Learn About Medicaid Coverage Plans

What Medicaid Is and How It Works

Medicaid is a government health insurance program that helps pay for medical care for certain people and families with limited income. Unlike Medicare, which is based on age, Medicaid is based mainly on income level. The program was created in 1965 and is jointly funded by the federal government and individual states, which means each state runs its own Medicaid program with some differences in how it operates.

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The basic way Medicaid works is straightforward: when you receive medical services like doctor visits, hospital stays, or prescriptions, Medicaid can help pay the costs. Instead of you paying the full amount out of pocket, Medicaid covers a portion or sometimes all of the costs. Healthcare providers—doctors, hospitals, and pharmacies—then bill Medicaid for the services provided. This system helps people manage healthcare expenses that might otherwise be unaffordable.

It's important to understand that Medicaid is not the same as charity care or welfare in the traditional sense. It's a structured insurance program with specific rules about who can participate and what services are covered. Each state's Medicaid program decides which services to cover, though federal law requires certain core services like hospital care, doctor visits, and emergency services to be included in all state programs.

As of 2024, Medicaid serves over 72 million people across the United States. This makes it one of the largest health insurance programs in the country. The number of people covered has changed significantly over the years, especially following major policy changes. For example, the Affordable Care Act in 2010 expanded Medicaid in many states, allowing more low-income adults to participate.

Practical takeaway: Think of Medicaid as health insurance specifically designed for people with lower incomes. It works like other insurance—you receive medical care, and the program helps pay the bills—but the rules for who can participate are different from private insurance.

Different Types of Medicaid Coverage Plans

Medicaid offers several different types of coverage plans, and the specific plans available depend on which state you live in and your personal circumstances. Understanding the different plan types helps you know what kind of healthcare coverage structure you might encounter.

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The most common type is called Traditional Fee-for-Service Medicaid. In this plan structure, Medicaid pays healthcare providers directly for each service they provide. When you see a doctor or go to the hospital, that provider bills Medicaid, and Medicaid pays them. This plan type gives you flexibility to see many different doctors and specialists without needing permission from a gatekeeper first. However, you may have more paperwork and billing involvement with different providers.

Another major plan type is Managed Care. In managed care plans, Medicaid contracts with private insurance companies to manage your coverage. You choose or are assigned to a specific managed care plan run by a company like Anthem, Molina Healthcare, or UnitedHealthcare. These plans work more like traditional health insurance—you have a network of doctors, you may need a primary care doctor, and you typically need referrals to see specialists. Managed care plans often include additional services like care coordination or disease management programs that fee-for-service plans might not offer.

Some states offer Program of All-Inclusive Care for the Elderly (PACE). This plan is specifically for people who are 55 or older and need significant care support. PACE programs provide comprehensive services including adult day care, transportation, meals, and medical care all in one coordinated program. It's designed to help older adults stay in their communities instead of moving to nursing homes.

Several states operate Health Maintenance Organization (HMO) plans through Medicaid. HMOs are similar to managed care but with stricter networks. You must use doctors and hospitals within the HMO's network, except in emergencies. HMOs typically have lower costs but less flexibility in choosing providers.

Preferred Provider Organization (PPO) plans are available in some states. PPOs give you more flexibility than HMOs—you can see doctors outside the network if you're willing to pay more out of pocket. Within the network, costs are lower.

Dental and vision coverage plans are sometimes available as separate plans or add-ons. Medicaid dental coverage varies greatly by state; some states cover comprehensive dental care while others cover only emergency services. Vision coverage similarly varies and may include eye exams, glasses, or contact lenses depending on your state.

Practical takeaway: Your state's Medicaid program offers specific plan types based on its structure. Research what types are available in your state to understand whether you'll have a choice between managed care and fee-for-service, and what additional services might be included.

Who May Participate in Medicaid Programs

Medicaid participation requirements vary by state, but generally, income is the primary factor. Federal law sets minimum standards that states must follow, but states can set their own rules that are sometimes more generous than the federal minimum. This means that two people with the same income might qualify in one state but not in another.

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Income limits for Medicaid are typically expressed as a percentage of the federal poverty level. The federal poverty level changes yearly—for 2024, the poverty line for a family of four is approximately $31,200 per year. Most states set Medicaid income limits between 130% and 200% of the poverty level, though some states set them lower or higher. For example, if a state sets the limit at 138% of poverty for adults, a family of three with an annual income below approximately $30,000 might be within the income range, though this varies by state.

Different groups of people have different income limits within the same state. Children often have higher income limits than adults. Pregnant women frequently have higher limits than other groups. Elderly people and people with disabilities may have different rules than working-age adults. Some states have separate income limits for families with children versus childless adults.

Beyond income, other factors determine participation eligibility. Citizenship or immigration status matters in most states—generally, U.S. citizens and certain legal immigrants may participate, but undocumented immigrants are excluded from most state Medicaid programs (though a few states offer limited coverage). Age can be a factor for certain programs. Residency in the state is required. Some states have asset limits, meaning if you have too much money in savings or investments, you may not be able to participate, though many states have eliminated or raised asset limits significantly.

Specific populations have dedicated Medicaid programs with their own rules. Children have the Children's Health Insurance Program (CHIP), which often has higher income limits than adult Medicaid. Pregnant women and new parents may have coverage options that extend beyond what other groups receive. People who are blind, disabled, or elderly have specific pathways to Medicaid. Some states offer coverage for working people with disabilities who want to maintain employment without losing benefits.

The rules changed significantly in many states following 2020. During the COVID-19 pandemic, the federal government temporarily stopped states from removing people from Medicaid even if their circumstances changed. When this temporary measure ended in 2023, many people lost coverage. Some states have since expanded who can participate, while others have tightened their rules.

Practical takeaway: Income limits and rules differ significantly by state and by population group. To understand participation rules that might apply to your situation, you need information specific to your state, not general national information.

What Services and Treatments Medicaid Covers

Medicaid coverage includes a basic set of services that every state must provide, called "mandatory benefits." These services form the foundation of coverage across all state programs. However, states can add additional optional services, so coverage varies from state to state.

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The mandatory services that all states must cover include inpatient hospital care, outpatient hospital care, emergency services, physician services (doctor visits), laboratory and x-ray services, nursing facility care for people age 21 and older, and home health services. These core services ensure that everyone with Medicaid has coverage for essential medical needs like treating illnesses, managing emergencies, and receiving diagnostic testing.

Most states also cover prescription medications through Medicaid. However, the specific drugs covered and how much you pay (called "cost-sharing") vary. Some states cover a wide range of medications while others maintain restrictive lists of approved drugs. Your cost for medications might be zero, a small copayment (like $1-3 per prescription), or you might need prior authorization before the medication is covered.

Dental coverage through Medicaid is inconsistent