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Medicaid is a cornerstone of the American health care system, providing vital health coverage to millions. But navigating what it is, who qualifies, and what it covers can feel complex. This guide breaks down the basics of Medicaid to help you understand this essential program.
Often mentioned alongside Medicaid is the Children’s Health Insurance Program (CHIP), a related program specifically providing low-cost coverage for children in families who earn too much to qualify for Medicaid but cannot afford private insurance.
What is Medicaid? The Basics
Definition and Purpose
Authorized under Title XIX of the Social Security Act and signed into law in 1965 alongside Medicare, Medicaid serves as a critical health safety net. It is a partnership between the federal government and state governments designed to provide health coverage for specific categories of low-income Americans.
As the nation’s largest source of health insurance coverage, Medicaid plays a significant role in the U.S. healthcare landscape, covering hospital care, doctor visits, long-term care, and more for tens of millions of individuals who might otherwise be uninsured. The program’s primary goal is to provide access to medical services for vulnerable populations, improving health outcomes and offering financial protection against high healthcare costs.
Federal-State Partnership
Medicaid operates through a unique federal-state partnership structure. Funding is shared between the federal government and each state government. The federal government establishes baseline standards and requirements that all state programs must meet, ensuring a certain level of consistency nationwide.
States then administer their own programs, designing them to meet the specific needs of their residents within those federal guidelines.
This partnership allows states significant flexibility. They can choose to cover optional eligibility groups beyond the federally mandated ones, offer benefits exceeding the minimum requirements, determine how services are delivered (such as through managed care organizations or directly paying providers), and set provider payment rates.
This flexibility inevitably results in variations in Medicaid programs from state to state. The federal share of funding, known as the Federal Medical Assistance Percentage (FMAP), is calculated annually based on a state’s average per capita income relative to the national average, with poorer states receiving a higher federal match rate (minimum 50%) to help support their programs.
Medicaid vs. Medicare vs. CHIP
It’s easy to confuse Medicaid with Medicare and CHIP, but they serve different populations:
Medicaid: Primarily based on low income and belonging to an eligible group (like children, pregnant women, parents, seniors, or individuals with disabilities). It’s a joint federal-state program with state-specific rules.
Medicare: A federal program primarily for people aged 65 and older, regardless of income, and for younger individuals with certain disabilities or conditions. Coverage and costs are generally uniform across the country.
CHIP (Children’s Health Insurance Program): A joint federal-state program specifically for children (and in some states, pregnant women) in families who earn too much to qualify for Medicaid but cannot afford private insurance.
Some individuals, often referred to as “dual eligibles,” qualify for and are enrolled in both Medicare and Medicaid. Typically, these are low-income seniors or younger individuals with disabilities. For these individuals, Medicare pays first for services covered by both programs, and Medicaid may then cover remaining costs and additional services not covered by Medicare, such as long-term care, dental, and vision care.
Who is Eligible for Medicaid?
Eligibility for Medicaid depends on meeting both non-financial and financial requirements set by federal and state law.
General Federal Guidelines & Mandatory Groups
Federal law requires states participating in Medicaid to cover certain mandatory populations. These include specific groups of low-income families, qualified pregnant women and children, and individuals receiving Supplemental Security Income (SSI). Beyond these mandatory groups, states have the option to cover additional populations.
Non-Financial Requirements
Regardless of income, individuals must meet certain non-financial criteria:
Residency: Applicants must generally be residents of the state in which they are applying for Medicaid.
Citizenship/Immigration Status: Applicants must be U.S. citizens or fall into specific categories of “qualified non-citizens.” Qualified non-citizens include Lawful Permanent Residents (LPRs, or “green card” holders), refugees, asylees, Cuban/Haitian entrants, individuals paroled into the U.S. for at least a year, and certain victims of trafficking or domestic violence, among others.
The 5-Year Waiting Period: Many qualified non-citizens, particularly LPRs, are subject to a five-year waiting period after obtaining their qualified status before they can become eligible for full Medicaid benefits. However, there are important exceptions: refugees, asylees, Cuban/Haitian entrants, certain trafficking victims, veterans and active-duty military members (and their families with qualified status) are exempt from the wait.
Additionally, states have the option (under the Immigrant Children’s Health Improvement Act or ICHIA) to waive the five-year wait for lawfully residing children and pregnant women.
Emergency Medicaid: Federal law requires states to provide Medicaid coverage for the treatment of emergency medical conditions (including labor and delivery for pregnant individuals) to people who meet all Medicaid eligibility requirements except for their immigration status. This includes undocumented immigrants.
Financial Requirements (Income & Household Size)
Financial eligibility is a major component of qualifying for Medicaid.
Role of the Federal Poverty Level (FPL): Medicaid income limits are typically expressed as a percentage of the Federal Poverty Level (FPL). The FPL is a measure of income issued annually by the U.S. Department of Health and Human Services (HHS) that varies based on family/household size. For example, an eligibility limit might be set at 138% FPL for a certain group.
2025 Federal Poverty Level (FPL) Guidelines (48 Contiguous States and DC)
| Persons in family/household | Annual Poverty Guideline |
|---|---|
| 1 | $15,650 |
| 2 | $21,150 |
| 3 | $26,650 |
| 4 | $32,150 |
| 5 | $37,650 |
| 6 | $43,150 |
| 7 | $48,650 |
| 8 | $54,150 |
| For each additional person | Add $5,500 |
(Note: Alaska and Hawaii have separate, higher FPL guidelines)
Modified Adjusted Gross Income (MAGI) Rules: The Affordable Care Act (ACA) established Modified Adjusted Gross Income (MAGI) as the standard methodology for determining income eligibility for most Medicaid applicants, including children, pregnant women, parents and caretaker relatives, and adults covered under the ACA expansion.
MAGI is based on taxable income and tax filing relationships, similar to how income is calculated for federal income taxes and Marketplace subsidies. A key feature of MAGI-based eligibility is that it does not include an asset or resource test; eligibility is based solely on income.
MAGI calculations also generally include a standard disregard equivalent to 5% of the FPL, effectively raising the income limit slightly.
Non-MAGI Rules (Age 65+, Blind, Disabled) & Asset Tests: Individuals whose eligibility is based on being age 65 or older, blind, or disabled are generally exempt from MAGI rules. For these groups, states typically use income methodologies related to the Supplemental Security Income (SSI) program.
Crucially, these non-MAGI pathways do usually include asset limits (also called resource limits). While California eliminated its asset test in 2024, most states limit countable assets to $2,000 for an individual and $3,000 for a married couple applying together.
Exempt Assets: Not all assets count toward the limit. Common exempt assets include the applicant’s primary home (often subject to equity limits if the applicant is in long-term care and has no spouse or dependent relative living there), one vehicle, household goods, personal belongings, burial plots, and certain pre-paid funeral arrangements.
Spousal Rules: Special rules apply to married couples when only one spouse needs long-term care Medicaid. The “community spouse” (the one not needing care) can typically keep a larger amount of assets under the Community Spouse Resource Allowance (CSRA), often up to $157,920 in 2025, plus the applicant spouse’s $2,000 limit.
Look-Back Period: States “look back” five years from the date of a long-term care Medicaid application to see if assets were transferred for less than fair market value (e.g., gifted away). Improper transfers during this period can result in a penalty period of Medicaid ineligibility.
Medicaid Estate Recovery Program (MERP): It’s important to understand MERP, although it applies after a Medicaid recipient’s death. Federal law requires states to attempt to recover the costs of certain Medicaid benefits (primarily long-term care services received at age 55 or older) from the deceased recipient’s estate.
An estate generally includes assets solely in the deceased’s name that go through probate, like a house. However, recovery is prohibited under certain circumstances, such as if there is a surviving spouse, a child under 21, or a blind/disabled child of any age. States also must have procedures for waiving recovery if it would cause undue hardship for the heirs.
While the home is often exempt for eligibility purposes during life, it can be subject to estate recovery after death unless protected through specific planning strategies.
Household Size Determination: How “household” is defined affects the FPL calculation. For MAGI groups, household size is generally based on the tax filing unit – who expects to file taxes together. This means parents and their tax dependents are typically counted. Specific rules exist for complex situations like unmarried partners living together or children claimed by non-custodial parents. Non-MAGI rules may use different household definitions.
Eligibility Categories (Specific Groups)
Medicaid eligibility is often tied to belonging to a specific category:
Children: Medicaid is a crucial source of coverage for children, covering nearly 4 in 10 nationwide. Federal law requires states to cover children up to at least 133% FPL (using MAGI rules), though many states set higher income limits. Children under 21 enrolled in Medicaid are entitled to a comprehensive set of benefits known as Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services.
Pregnant Women: This is another mandatory eligibility group. Income limits (using MAGI) are often higher than for other adults, reaching at least 133% FPL in all states and often exceeding 200% FPL. Coverage typically includes pregnancy-related services and extends for a postpartum period (often 12 months now due to recent federal options).
Adults (Parents/Caretakers & ACA Expansion Adults): Parents and caretaker relatives of dependent children are a mandatory group, but income limits (using MAGI) can be extremely low in states that have not expanded Medicaid – sometimes below 20% FPL.
The ACA allows states to expand Medicaid to cover nearly all non-elderly adults (including those without dependent children) with incomes up to 138% FPL (133% FPL plus the 5% disregard) using MAGI rules.
Individuals Aged 65+ or with Disabilities/Blindness: This group qualifies based on their age or disability status, provided they also meet specific, usually stringent, financial requirements based on non-MAGI (often SSI-related) rules, including asset tests. This category includes many “dual eligibles” who also have Medicare.
State Variations and the ACA Expansion
The ACA Expansion Decision: The ACA originally intended to expand Medicaid nationwide to adults up to 138% FPL. However, the 2012 Supreme Court ruling in National Federation of Independent Business v. Sebelius made this expansion optional for states.
The court found that threatening to withhold all existing Medicaid funds if a state didn’t expand was unconstitutionally coercive. As a result, each state decides whether to adopt the expansion. As of early 2025, 41 states and the District of Columbia have adopted the Medicaid expansion, while 10 states have not.
You can track the current status of state decisions at the Kaiser Family Foundation website. Reasons states have chosen not to expand often involve political opposition, concerns about state budget impacts (despite the enhanced federal match), or attempts to attach conditions like work requirements.
Eligibility Differences & The Coverage Gap: The decision to expand Medicaid creates significant differences in eligibility, particularly for low-income adults. In expansion states, adults under 65 generally qualify with incomes up to 138% FPL ($21,597 annually for an individual in 2025).
In the 10 non-expansion states (except Wisconsin, which covers adults up to 100% FPL via a waiver), eligibility for parents remains very low, and childless adults generally do not qualify for Medicaid at all, regardless of how low their income is.
This creates the “coverage gap”: individuals earn too much to qualify for traditional Medicaid in their state but too little (below 100% FPL) to qualify for subsidies to buy private insurance on the Health Insurance Marketplace. An estimated 1.4 million uninsured people fall into this gap.
You can view detailed state-by-state eligibility levels at the Medicaid.gov website.
Medically Needy / Spend-Down Programs: Some states offer a “medically needy” or “spend-down” pathway. This allows individuals whose income is too high for regular Medicaid (often those aged, blind, or disabled) but who have significant medical expenses, to qualify.
Essentially, they can deduct incurred medical costs (like health insurance premiums, hospital bills, prescription costs) from their income over a set period (1-6 months). If their income, after deducting these expenses, falls below the state’s Medically Needy Income Limit (MNIL), they become eligible for Medicaid for the remainder of that period.
This requires requalifying each period and is often complex, but provides a crucial option for those with high healthcare needs.
Finding State-Specific Information: Because rules vary, the best way to know if you qualify is to apply. You can find your state’s specific eligibility rules and contact information for your state Medicaid agency through the Health Insurance Marketplace website or directly via Medicaid.gov’s state resource finder.
What Does Medicaid Cover?
While coverage details vary by state, all Medicaid programs must provide a set of core benefits, and many offer additional optional services.
Mandatory Benefits
Federal law requires all state Medicaid programs to cover a specific list of essential services. These mandatory benefits ensure a baseline level of care across the country. Key mandatory benefits include:
- Inpatient and outpatient hospital services
- Physician services
- Laboratory and X-ray services
- Nursing facility services for individuals aged 21 and older
- Home health services for individuals entitled to nursing facility care
- Federally Qualified Health Center (FQHC) and Rural Health Clinic (RHC) services
- Family planning services and supplies
- Nurse midwife services
- Certified pediatric and family nurse practitioner services
- Freestanding birth center services (where licensed/recognized)
- Transportation to medical care
- Tobacco cessation counseling and pharmacotherapy for pregnant women
- Medication Assisted Treatment (MAT) for substance use disorders
- Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services for individuals under age 21. This is a comprehensive child health benefit unique to Medicaid. It requires states to cover regular medical, vision, dental, and hearing screenings, as well as any medically necessary services listed in the Medicaid statute needed to correct or ameliorate conditions identified during screening, regardless of whether those services are covered for adults in the state plan. This includes things like eyeglasses, hearing aids, dental care (including orthodontia in some cases), and mental health services. The goal is early detection and treatment to prevent long-term health problems.
Optional Benefits
Beyond the mandatory services, states have the flexibility to cover a wide range of optional benefits. The availability of these services varies significantly from state to state. Common optional benefits include:
- Prescription drugs (covered in all states, though technically optional)
- Dental services for adults
- Vision services and eyeglasses for adults
- Hearing aids for adults
- Physical and occupational therapy
- Speech, hearing, and language disorder services
- Podiatry services
- Chiropractic services
- Personal care services (assistance with daily activities)
- Case management
- Hospice care
- Inpatient psychiatric services for individuals under 21 or over 65
- Services in an intermediate care facility for individuals with intellectual disabilities (ICF/IID)
- Home and Community-Based Services (HCBS): This is a critical category of optional services that allows individuals who need long-term care (often seniors or people with disabilities) to receive support in their own homes or communities instead of institutions like nursing homes. HCBS can include personal care, respite care for caregivers, home modifications, adult day care, supported employment, and more. These services are increasingly important as most people prefer to receive care at home, and HCBS now accounts for the majority of Medicaid long-term care spending.
Cost Sharing (Premiums & Copays)
While Medicaid is often free, states can charge premiums and out-of-pocket costs (like copayments or deductibles) for some beneficiaries and some services. However, there are important protections:
Exemptions: Certain groups are exempt from most cost-sharing, including children under 18, pregnant women (for pregnancy-related services), individuals in institutions who contribute most of their income to care costs, and individuals receiving hospice care. Emergency services and family planning services are also exempt for everyone.
Nominal Amounts: For those subject to cost-sharing, the amounts are generally limited to “nominal” levels defined in federal regulations, often just a few dollars per service.
Aggregate Cap: Total cost-sharing for a family cannot exceed 5% of their household income.
Access Protection: Generally, providers cannot deny Medicaid-covered services (except sometimes non-preferred drugs or non-emergency ER use for higher-income groups) simply because an individual cannot afford the copayment.
How Benefits Are Delivered: Managed Care vs. Fee-for-Service
States use two main models to deliver Medicaid services:
Fee-for-Service (FFS): The traditional model where the state Medicaid agency pays healthcare providers directly for each service rendered to a beneficiary.
Managed Care: Most states now contract with private insurance companies, known as Managed Care Organizations (MCOs), to provide Medicaid benefits to enrollees. The state pays the MCO a fixed monthly rate per member (capitation), and the MCO is responsible for managing the member’s care, coordinating services, and paying providers.
The goals of managed care include improving care coordination, managing utilization, enhancing quality, and providing budget predictability for the state. The vast majority of Medicaid beneficiaries today are enrolled in some form of managed care.
How to Apply for Medicaid
When to Apply
Unlike private insurance or Medicare, Medicaid and CHIP do not have limited open enrollment periods. You can apply for coverage any time of year. If you think you might be eligible, even if you’re unsure, it’s best to submit an application to get a formal determination.
Where to Apply
There are two main ways to apply:
Through the Health Insurance Marketplace®: You can apply online at HealthCare.gov. When you fill out a Marketplace application, it automatically screens you and your household members for potential eligibility for Medicaid and CHIP based on the information you provide (like income, household size, state of residence).
If it looks like anyone might qualify, the Marketplace securely sends your information to your state Medicaid agency. The state agency will then contact you to complete the enrollment process or request additional information.
Applying through the Marketplace also allows you to find out if you qualify for financial assistance (premium tax credits and cost-sharing reductions) to buy a private plan if you are not eligible for Medicaid or CHIP.
Directly with Your State Medicaid Agency: You can also apply directly to your state’s Medicaid agency. This might be the required or preferred method for certain groups, particularly those applying based on age (65+), blindness, or disability, as their eligibility often involves non-MAGI rules and asset tests that may not be fully handled through the Marketplace application.
State agencies typically offer applications online through their own portals, by phone, by mail, or in person at local offices. You can find contact information for your state agency by using the state selector tool on HealthCare.gov or through the Medicaid.gov beneficiary resource page.
Getting Help with Your Application
Applying can sometimes feel overwhelming, but free help is available:
Navigators and Certified Application Counselors (CACs): These are individuals and organizations trained and certified to provide free, unbiased assistance with applications for Medicaid, CHIP, and Marketplace coverage.
They work in communities, often through hospitals, clinics, or community groups, and can help you understand your options, fill out forms, and gather documents. They can provide assistance in multiple languages and often have flexible hours.
While they can explain plans, they cannot choose one for you. You can find local help near you using the tool on HealthCare.gov or through your state’s specific resources.
Marketplace Call Center: You can also get help over the phone by calling the Marketplace Call Center at 1-800-318-2596 (TTY: 1-855-889-4325).
What Information and Documents Might Be Needed?
While the goal is a streamlined application, you may need to provide information and potentially documents to verify your eligibility. Specific requirements vary by state, but common items include:
- Basic Information: Full legal names and dates of birth for everyone in the household applying.
- Social Security Numbers (SSNs): For applicants who have them (providing SSNs helps speed up electronic verification of income and other data). Document numbers are needed for lawfully present immigrants applying for coverage.
- Household Information: Who lives with you, their relationship to you, and how you plan to file taxes.
- Income Information: Proof of income for all household members (e.g., pay stubs, W-2 forms, tax returns, self-employment records, Social Security award letters).
- Citizenship/Immigration Status: Proof of U.S. citizenship (like a birth certificate or passport) or eligible immigration status documents (like a green card or refugee documentation). States verify this electronically when possible but may request documents if needed.
- Other Health Insurance: Information about any other health coverage available to household members (like through a job).
- Residency: Proof you live in the state (like a utility bill, lease, or driver’s license).
- Assets (for non-MAGI applicants): Information on resources like bank accounts, stocks, or bonds if applying based on age, blindness, or disability.
The state agency will review your application and attempt to verify information through electronic data sources first. They will contact you if they need specific documents. The extensive documentation sometimes required, especially when electronic data isn’t sufficient or for non-MAGI groups, highlights the complexity that can still exist despite simplification efforts.
Retroactive Coverage
Medicaid offers an important protection called retroactive coverage. If your application is approved, Medicaid may cover qualified medical bills for up to three months prior to the month you applied, as long as you met the eligibility requirements during that time.
This is a federal requirement, though a few states have waivers limiting it for certain adult groups. This “look-back” period acts as a crucial safety net, especially if you had an unexpected hospitalization or needed nursing home care before you could complete the application process.
It helps ensure that necessary care received during the application window can be paid for, protecting both patients and providers from large unpaid bills. You may need to specifically ask for retroactive coverage on your application and provide proof of medical expenses from that period.
What Happens After Applying?
After you submit your application, the state Medicaid agency will review it. They may contact you if they need more information or documentation. By law, they generally must make a decision within 45 days for most applications, or 90 days if eligibility is based on a disability.
You will receive a written notice informing you whether your application was approved or denied. If your application is denied, the notice must explain the reason and inform you of your right to appeal the decision through a Medicaid Fair Hearing. This formal process allows you to present your case before an impartial hearing officer.
Common Myths About Medicaid
Several misconceptions exist about Medicaid. Let’s address some common ones:
Myth: Medicaid is only for people who don’t work.
Reality: This is false. The majority of non-elderly, non-disabled adult Medicaid recipients are in working families. Many work in low-wage jobs that don’t offer affordable health insurance, making Medicaid essential coverage. Access to Medicaid can actually support employment by helping people manage health conditions.
Myth: Medicaid provides poor quality care compared to private insurance.
Reality: Studies show that people with Medicaid generally report similar access to care as those with private insurance, and significantly better access than the uninsured. Medicaid coverage is linked to improved access to preventive care, better management of chronic conditions, increased financial security, and in some cases, improved health outcomes and reduced mortality rates compared to being uninsured.
Myth: You have to give up your house and all your assets to get Medicaid.
Reality: This is largely untrue, especially regarding eligibility. For MAGI-based groups (most children, pregnant women, non-disabled adults), there is no asset test. For non-MAGI groups (aged, blind, disabled), while asset limits exist, your primary home is typically an exempt asset during your lifetime, along with one car, household goods, and personal items.
The Medicaid Estate Recovery Program (MERP) can seek reimbursement from the estate (including the home) after death, but there are significant protections, exemptions (like for surviving spouses or minor/disabled children), and hardship waivers. Proper planning can often protect assets.
Myth: Medicaid covers everyone living below the poverty line.
Reality: Eligibility is not solely based on poverty. You must also fit into an eligible category (child, pregnant, parent, aged, disabled, expansion adult). In states that haven’t expanded Medicaid, many adults below the poverty line (especially childless adults) do not qualify, creating the “coverage gap”.
Myth: Medicare pays for long-term nursing home care.
Reality: Medicare covers only limited, short-term nursing home stays following a qualifying hospital visit (typically up to 100 days with significant cost-sharing after day 20). Medicaid is the primary payer for long-term nursing home care and home/community-based long-term services and supports in the U.S.
Myth: Giving away assets means you can never get Medicaid.
Reality: While transferring assets for less than fair market value within the five-year “look-back” period before applying for long-term care Medicaid can trigger a penalty period of ineligibility, it doesn’t necessarily mean permanent disqualification.
The length of the penalty depends on the value of the transfer. Furthermore, certain transfers are exempt (like to a spouse or sometimes to a disabled child or caregiver child), and specific legal planning strategies (like certain trusts or annuities) can be used to protect assets, though these often require careful planning well in advance. Hiding assets is illegal and should never be done.
Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.
