Medicaid: Eligibility, Benefits, and How to Apply for Coverage

Medicaid is the single largest source of health coverage in the United States, a joint federal and state public insurance program that provides a critical health safety net for millions of Americans. It serves a broad and diverse population, offering medical assistance to low-income children and their families, pregnant women, adults, seniors, and people with disabilities.

The program's structure as a partnership between the federal government and individual states is the source of both its strength and its complexity. This framework allows for tailored programs that meet local needs but also results in significant variations in eligibility and benefits from one state to another. Navigating this system requires a clear understanding of its core rules, from who qualifies and what services are covered to the specific steps of the application process.

Medicaid's Role in the U.S. Health System

Medicaid is a cornerstone of the American healthcare landscape, providing comprehensive health and long-term care coverage to approximately 80 million low-income people. Its economic footprint is immense, accounting for nearly one-fifth of all healthcare spending in the nation. Critically, it covers over half of all spending on long-term care services like nursing homes, making it a major financial pillar of the entire U.S. healthcare industry.

Understanding the Federal and State Partnership

The defining characteristic of Medicaid is its structure as a joint federal-state initiative. The federal government guarantees matching funds to states for all qualified services provided to eligible enrollees, with no predetermined cap on federal dollars. This financial support is determined by the Federal Medical Assistance Percentage (FMAP), a formula that provides a higher federal match rate to states with lower per capita incomes.

While the Centers for Medicare & Medicaid Services (CMS) sets broad federal requirements, each state administers its own program. This division of responsibility creates an inherent tension between national standards and state autonomy. Because of this, there is no single, uniform "Medicaid program" in the U.S.; rather, there are more than 50 distinct versions, and the answer to any specific question often depends on the rules in a particular state.

Populations Served: Who Relies on Medicaid?

The program's reach is extensive, touching communities across the country. Nationally, Medicaid covers one in five Americans, but its impact is even more pronounced for specific vulnerable groups.

• Children: Medicaid covers nearly four in ten children nationwide and over 80% of all children living in poverty. It provides them with essential health services through its Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit.
• Births: The program finances 41% of all births in the United States, offering vital prenatal and postpartum care to mothers and infants.
• Seniors and People with Disabilities: Medicaid is the primary payer for long-term care, covering five in eight nursing home residents. It also provides coverage for a significant share of non-elderly adults with disabilities, mental illness, or HIV.

Distinguishing Medicaid from Medicare

One of the most common points of confusion is the difference between Medicaid and Medicare. While both are government-run health programs, they serve different populations and are funded and structured in distinct ways.

Eligibility: Income-Based vs. Age and Disability

The fundamental difference lies in their eligibility criteria.

• Medicaid is a means-tested program. Eligibility is primarily determined by an individual's or family's income and resources, targeting those with limited financial means.
• Medicare is a federal health insurance program primarily for people age 65 or older, regardless of their income. It also covers some younger individuals with specific disabilities or End-Stage Renal Disease.

Coverage and Costs: A Comparative Overview

Medicaid typically offers more comprehensive benefits than Medicare, with little to no out-of-pocket costs for beneficiaries. A key distinction is that Medicaid covers services not normally paid for by Medicare, most notably long-term custodial care in a nursing home and personal care services at home.

In contrast, Medicare has a more defined benefit structure, often referred to by its parts (Part A for hospital, Part B for medical, Part D for prescription drugs). It also requires beneficiaries to pay premiums, deductibles, and coinsurance.

When Both Programs Work Together: The Dual Eligible Population

Some individuals, often low-income seniors or people with disabilities, qualify for both programs simultaneously and are known as "dual eligibles". For this population, Medicare is always the primary payer for Medicare-covered services, while Medicaid acts as the secondary payer.

For these individuals, Medicaid "wraps around" Medicare to cover costs that would otherwise be a significant burden, such as Medicare Part B premiums, deductibles, and copayments. Furthermore, Medicaid fills critical gaps in Medicare's coverage, particularly for long-term care. This dual eligibility also automatically qualifies an individual for the "Extra Help" program, which significantly lowers the cost of Medicare Part D prescription drugs.

The Rules of Eligibility: Who Qualifies for Medicaid?

Determining who qualifies for Medicaid involves a complex assessment of both financial and non-financial criteria. The Affordable Care Act (ACA) introduced significant changes, creating a bifurcated system with two distinct pathways to eligibility.

Financial Requirements: Income Limits

Medicaid eligibility is almost always tied to the Federal Poverty Level (FPL), a measure of income issued annually by the federal government. For example, the 2025 FPL is $15,650 for an individual and $26,650 for a family of three. States set their Medicaid income limits as a percentage of this FPL.

The method for counting that income depends on the applicant's eligibility group:

• MAGI (Modified Adjusted Gross Income): The ACA established a simplified income-counting methodology for most applicants, including children, pregnant women, parents, and adults in states that expanded Medicaid. MAGI is based on taxable income and tax-filing relationships and does not include an asset or resource test.
• Non-MAGI: Individuals applying for Medicaid based on being age 65 or older, blind, or disabled are exempt from MAGI rules. Their financial eligibility is determined using older, more complex methodologies that include a strict asset test in addition to income limits.

Financial Requirements: Asset Limits

For applicants in the non-MAGI category (seniors and people with disabilities), there is a limit on "countable assets."

• The Asset Test: In most states, an individual applicant is permitted to have no more than $2,000 in countable assets to qualify for long-term care services.
• Countable vs. Exempt Assets: Countable assets include cash, bank accounts, stocks, and bonds. Key exempt assets typically include the applicant's primary home (up to a certain equity limit), one vehicle, personal belongings, and household furnishings.
• Rules for Married Couples: To prevent the impoverishment of a healthy spouse, the Community Spouse Resource Allowance (CSRA) allows the non-applicant spouse to retain a significant portion of the couple's assets, up to $157,920 in most states in 2025. States also employ a five-year "Look-Back Period" to ensure assets were not improperly transferred to meet the limit.

Non-Financial Requirements: Residency and Citizenship

In addition to financial rules, all applicants must be a resident of the state in which they are applying. They must also be either a U.S. citizen or a "qualified non-citizen." Qualified non-citizens, such as lawful permanent residents, are often subject to a five-year waiting period before they can become eligible for Medicaid.

Medicaid Coverage Across Different Life Stages and Needs

Medicaid eligibility rules are applied differently to various populations, reflecting the program's goal of serving diverse groups with distinct healthcare needs.

Health Care for Adults: The Impact of ACA Expansion

The Affordable Care Act gave states the option to expand their programs to cover nearly all non-elderly adults with household incomes up to 138% of the FPL. A 2012 Supreme Court ruling made this expansion optional for states, creating a major policy divergence across the country.

• In Expansion States: As of early 2025, 40 states and the District of Columbia have adopted the expansion, creating a clear pathway to coverage for low-income working adults.
• In Non-Expansion States: The 10 states that have not expanded Medicaid have created a "coverage gap." In these states, many adults are too poor to qualify for Marketplace subsidies but do not meet the state's restrictive traditional Medicaid criteria, leaving them uninsured.

Coverage for Children and Pregnant Women (Including CHIP)

Medicaid has long provided robust coverage for children and pregnant women, with income eligibility thresholds that are significantly higher than for other adults. Federal law requires states to cover children and pregnant women up to at least 133% FPL, though most states have set their limits much higher.

For families with income too high for Medicaid, the Children's Health Insurance Program (CHIP) serves as a vital bridge. CHIP provides low-cost health coverage for children, and in some states pregnant women, ensuring that nearly all children in the U.S. have a pathway to affordable health insurance.

Support for Seniors and Individuals with Disabilities

For seniors and people with disabilities, Medicaid is the primary source of coverage for long-term services and supports (LTSS). As this population is evaluated under the more stringent non-MAGI rules, they must meet both income and asset tests to qualify. This is the pathway through which Medicaid covers services that are financially catastrophic for most families and are not covered by Medicare, such as extended stays in a nursing facility.

Medical Services Covered by Medicaid

Medicaid provides a comprehensive set of benefits, though the exact package of services can vary by state. The program is built on a foundation of federally required benefits, supplemented by a wide range of optional services.

Federally Mandated Benefits: The Essential Health Services

Federal law requires all state Medicaid programs to cover a set of mandatory benefits. These essential services include:

• Inpatient and outpatient hospital services
• Physician services
• Laboratory and X-ray services
• Home health services
• Nursing facility services for individuals aged 21 or older.

For children under 21, Medicaid provides a particularly comprehensive benefit package known as Early and Periodic Screening, Diagnostic, and Treatment (EPSDT). This benefit requires states to cover all medically necessary services to correct or ameliorate health conditions.

Optional State Benefits: From Dental Care to Physical Therapy

States have the flexibility to cover a broad array of optional benefits. While services like prescription drugs are technically "optional," they are functionally essential, and virtually all states cover them. Common optional benefits include:

• Prescription drugs
• Dental services
• Vision care
• Physical and occupational therapy
• Case management services.

A Critical Lifeline: Long-Term Services and Supports (LTSS)

One of Medicaid's most vital functions is its coverage of long-term services and supports. It is the nation's primary payer for these services, covering over half of all LTSS spending. This includes care provided in nursing facilities as well as a growing array of Home and Community-Based Services (HCBS), which allow individuals to receive care in their own homes or communities.

A Step-by-Step Guide to the Medicaid Application Process

Applying for Medicaid can seem daunting, but understanding the steps involved can make the process more manageable. The application and enrollment process is an interactive one that often requires diligent follow-up.

How to Submit Your Application

States offer several ways to apply for Medicaid, providing flexibility for applicants.

• Online: This is often the fastest method, either through HealthCare.gov or the state's Medicaid agency portal.
• By Phone: Many states have a call center where individuals can apply over the phone.
• In-Person: Applicants can visit their local Department of Social Services (DSS) or County Assistance Office (CAO).
• By Mail or Fax: Paper applications can be downloaded, completed, and submitted to the local eligibility office.

Preparing Your Documentation: A Checklist

Gathering documents in advance can speed up the eligibility determination process. A general checklist includes:

• Proof of Identity: Driver's license, state ID, or passport.
• Proof of Citizenship or Immigration Status: Birth certificate or immigration documents.
• Proof of State Residency: Utility bill or lease agreement.
• Social Security Numbers: For every household member applying.
• Proof of Income: Pay stubs, W-2 forms, or tax returns.
• Proof of Assets (for non-MAGI applicants): Bank statements, property deeds, or vehicle registrations.
• Other Information: Details about any other available health insurance coverage.

After You Apply: The Review, Approval, and Enrollment Timeline

After an application is submitted, a state eligibility worker will review it. It is common for the agency to send a request for more information (RFI), and responding promptly is critical to avoid delays or denial.

The decision process typically takes up to 45 days, or up to 90 days if a disability determination is required. Once approved, the new beneficiary will receive a welcome packet and a Medicaid ID card. In most states, beneficiaries are then required to enroll in a Managed Care Organization (MCO) to receive services.

Maintaining coverage is an ongoing responsibility. Eligibility must be renewed annually, and beneficiaries must report changes in their circumstances, such as a change in income or household size, to the Medicaid agency.

Navigating a State-Based System

The flexibility granted to states in designing their Medicaid programs results in a patchwork of different rules and delivery systems across the country.

Why Medicaid Varies Significantly by State

The federal-state partnership structure allows states to make key policy choices, leading to differences in:

• Eligibility Levels: Income limits can vary dramatically, especially between states that have expanded Medicaid and those that have not.
• Benefit Packages: The scope of optional benefits like dental, vision, and physical therapy can differ significantly.
• Delivery Systems: Most states now rely on private managed care plans instead of the traditional fee-for-service model.
• Provider Payments: The rates that states pay doctors and hospitals vary, which can impact beneficiaries' access to care.

These choices have a tangible impact on spending. Average per-enrollee spending ranges from less than $5,000 in some states to more than $12,000 in others.

The Medicaid Spend Down: A Pathway to Eligibility

For individuals whose income is slightly too high to qualify for Medicaid under the non-MAGI rules, some states offer a "spend down" or "medically needy" program. This allows a person to become eligible by subtracting their medical expenses from their income.

The amount of income that exceeds the state's Medicaid limit is called the "spenddown liability." Once an individual incurs medical bills equal to this liability, Medicaid will then cover their remaining medical costs for the rest of that period.

Receiving Care: Managed Care vs. Fee-for-Service Models

The nationwide shift toward Medicaid managed care represents a fundamental change in how the program operates.

• Fee-for-Service (FFS): In the traditional FFS model, the state Medicaid agency pays providers directly for each individual service rendered.
• Managed Care: This is now the dominant model, where the state pays a private insurance company—a Managed Care Organization (MCO)—a fixed monthly premium per member. In return, the MCO is responsible for managing all of that person's care.

For beneficiaries, this means they must typically use doctors and hospitals within their health plan's network and may need referrals or prior authorization for certain services, much like in a private insurance plan.

Conclusion

Medicaid stands as an indispensable pillar of the U.S. health system, providing essential coverage to one in five Americans and serving as the primary payer for long-term care nationwide. While the system's complexity can be challenging, understanding its core principles is the key to accessing its vital benefits.

By grasping the fundamentals of eligibility, the scope of covered services, and the steps of the application process, individuals and families can be empowered to secure the healthcare they need. For the most accurate and specific information, the next step is to consult the official resources provided by your state's Medicaid agency and the Health Insurance Marketplace.

You can find your state's Medicaid agency through the official directory on Medicaid.gov or begin an application at HealthCare.gov.

Frequently Asked Questions