
R43357 · VERSION 15 · UPDATED
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