	Introduction

Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well 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. In FY2014, Medicaid is estimated to have provided health care services to 65 million individuals at a total cost of $498 billion, with the federal government paying $303 billion of that total. State participation in Medicaid is voluntary, though all states, the District of Columbia, and the territories choose to participate. States submit these Medicaid state plans to the federal Centers for Medicare & Medicaid Services (CMS) for approval. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) is the most recent federal law to make fundamental revisions to the Medicaid program, including a substantial expansion of Medicaid eligibility that began in 2014. 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, how the program is financed, and how providers are paid. The report also explains waivers, program integrity activities, and the dual-eligible population. In addition, the report addresses the following selected issues: the ACA Medicaid expansion, the impact of the ACA health insurance annual fee on Medicaid, and the ACA maintenance of effort (MOE) requirement with respect to Medicaid eligibility. If a state participates in Medicaid, the following are examples of groups that must be provided Medicaid coverage:
low-income families that meet the financial requirements (based on family size) of the former Aid to Families with Dependent Children (AFDC) cash assistance program; pregnant women and children through the age of 18 with family income at or below 133% of the federal poverty level (FPL); low-income individuals who are aged 65 and older, or who are blind, or who are under the age of 65 and disabled who qualify for cash assistance under the Supplemental Security Income (SSI) program; recipients of adoption assistance and foster care (who are under the age of 18) under Title IV–E of the Social Security Act; certain individuals who age out of foster care, up to the age of 26, and do not qualify under other mandatory groups noted above; and certain groups of legal permanent resident immigrants (e.g., refugees for the first 7 years after entry into the United States; asylees for the first 7 years after asylum is granted; lawful permanent aliens with 40 quarters of creditable coverage under Social Security; immigrants who are honorably discharged U.S. military veterans) who meet all other financial and categorical Medicaid eligibility requirements. Modified Adjusted Gross Income

As of January 1, 2014, MAGI rules are used in determining eligibility for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion. In addition, states have the option to provide ABP coverage to other subgroups. As a result, there is significant variation from state to state in funding sources. 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 newly eligible and expansion state federal matching rates. Medicaid Program Waivers

The Social Security Act authorizes several waiver and demonstration authorities to provide states with the flexibility to operate their Medicaid programs. The ACA included some provisions to increase uniformity among Medicare, Medicaid, and CHIP program integrity activities. In addition, the ACA provided CMS with the ability to test innovative payment and service delivery models to improve coordination of care and reduce the cost of dual-eligible beneficiaries.
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports (LTSS) to an estimated 65 million people at a cost to states and the federal government of $498 billion in FY2014. In comparison, the Medicare program provided health care benefits to nearly 54 million seniors and certain individuals with disabilities in that same year at a cost of roughly $606 billion to the federal government. Because Medicaid represents a large component of federal mandatory spending, Congress is likely to continue its oversight of Medicaid's eligibility, benefits, and costs.
Participation in Medicaid is voluntary for states, though all states, the District of Columbia, and the territories choose to participate. The federal government requires states to cover certain mandatory populations and benefits, but the federal government also allows states to cover other optional populations and services. Due to this flexibility, there is substantial variation among the states in terms of factors such as Medicaid eligibility, covered benefits, and provider payment rates. In addition, there are several waiver and demonstration authorities that allow states to operate their Medicaid programs outside of federal rules.
Historically, Medicaid eligibility generally has been limited to low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) included the ACA Medicaid expansion, which expands Medicaid eligibility to individuals under the age of 65 with income up to 133% of the federal poverty level (FPL) (effectively 138% of FPL) at state option.
The ACA makes a number of other changes, which together represent the most significant reform to the Medicaid program since its establishment in 1965. In addition to the ACA Medicaid expansion, the ACA expands Medicaid eligibility for children aged 6 to 18 and former foster care children; transitions to the modified adjusted gross income (MAGI) counting methodology to determine eligibility for most non-elderly Medicaid enrollees; requires alternative benefit plan (ABP) coverage for certain Medicaid enrollees; provides enhanced federal matching funds for the ACA Medicaid expansion; increases uniformity among Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP) program integrity activities; and provides the Centers for Medicare & Medicaid Services (CMS) with the ability to test methods to improve coordination of care for dual-eligible beneficiaries, among other changes.
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, how the program is financed, and how providers are paid. The report also explains waivers, program integrity activities, and the dual-eligible population. In addition, it describes the following selected issues: the ACA Medicaid expansion, the impact of the ACA health insurance annual fee on Medicaid, and the ACA maintenance of effort (MOE) requirement with respect to Medicaid eligibility.