Medicaid stands as the primary healthcare program in the United States, meticulously designed to provide comprehensive medical coverage and long-term care services to 83 million individuals with low incomes. This vital program, often described as the program that covers health care for the poor, represents a significant portion of the nation’s health expenditure, accounting for one-fifth of total healthcare spending and over half of all spending on long-term care services. Furthermore, Medicaid constitutes a substantial portion of state budgets, reflecting its crucial role in the healthcare landscape. Financed collaboratively by both state and federal governments, Medicaid is administered by individual states within a broad federal framework, granting states considerable latitude in determining eligibility criteria, service coverage, care delivery models, and provider reimbursement rates. This state-level flexibility results in notable variations in program spending and the proportion of state residents benefiting from Medicaid across the nation.
As we navigate towards 2025, numerous critical issues are poised to shape the future of Medicaid, influencing coverage availability, funding mechanisms, and access to essential care. Despite limited discussion of Medicaid during recent political campaigns, significant changes may be on the horizon through congressional tax and spending debates, as well as potential executive actions from the administration. Amidst this evolving landscape, it is crucial to understand the fundamental aspects of this essential healthcare safety net. This article highlights ten key facts about Medicaid, providing a comprehensive overview of its scope, impact, and ongoing relevance in the American healthcare system.
1. Medicaid Coverage Varies Significantly Across States
Nationally, Medicaid provides health coverage for a substantial portion of the population, with one in five individuals reporting enrollment in the program. However, this figure exhibits considerable variation across different states. While the national average stands at 21%, state-level coverage rates range from a low of 11% in Utah to a high of 34% in New Mexico.
Figure 1: State-level variation in Medicaid coverage, highlighting disparities across the US.
Notably, states that expanded Medicaid under the Affordable Care Act (ACA) tend to exhibit higher coverage rates. This expansion, a bipartisan effort with support in both traditionally Republican and Democratic states, has broadened Medicaid eligibility to include more low-income adults. Furthermore, states with lower average incomes and reduced employer-sponsored health insurance offerings generally demonstrate higher Medicaid enrollment percentages, underscoring Medicaid’s role in filling coverage gaps where other options are limited.
2. Medicaid is a Cornerstone of Coverage for Vulnerable Populations
While Medicaid’s reach extends to one in five Americans, its significance is amplified for specific demographic groups. In 2023, Medicaid provided essential healthcare coverage for nearly 40% of all children in the US, and crucially, over 80% of children living in poverty. The program also plays a vital role for adults, covering approximately one in six non-elderly adults and almost half of non-elderly adults living below the poverty line.
Medicaid’s impact is particularly pronounced among minority populations. Compared to White children and adults, a greater proportion of Black, Hispanic, and American Indian or Alaska Native (AIAN) individuals rely on Medicaid for their healthcare needs. Moreover, Medicaid serves as a critical safety net for adults with disabilities, covering more than 25% of non-elderly adults with various disabilities affecting hearing, vision, cognition, mobility, self-care, or independent living.
Figure 2: Medicaid’s crucial role in providing health coverage for adults with disabilities.
Beyond these broad categories, Medicaid extends its reach to numerous special populations. It finances a substantial 41% of all births nationwide and provides essential support to nearly half of children with special healthcare needs. Medicaid is also the primary payer for long-term care, covering five in eight nursing home residents. Furthermore, it provides vital coverage for 23% of non-elderly adults with mental illness, 40% of non-elderly adults with HIV, and nearly one in five Medicare beneficiaries, offering wraparound services and paying Medicare premiums for those dually eligible. Medicaid is also increasingly recognized for its role in supporting individuals experiencing homelessness and those transitioning out of incarceration, particularly in states that have expanded Medicaid eligibility.
3. Medicaid is a Joint Federal and State Partnership
The financial structure of Medicaid is a collaborative effort between the federal government and individual states. The federal government guarantees matching funds to states without a cap for eligible services provided to qualified enrollees. This federal match rate is determined by a formula that ensures a minimum 50% federal contribution, with higher match rates allocated to states with lower per capita incomes.
States may also qualify for enhanced federal matching rates for specific services and populations, further incentivizing targeted healthcare initiatives. A notable example is the ACA Medicaid expansion, which is funded with a 90% federal match rate, significantly reducing the state financial burden. The American Rescue Plan Act introduced a temporary fiscal incentive to encourage additional states to adopt the ACA expansion. In Fiscal Year 2023, total Medicaid spending reached $880 billion, with the federal government contributing 69% of this total.
Medicaid spending patterns are often influenced by economic cycles. During economic downturns, enrollment typically increases as individuals lose income and become eligible for the program. To mitigate the financial strain on states during these periods, the federal government has historically provided temporary increases in the federal share of Medicaid funding. Most recently, states benefited from an enhanced match rate between 2020 and 2024 to address increased enrollment and costs associated with the pandemic-related continuous enrollment provision.
4. Medicaid’s Broad Reach in Healthcare Spending
Medicaid’s financial impact extends throughout the US healthcare system. It accounts for 19% of all national health expenditure and 19% of hospital spending, making it a major source of funding for healthcare providers and institutions. Beyond the services mandated by federal Medicaid law, states have the option to cover a wide range of additional benefits. All states have chosen to include prescription drug coverage and home care services as optional benefits within their Medicaid programs.
Home care, also known as home- and community-based services (HCBS), provides long-term care in non-institutional settings like private residences, adult day care centers, and assisted living facilities. In contrast, institutional long-term care is delivered in facilities such as nursing homes. Medicaid is the dominant payer for long-term care in the US, financing 61% of total long-term care expenditures. In addition to long-term care, Medicaid offers benefits often excluded from private health insurance, such as non-emergency medical transportation to facilitate access to healthcare appointments, and comprehensive Early Periodic Screening Diagnosis and Treatment (EPSDT) services specifically designed for children.
Figure 4: Breakdown of Medicaid’s share of national health spending across various categories.
5. High Spending Driven by Seniors and People with Disabilities
An analysis of Medicaid spending reveals that while seniors and individuals with disabilities constitute 23% of total enrollment, they account for a disproportionate 51% of program expenditures. Conversely, children represent a larger share of enrollees at 34%, but contribute to a smaller portion of spending, at 14%. This disparity arises from the higher per-enrollee costs associated with seniors and people with disabilities.
Spending per enrollee is significantly higher for those aged 65 and older ($18,923) and those eligible due to disability ($18,437) compared to other enrollee groups. This elevated spending is attributed to the more complex healthcare needs of these populations, including higher rates of chronic conditions and a greater likelihood of requiring long-term care services. However, there is considerable state-level variation in the proportion of Medicaid spending directed towards seniors and individuals with disabilities. In some states, this demographic accounts for only about a third of total Medicaid spending, while in others, it can reach as high as two-thirds, reflecting differences in state demographics, service delivery models, and long-term care utilization patterns.
Figure 5: Distribution of Medicaid enrollment and spending across different eligibility groups.
6. State Flexibility Leads to Spending Variations
The decentralized nature of Medicaid administration, granting states flexibility in program design, results in significant variations in per-enrollee spending across the nation. In 2020, spending per full-benefit enrollee ranged from a low of $3,713 in Alabama to a high of $10,229 in the District of Columbia. This variation reflects state-specific choices regarding covered benefits, provider payment rates, and the unique health and demographic characteristics of each state’s population, as well as broader differences in healthcare costs.
While certain Medicaid benefits are federally mandated, states have considerable discretion in offering optional benefits. These optional services, though not required, are often vital for comprehensive care. Examples include prescription drugs (universally covered by states), vision services, dental care, and the majority of home care services. In recent years, many states have expanded their Medicaid programs to include enhanced behavioral health services and benefits addressing social determinants of health (SDOH), such as nutrition support and housing assistance, recognizing the profound impact of these factors on overall health outcomes.
Figure 6: State-level disparities in Medicaid spending per full-benefit enrollee.
7. Managed Care Organizations are Prevalent in Medicaid
Managed Care Organizations (MCOs) have become a dominant feature of Medicaid service delivery. Three out of every four Medicaid enrollees, representing 75% of the total population, receive their care through comprehensive, risk-based MCOs. Payments to MCOs constitute a substantial portion of overall Medicaid expenditure, accounting for over half (52%) of total spending in FY 2023. As of July 2024, 42 states, including the District of Columbia, have contracted with comprehensive MCOs to manage their Medicaid programs.
Medicaid MCOs provide a comprehensive suite of acute care services, including most physician and hospital services, and in some instances, long-term care services. These organizations receive a fixed per-member-per-month payment for these services, creating a predictable budgeting framework for states. The Medicaid MCO landscape includes a mix of private for-profit, private non-profit, and government-run plans. A significant portion of the market is concentrated among a few major for-profit parent firms, with five companies – Centene, Elevance (formerly Anthem), UnitedHealth Group, Molina, and CVS – accounting for half of all Medicaid MCO enrollment. States have increasingly adopted MCOs with the goals of improving access to specialized services, enhancing care coordination and management, and achieving greater budget predictability. However, the evidence regarding the impact of managed care on key outcomes such as access to care, cost-effectiveness, and overall health outcomes remains limited and mixed, necessitating ongoing evaluation and refinement of these models.
Figure 7: Prevalence of Medicaid managed care enrollment across the United States.
8. Medicaid Improves Access to Care and Health Outcomes
Extensive research consistently demonstrates that Medicaid coverage significantly enhances access to healthcare services for beneficiaries compared to uninsured individuals, who often share similar low-income backgrounds. Medicaid enrollees are less likely to delay or forgo necessary medical care due to cost concerns, a benefit stemming from federal regulations that generally limit out-of-pocket expenses within the program. Key indicators of access to care among Medicaid enrollees are largely comparable to those observed among individuals with private health insurance, highlighting Medicaid’s success in bridging coverage gaps.
However, challenges persist in ensuring adequate access to certain specialized providers, such as psychiatrists and dentists, within Medicaid. These access limitations may reflect broader systemic issues within the healthcare system, but could be exacerbated by provider shortages in low-income communities, Medicaid’s typically lower physician reimbursement rates compared to private insurance, and potentially lower physician participation in Medicaid networks.
Decades of research underscore the long-term positive impacts of Medicaid eligibility, particularly during childhood. Childhood Medicaid enrollment is associated with improved health outcomes, including reductions in avoidable hospitalizations and mortality rates, and extends to benefits beyond health, such as enhanced educational attainment in the long run. Studies evaluating the effects of state Medicaid expansions to low-income adults under the ACA have consistently shown increased access to care, improved economic security, better self-reported health status, and other positive outcomes. These include higher rates of early-stage cancer diagnoses, reduced mortality rates for specific conditions (e.g., cancer, cardiovascular disease, liver disease), decreased maternal mortality, improved management of chronic conditions like diabetes and HIV, and better outcomes related to substance use disorders. Furthermore, research from the National Bureau of Economic Research (NBER) suggests that ACA Medicaid expansion has had broader positive impacts on consumer finances, including reductions in unpaid medical bills and medical debt sent to collection agencies.
Figure 8: Comparison of access to care measures across different insurance coverage types.
9. Section 1115 Waivers Reflect Evolving Policy Priorities
Section 1115 demonstration waivers offer states a mechanism to pilot innovative approaches within their Medicaid programs that deviate from standard federal requirements. These waivers, approved by the HHS Secretary, are intended to test strategies that are likely to advance the objectives of the Medicaid program. The utilization of Section 1115 waivers often reflects the evolving priorities of both individual states and successive presidential administrations.
Waivers have been employed to pursue a diverse range of program modifications, including expanding coverage eligibility or benefits, altering policies for existing Medicaid populations (e.g., implementing premiums or work requirements), restructuring care delivery systems, modifying financing arrangements or authorizing new payment models (e.g., supplemental or incentive-based payments), and implementing various other program changes. Waivers can be comprehensive in scope, enacting broad program reforms, or narrowly focused on specific populations or service areas. Nearly every state has at least one active Section 1115 waiver, and some states operate under multiple waivers simultaneously, indicating the widespread use of this flexibility mechanism to tailor Medicaid programs to state-specific needs and priorities.
Figure 9: Trends in Medicaid Section 1115 waiver approvals across different presidential administrations.
10. Public Opinion Favors Medicaid
Public sentiment towards Medicaid is overwhelmingly positive. Recent polling data from KFF reveals that over three-quarters (77%) of Americans hold favorable views of Medicaid. This bipartisan support extends across political affiliations, with strong favorability expressed by Democrats (87%) and Independents (81%), and even a majority of Republicans (63%) viewing the program favorably. Notably, Medicaid also enjoys majority support among voters who reported voting for President Trump in the 2024 election (62%).
Regarding government spending on Medicaid, nearly half of the public (46%) believe that federal funding for the program is insufficient, while another third (33%) consider current spending levels to be “about right.” Only a minority (19%) believe that Medicaid spending is “too much.” Amidst potential changes to government health programs, a significant majority (72%) of Americans express concern about the future level of benefits available to Medicaid enrollees, highlighting the public’s recognition of Medicaid’s crucial role and the importance of maintaining its safety net function.
Figure 10: Public opinion of Medicaid, demonstrating broad-based support for the program.
