Medicaid

Medicaid, the nation's major public financing program for providing health and long-term care coverage to low-income people, fills in Medicare's gaps for millions of low-income elderly people. Medicaid is jointly funded by federal and state governments and administered by the states. Enacted as Title XIX of the Social Security Act in 1965, the program has evolved from one that primarily covered people receiving cash assistance to being an essential provider of health and long-term care coverage for over forty million low-income Americans.

Medicaid coverage is targeted to people who have low incomes, few assets, and who fall into particular categories, such as low-income children, some poor parents, pregnant women, people with disabilities, and elderly persons. In 1998, the program covered over four million elderly people, accounting for about 10 percent of total Medicaid enrollment and about 12 percent of elderly people on Medicare.

There are several pathways through which elderly people can become eligible for Medicaid assistance, and the scope of coverage varies according to which pathway is used (see Table 1). The poorest Medicare beneficiaries—those who are receiving or eligible for cash assistance through the Supplemental Security Income (SSI) program—receive assistance with all of Medicare's financial requirements and are also covered for the full range of Medicaid benefits. These benefits wrap around and supplement Medicare coverage. People who have exhausted their personal resources paying for health and long-term care services to the point that their available incomes fall below cash assistance income standards are also eligible for the same level of benefits. States also have the option to provide this level of coverage to elderly persons with slightly higher incomes or assets.

The majority of elderly people receiving Medicaid assistance fall into one of these groups and receive full Medicaid benefits. Because Medicaid supplements Medicare benefits, these beneficiaries (known as dual eligibles) rely on Medicaid primarily for services not covered by Medicare, such as prescription drugs and long-term care, and for coverage of Medicare's premiums and cost-sharing.

Other low-income beneficiaries are eligible to receive assistance primarily limited to Medicare financial requirements (most notably, Part B premiums and cost-sharing), through four related programs, which are often referred to as the buy-in programs or "Medicare savings programs." Since the programs' inception in 1965, states have had the option to buy-in the poor to Medicare by paying their Part B premium and cost-sharing. In the late 1980s and the 1990s, the federal government expanded the Medicaid buy-in to assist low-income Medicare beneficiaries with the growing cost of Medicare premiums and cost-sharing. The first initiative was the Qualified Medicare Beneficiary (QMB) program, through which Medicaid pays the Medicare cost-sharing requirements and the Part B premium for beneficiaries with incomes below the federal poverty level (in 2000, the poverty level was $8,350 for an individual and $11,250 for couples) and limited assets. The Specified Low-Income Medicaid Beneficiary (SLMB) program pays the Part B premium for people with incomes between 100 and 120 percent of the federal poverty level and limited assets. Finally, the Qualified Individual (QI) programs provide a set amount of money to provide some assistance to Medicare beneficiaries with higher incomes (up to 175 percent of poverty) on a first come, first served basis.

Figure 2 Health Insurance Coverage of Medicare Beneficiaries, 1998 SOURCE: Urban Institute analysis of 1998 Medicare Current Beneficiary Survey. Kaiser Commission on Medicaid and the Uninsured.

NOTE: Columns may not sum to 100 percent; employer/retiree includes both beneficiaries who have supplemental insurance from a former employer or union and those who are still working and whose current employer is their primary source of insurance.