MEDICAID

The goal of this large and rapidly growing program is to provide

health insurance coverage to low-income populations who cannot afford private
coverage, thus providing them with financial protection and ultimately
improving their health.

Classification: Public
 Medicaid
• program targets low-income families, including low-income elderly
and disabled who do not qualify for Medicare. Medicaid and Medicare
represent the most rapidly growing expenditure item for federal and
state governments; the programs did not exist until 1965 but today
account for almost 17.4% of gross domestic product.

Classification: Public
 How Medicaid Works
• Medicaid, like unemployment insurance (UI), is a program that is
federally mandated but administered by the states. The program is
financed by matching grants from the federal government, paid out of
general revenues.
• Individuals qualify for Medicaid on the basis of their income and
family structure, as described next. If eligible, individuals may then
enroll in the Medicaid program. Medicaid insurance coverage is
similar to private insurance: it reimburses providers for the services
they provide to enrollees, although there is little or no patient
coinsurance.

Classification: Public
 What Health Services Does Medicaid
Cover?
• The first is service coverage.
While federal Medicaid rules
require states to cover major
services, such as physician and
hospital care, all states have
chosen to cover the most
expensive optional benefits; all
states cover prescription drugs
and optometrist services
Classification: Public
How Do Providers Get Paid?
• States can also regulate the rate
at which health service providers
are reimbursed. Medicaid
reimburses physicians at a much
lower level than does the private
sector, which often leads
physicians to be unwilling to
serve Medicaid patients
 BENEFIT AND COST EFFECTIVENES
• The primary goal of insurance programs such as Medicaid is to provide financial protection
against the risks imposed by medical spending.

• we come to cost-effectiveness, the last arrow in Figure 16-1; evidence indicates that
expanding public insurance does improve health, but at what cost? Currie and Gruber (1996)
estimated that it cost Medicaid roughly $1 million per infant life saved through its
expansions.
• That $1 million is also much lower than the cost of many alternative government
interventions designed to save lives, such as food regulation or seat-belt safety. This finding
suggests that investing in low-income health care may be a costeffective means of
improving health in the United States.
• The Medicaid program has been shown to reduce the number of uninsured people (although
there is also significant crowd-out of private health insurance coverage),

Classification: Public