Medicaid: Overview

Medicaid is a joint federal/state program, established in 1965, that provides health insurance to eligible low-income and medically vulnerable populations. Medicaid and other government health insurance programs provide a safety net for specific populations that might otherwise have difficulty obtaining coverage.

To be eligible for federal funds, states are required to provide coverage to certain groups of individuals and can choose to extend coverage to other categorically needy groups. For example, all states are required to cover children under age six and pregnant women at or below 133 percent of the federal poverty level (FPL) and may opt to provide coverage for institutionalized individuals with income and resources below specified limits.

While there are over 25 different eligibility categories for which federal funds are available, these groups are often classified into two broad groups: covered families and children – comprising eligible parents, children and pregnant women – and the aged, blind and disabled (ABD) population.

In Ohio, the federal government pays roughly 60 percent and the state government pays about 40 percent of Medicaid costs. As Medicaid continues to absorb ever larger portions of both state and federal budgets, there is growing concern about the future affordability of the program.

Ultimately, the challenge is that controlling costs is not straightforward when it comes to Medicaid. While policymakers can decide to limit spending, the health needs of the population do not simply go away. Spending may be cut in one area only to resurface as an increased expense in another area. Cut eligibility, for example, and people who have lost access to primary care then turn to hospital emergency rooms, oftentimes with more expensive health problems after having put off seeking care. (See testimony of Bill Ryan)

And the money introduced into the economy by state and federal governments through the Medicaid program ripples out into the community, creating indirect economic activity as a result, through employment and the purchase of goods, for example. As a result, cuts in these funding streams have deeper implications for our communities than the obvious problem of making it harder for those who need care to access it.

Last Updated: May 2005