Medicaid
Based on Wikipedia: Medicaid
Here's a number that might surprise you: Medicaid paid for half of all births in the United States in 2019. Not a quarter. Not a third. Half. This single government program—often dismissed in political debates as welfare for the poor—is so woven into American healthcare that it touches nearly every maternity ward in the country.
And births are just the beginning. Medicaid provides health insurance to 85 million Americans as of 2022, making it the largest source of medical funding for low-income people in the nation. To put that in perspective, that's roughly one in four Americans covered by this single program.
What Medicaid Actually Is (And What It Isn't)
Medicaid is often confused with Medicare, and the similar names don't help. Here's the simplest way to remember the difference: Medicare is for the elderly, Medicaid is for the poor.
Medicare functions as a universal program—once you turn 65, you're eligible regardless of income. It's essentially social insurance you've paid into throughout your working life. Medicaid works differently. It's means-tested, meaning your eligibility depends on having limited income and resources.
But here's where it gets interesting: the two programs overlap significantly. Many elderly Americans qualify for both, receiving what are called "dual health plans." This matters because Medicaid covers things Medicare doesn't, particularly long-term care. If you've ever wondered how elderly Americans afford nursing homes—which can easily cost $8,000 to $10,000 per month—the answer is often Medicaid. Of the 7.7 million Americans who used long-term care services in 2020, about 5.6 million were covered by Medicaid.
There's also the Children's Health Insurance Program, known as CHIP, which covers children in families that earn too much to qualify for Medicaid but not enough to afford private insurance. Think of CHIP as Medicaid's higher-income cousin for kids.
The Great Society's Lasting Legacy
Medicaid was born in 1965, part of President Lyndon B. Johnson's ambitious "Great Society" programs. That same year gave us Medicare, Head Start, and the Voting Rights Act. Johnson, a Texan who had grown up in rural poverty, pushed through legislation that fundamentally reshaped the relationship between the federal government and American citizens.
The design of Medicaid reflected the political realities of the 1960s. Rather than creating a purely federal program, Congress established a partnership between Washington and the states. The federal government would provide matching funds—essentially saying "for every dollar you spend, we'll contribute some amount too"—while states would run the programs according to federal baseline standards.
This structure gave states enormous latitude. They could set their own eligibility requirements, determine which services to cover, and decide how to administer the program. The result was not one Medicaid program but fifty different ones, each reflecting the politics and priorities of its state.
Not every state rushed to participate. Arizona held out until 1982, making it the last state to join. The program wasn't mandatory—states could opt out entirely—but the federal matching funds proved too valuable to refuse. By the early 1980s, every state had signed on.
Following the Money
In 2023, Medicaid cost $870 billion in combined federal and state spending. That's a staggering sum—larger than the defense budgets of most countries. But the spending patterns reveal something important about what Medicaid actually does.
Children make up 37% of Medicaid enrollees but account for only 15% of spending, averaging about $3,000 per child annually. Seniors and people with disabilities, by contrast, represent just 21% of enrollees but consume 52% of the budget—more than $18,000 per person.
Why such a dramatic difference? Children generally need preventive care, vaccinations, and occasional treatment for acute illnesses. They're relatively inexpensive to insure. The elderly and disabled, however, often require ongoing treatment for chronic conditions, expensive medications, and most significantly, long-term care. A single year in a nursing home can cost more than a decade of pediatric care.
This spending distribution matters for policy debates. When politicians discuss cutting Medicaid, they're often implicitly talking about reducing care for the elderly and disabled—the most expensive enrollees—not necessarily the children who make up the program's largest demographic group.
The Affordable Care Act Transformation
For decades after its creation, Medicaid served a relatively narrow population: very poor families with children, pregnant women, the elderly poor, and people with disabilities. Many states didn't cover able-bodied adults without children at all, regardless of how poor they were.
The Affordable Care Act, passed in 2010 during President Barack Obama's administration, attempted to change this fundamentally. Under the law's original design, every state would expand Medicaid to cover anyone earning up to 138% of the federal poverty level—roughly $20,000 for an individual or $41,000 for a family of four in today's dollars.
The federal government sweetened the deal considerably. Washington would pay 100% of the costs for newly eligible enrollees initially, gradually decreasing to 90% by 2020. States would never have to pay more than 10% of the expansion costs—a remarkably generous arrangement compared to traditional Medicaid matching rates.
But then came the Supreme Court.
The Supreme Court's Unexpected Twist
In 2012, the Supreme Court ruled on National Federation of Independent Business versus Sebelius, a case challenging the Affordable Care Act's constitutionality. The Court upheld most of the law but struck down one crucial provision: the requirement that states expand Medicaid or lose all their existing Medicaid funding.
Chief Justice John Roberts, writing for the majority, found this penalty "unconstitutionally coercive." States couldn't be threatened with losing their entire Medicaid programs—programs that had existed for nearly fifty years—if they refused to adopt the expansion. The practical result was that Medicaid expansion became optional.
What followed was a stark partisan divide. States controlled by Democrats generally embraced the expansion, while many Republican-controlled states refused it. As of March 2023, 40 states plus the District of Columbia have expanded Medicaid. Ten states have not.
The consequences are measurable. In states that expanded Medicaid, the uninsured rate among working-age adults was 7.3% in early 2016. In non-expansion states, it was nearly double: 14.1%. A 2019 study by the National Bureau of Economic Research found that states enacting Medicaid expansion showed statistically significant reductions in mortality rates. People were, quite literally, living longer because of the expansion.
The Coverage Gap: Falling Through the Cracks
The Affordable Care Act created an unexpected problem in states that didn't expand Medicaid. The law's authors had assumed universal Medicaid expansion, so they designed premium subsidies for private insurance to begin only above 138% of the poverty level. Below that threshold, everyone was supposed to be on Medicaid.
When some states refused to expand, this created what's called the "coverage gap." In these states, people can earn too much to qualify for traditional Medicaid but too little to receive subsidies for private insurance. They're caught in a no-man's-land where no affordable coverage exists.
Consider a concrete example from Kansas, which hadn't expanded Medicaid. A family of three earning $6,250 annually—32% of the poverty line—qualified for Medicaid. But if their income increased to $7,000, they lost Medicaid eligibility. They wouldn't qualify for insurance subsidies until their income reached $19,530—the poverty line. Everyone in between had essentially no options.
This isn't a small population. Studies estimated that up to 6.4 million people fell into this coverage gap nationally. More than half the uninsured population in America lives in states that haven't expanded Medicaid.
The Managed Care Revolution
Beginning in the 1980s, states began experimenting with a fundamentally different way of delivering Medicaid: managed care. Instead of paying doctors and hospitals directly for each service (called "fee-for-service"), states contracted with private health plans. These managed care organizations, or MCOs, receive a fixed monthly payment for each enrollee and must provide all necessary care within that budget.
The theory is straightforward. Under fee-for-service, providers have an incentive to deliver more care—more tests, more procedures, more visits—because they're paid for each one. Under managed care, the incentive reverses. MCOs make money by keeping people healthy and avoiding expensive treatments.
The shift has been dramatic. Today, roughly 80% of Medicaid enrollees are in managed care plans. But the transition hasn't been uniform across all populations. Low-income families—generally healthier and less expensive to cover—are most likely to be in managed care. The elderly and disabled, whose complex conditions are harder to manage within fixed budgets, more often remain in traditional fee-for-service Medicaid.
As of 2014, 26 states had contracts with MCOs specifically for long-term care for the elderly and disabled. This represents one of the most significant experiments in American healthcare: can private companies efficiently manage care for the most vulnerable and expensive populations?
The Drug Rebate Program
In 1990, Congress created the Medicaid Drug Rebate Program to address a peculiar problem: Medicaid was paying more for prescription drugs than almost anyone else. Private insurers and other large purchasers negotiated substantial discounts, but Medicaid programs were often paying full price.
The solution was mandatory rebates. Drug manufacturers who want Medicaid to cover their products must provide rebates to state Medicaid programs. The rebate amount is tied to the difference between what manufacturers charge Medicaid and their "best price" offered to other purchasers.
This program has saved Medicaid tens of billions of dollars over the years. But it's also created ongoing tension between pharmaceutical companies and Medicaid programs. Manufacturers sometimes argue the rebates are too steep; states counter that drug prices remain too high. This quiet battle over prescription drug pricing continues to shape both Medicaid budgets and pharmaceutical industry practices.
Medicaid in Schools
Here's something many people don't realize: Medicaid funds significant services in public schools. Under federal law, children with disabilities have the right to a "free appropriate public education," established by Section 504 of the Rehabilitation Act of 1973. Many of these children need health-related services—speech therapy, physical therapy, nursing care—to access their education.
Medicaid reimburses schools for providing these services to eligible children. This has become a substantial funding stream for school districts, helping them afford the specialists and equipment that special education students need. When debates arise about Medicaid cuts, school administrators often voice concern because their special education budgets depend partly on these reimbursements.
Estate Recovery: The Hidden Cost
One aspect of Medicaid that often surprises families is estate recovery. Since 1993, federal law has required states to recover certain Medicaid costs from the estates of deceased beneficiaries, particularly for long-term care.
Here's how it works. An elderly person qualifies for Medicaid by having very limited assets—typically less than $2,000 in countable resources, though rules vary by state. Medicaid then pays for their nursing home care, which might cost $100,000 or more annually. After that person dies, the state can file a claim against their estate—including their home, if they owned one—to recover what Medicaid spent.
This means the family home that someone hoped to leave to their children might instead be sold to reimburse Medicaid. Many families are shocked to learn this after a parent's death. Estate planners have developed various strategies to protect assets from Medicaid recovery, but these must typically be implemented years before someone needs long-term care.
Work Requirements: A New Chapter
In July 2025, President Donald Trump signed the One Big Beautiful Bill Act, introducing significant changes to Medicaid. Most notably, the law established work requirements: beginning in 2027, most able-bodied adult Medicaid enrollees must work or volunteer for 80 hours per month to maintain their coverage.
The policy reflects a longstanding conservative argument that public assistance should be tied to work, encouraging self-sufficiency rather than dependency. But critics point to a crucial fact: according to the Government Accountability Office, roughly 70% of Medicaid recipients already work at least 35 hours per week. They qualify not because they're unemployed but because their wages are too low to afford health insurance.
The Congressional Budget Office estimated that the work requirements will cause 11 million people to lose Medicaid coverage. Many of these individuals already work or qualify for exemptions but, in the CBO's assessment, will not be able to navigate the documentation requirements—the "red tape," as one analysis put it.
This echoes earlier experiments. In 2019, a federal judge blocked work requirements in Arkansas and Kentucky, ruling that the mandates undermined Medicaid's core purpose of providing healthcare to the needy. That ruling found the requirements created obstacles to coverage rather than promoting health.
The 2025 Changes: Beyond Work Requirements
The One Big Beautiful Bill Act changed Medicaid in several other ways. It requires recipients above the federal poverty line to pay more fees for coverage. It adds new verification requirements and increases how often states must check whether their Medicaid expansion enrollees remain eligible. It prohibits Medicaid from funding nonprofits that provide abortion care.
The law also targets what are called "provider taxes"—fees that states impose on healthcare providers to help fund their share of Medicaid costs. These taxes have been controversial because they effectively let states leverage more federal matching funds. The new limits constrain this practice.
One provision addresses "spread pricing" by pharmacy benefit managers, the intermediaries that negotiate drug prices. These companies sometimes pay pharmacies less than they charge Medicaid programs, pocketing the difference. Banning this practice could reduce costs, though the magnitude is disputed.
The legislation prompted claims about undocumented immigrants using Medicaid. In reality, undocumented immigrants are already ineligible for full federal Medicaid benefits. Some access state-funded health programs—separate from federal Medicaid—and the CBO estimated that the bill's provisions could cause states to cut these programs, potentially affecting 1.4 million people.
The Research Consensus
Academic research on Medicaid has produced remarkably consistent findings. The program improves health outcomes. It increases access to healthcare. It reduces financial strain on recipients—medical bills are the leading cause of bankruptcy in America, and Medicaid protects against this.
Studies comparing states that expanded Medicaid to those that didn't have found measurable differences. Residents of expansion states are more likely to receive healthcare services, less likely to incur emergency room costs, and have less trouble paying medical bills. A 2016 study comparing Kentucky and Arkansas (which expanded) to Texas (which didn't) found dramatic improvements in the expansion states with no similar improvement in Texas.
Perhaps most significantly, expansion appears to save lives. The National Bureau of Economic Research study finding reduced mortality rates in expansion states represents one of the clearest demonstrations that health insurance—not just healthcare—affects whether people live or die.
The Political Divide
Medicaid has become one of the starkest partisan divides in American politics. Democrats generally support the program and its expansion, viewing it as essential social insurance for vulnerable populations. Republicans are divided, with some supporting the program's basic mission while advocating for reduced spending, work requirements, and greater state flexibility.
The 2025 budget debates illustrated this tension. Republican Congressional leaders announced goals of cutting $1.5 to $2 trillion from the federal budget. The House budget resolution, passed with only Republican votes, proposed $880 billion in cuts from committees overseeing programs including Medicaid and Medicare.
President Trump stated that cuts to Medicaid would target only "abuse or waste." Critics noted that identifying hundreds of billions in waste is easier said than done—Medicaid has been studied extensively, and while fraud exists, eliminating it entirely wouldn't approach the proposed savings.
Looking Forward
Medicaid's future remains contested. The program has grown far beyond what its 1965 creators imagined, becoming central to American healthcare in ways that would have been unthinkable at its founding. It now covers more Americans than any other insurance program, public or private.
The work requirements taking effect in 2027 represent the most significant structural change since the Affordable Care Act expansion. Whether they achieve their stated goal of encouraging work and self-sufficiency—or primarily result in coverage losses due to administrative barriers—will likely be debated for years.
What's certain is that Medicaid touches nearly every aspect of American healthcare. It pays for half of births and the majority of long-term care. It funds services in schools and supports rural hospitals that might otherwise close. It provides the only health insurance available to millions of working Americans whose jobs don't offer coverage and whose incomes don't stretch to private plans.
Understanding Medicaid means understanding how America actually delivers healthcare to its most vulnerable citizens—not in theory, but in practice. And that understanding has never been more important than it is today.