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What Does The Medicaid Program Do? (Title XIX of the Social Security Act)

Medicaid (Title XIX of the Social Security Act [42 U.S.C.A. 1396a-u]) is the nation's major public health program for low-income children (including most children in the child welfare system), pregnant women, the elderly and people with disabilities. In 1995, it provided health and long-term care coverage to 35.2 million people-more than 1 in 10 Americans.1 Medicaid is supported by federal and state funds, and administered by the states. The federal share ranges from 50 to 80 percent of Medicaid expenditures.2 Medicaid spending by the Federal government and the states totaled $147.7 billion in 1996, up 5.3 percent from the year before.3

States are allowed broad latitude in the operation of the Medicaid program, resulting in a wide variation in eligibility rules, benefit levels, and services from state to state. Historically, receipt of Medicaid assistance has been tied to AFDC, the federal entitlement program for cash assistance to families. Under the 1996 welfare law (the Personal Responsibility and Work Opportunity Reconciliation Act, P.L.104-193), AFDC was replaced by TANF, a block grant that allows states to determine their own eligibility criteria and benefit levels.

The link between receipt of cash welfare benefits and automatic eligibility for Medicaid was severed. States are still required, however, to determine Medicaid eligibility for all families with children, whether receiving TANF benefits or not, as if their AFDC state plans of July 16, 1996 were still in effect.

States are still required to provide Medicaid services to those children eligible for the Title IV-E Foster Care and Adoption Assistance program; pregnant women and children up to age six whose family incomes were less than or equal to 133 percent of the federal poverty level; and, through a phased-in process to be completed in the year 2002, all children up to age 19 who were born after September 30, 1983, and who are in families with incomes at or below 100 percent of the federal poverty level.

States have the option to provide Medicaid for certain additional groups. These include the so-called "Ribicoff children," children in privately subsidized foster care or institutional settings whose incomes would qualify them for AFDC, but who do not meet the definition of "dependent child"; the medically needy; children under certain adoption assistance agreements; and pregnant women and children up to age one in families with incomes up to 185 percent of the federal poverty level.

The health care services provided under Medicaid also vary from state to state, although states are required to support certain services. For eligible children, these include: 1) inpatient and outpatient hospital services and services at rural health clinics; 2) physician services; 3) laboratory and x-ray services; 4) family planning services; and 5) early and periodic screening, diagnosis, and treatment (EPSDT).

Medicaid Must Be Strengthened

Medicaid provides health care coverage to one out of every four of our nation's children.4 Although children make up half (49.7 percent) of all Medicaid beneficiaries, they account for less than 17 percent of Medicaid spending.5

Medicaid is an especially important source of care for many abused and neglected children and troubled families. The publicly funded community health and mental health centers, pediatric AIDS initiatives, and programs for abandoned infants and for individuals with disabilities also provide essential health care and other supports for at-risk children and families.

Too often, however, children and families, including those in the child welfare system, fall through holes in the public health care safety net. Medicaid covers only half of poor Americans.6 While the new State Child Health Insurance Program (SCHIP) expands coverage to many low-income uninsured children either through Medicaid or a separate program, millions of low-income families will remain uninsured. Even those who are eligible may have trouble obtaining needed health care services. Although states are required to provide certain services, these services have never reached all those who need them. States may also choose not to cover certain optional services, particularly mental health and rehabilitative services. As a result, some of the services most essential for children who have been abused or neglected or who are otherwise seriously troubled may not be available.
  • Even though the incidence of emotional disturbance among children in the child welfare system is exceedingly high, most states place limits on residential services, outpatient services, and day treatment for Medicaid-eligible children and adults.

  • Even though hundreds of thousands of infants are exposed to drugs and alcohol prenatally, residential substance abuse treatment for pregnant and postpartum women is not available under Medicaid or elsewhere.

  • Even though Medicaid's EPSDT program cost-effectively evaluates and respond to the health problems of low-income children, many states have not complied with federal law requiring them to provide comprehensive screening and follow-up diagnostic and treatment services.

EPSDT Opens the Door to Health Care for Poor Children

EPSDT is intended to function as a gateway to a broad array of health care screening and treatment services for Medicaid-eligible children. It has two major components: screening, and follow-up diagnosis and treatment for conditions, problems, and defects that have been identified through screening.

The EPSDT program screens children to uncover physical challenges, mental health problems, developmental delays, and dental needs. States are required to establish screening schedules for children at intervals that meet standards of reasonable medical and dental practice. When a screening identifies a physical or mental defect, illness, or condition, states must provide, under Medicaid, all treatment and follow-up services listed in Medicaid law if they are medically necessary, regardless of whether such services are otherwise included in the state's Medicaid plan.

In addition to covering basic health care needs, Medicaid also serves as the major source of coverage for special services for children and families in the child welfare system. This includes EPSDT, rehabilitative services, case management services, and in-patient psychiatric services, all critical services which must be continued and expanded.


To receive federal grants under the new SCHIP program, a state must maintain Medicaid eligibility for children that was in effect June 1997. Any separate state program must screen applicants for possible Medicaid coverage and enroll all eligible children into Medicaid. Hopefully, states will decide to use their new dollars to expand their existing Medicaid program rather than creating a duplicative-and potentially incredibly confusing-new program.

The reasons to expand Medicaid are strong:
  • Medicaid offers a comprehensive benefit package at no cost to low-income children including home and community-based services for children with special needs.

  • Medicaid expansion will avoid the need for, and cost of, duplicative administrative systems.

  • Medicaid provides eligible children with an assurance of coverage.

  • Medicaid has lower administrative costs than private insurance.7

  • States will continue receiving federal matching funds under Medicaid after the Title XXI allotment is exhausted.

  • The Medicaid option minimizes the risk that a two-tier system of publicly funded coverage will develop.

  • Medicaid provides states with options for also covering low income working parents. It makes good sense for children to be in the same program as their parents.
If a state does establish a new program, it is most important that it be coordinated with the Medicaid program to ensure that children do not slip through the cracks. This requires a simple and seamless application and enrollment process. One agency should be responsible for public education and outreach of both programs.

Medicaid Outreach

There are 3 million children who are eligible for Medicaid who are not now enrolled in the program.8 Many low-income families may not know that their children are eligible for Medicaid even if a parent works full time or if the family has two parents.9 Other possible reasons include the difficulty of enrolling in Medicaid and the fact that some families may not seek Medicaid until they face a medical crisis.10 States can streamline the eligibility process and facilitate enrollment by doing such things as allowing mail-in applications and dropping the asset test. President Clinton's 1999 budget request provides $900 million for children's Medicaid and health insurance outreach through advertising and other activities to find low-income families and inform them that their children might be eligible and to permit schools and child care centers to enroll children in Medicaid temporarily on the presumption that they would later be found eligible

Medicaid Option in Expansion of Health Care Coverage to Non-IVE Eligible Adopted Children with Special Needs

The Adoption and Safe Families Act of 1997 (P.L.105-89) requires states to provide health insurance coverage for any child with special needs with whom there is an adoptive assistance agreement between a state and the adoptive parents and whom the state has determined could be placed for adoption without medical assistance. The health insurance coverage can be provided through one or more state medical assistance programs including Medicaid and must include benefits of the same type and kind as provided under Medicaid. The state may determine sharing requirements.

Medicaid and Managed Care

The Balanced Budget Act of 1997 (P.L. 105-33) allows states to move their Medicaid recipients into managed care without first seeking a waiver from the federal government. In 1996, 13.3 million Medicaid beneficiaries were enrolled in managed care, a four-fold increase in 5 years.11 The new flexibility is expected to greatly accelerate this trend.

States, as well as private employers, have turned to managed care to provide access to high quality health care at a controllable cost. Managed care is based on the premise that preventive and primary care for enrollees are good financial investments because they can prevent illness and lower health expenditures. Ideally, managed care will mean that Medicaid recipients can access services more easily than under the traditional fee-for-service arrangement. Yet, there is concern that managed care may be unable to adequately address the unusually serious and extensive health care needs of some of the Medicaid population. For this reason, the new Budget law requires states to request a waiver from the federal government to enroll special needs children, including children receiving Title IV-E foster care or adoption assistance and children in state foster care or otherwise in out-of-home placement, in managed care.

Medicaid Remains a Target

Despite the limitations of Medicaid, there is no question that it remains the single most important source of health care for children in out-of-home placement and troubled families. Therefore, the persistent threats to its continuation are worrisome. Most states view Medicaid, and its EPSDT program for children, as costly federal mandates. There is constant pressure to reduce funding and relax federal requirements. This could eliminate even the promise of available care.

The nation's governors continue to press for increased state flexibility and funding cuts in running their Medicaid program. Advocates must do everything possible to strengthen the Medicaid program, and ensure its viability for children and families. When tough decisions are made on which needy populations continue to be eligible for which necessary services, children too often get squeezed out. Because children make up over half the Medicaid population, they will bear the brunt of any programmatic cuts unless certain protections are ensured.


  1. The Kaiser Commission on the Future of Medicaid, The Medicaid Program at a Glance, November, 1997
  2. The Kaiser Commission on the Future of Medicaid, The Medicaid Program at a Glance, November, 1997
  3. NYT 1-13-98
  4. Center on Budget and Policy Priorities, Why Not Medicaid? Using Child Health Funds to Expand Coverage Through the Medicaid Program, November 20, 1997.
  5. The Kaiser Commission on the Future of Medicaid, The Medicaid Program at a Glance, November, 1997
  6. The Kaiser Commission on the Future of Medicaid, The Medicaid Program at a Glance, November, 1997
  7. Families USA Foundation, Children's Health Insurance Program, 1998
  8. GAO Health Insurance for Children: Private Insurance Coverage Continues to Deteriorate. GAO/HEHS-96-129 June 1996
  9. GAO Health Insurance for Children: Many Remain Uninsured Despite Medicaid Expansion. GAO/HEHS-95-175, July 1995.
  10. GAO 95-175.
  11. The Kaiser Commission on the Future of Medicaid, Medicaid and Managed Care, November, 1997

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