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The Medicaid program, signed into law by President Lyndon B. Johnson on July 30, 1965, will reach its 50th anniversary this year, a historic milestone. At the Kaiser Commission on Medicaid and the Uninsured, where we have closely studied and analyzed Medicaid for nearly 25 years, we are recognizing this important occasion by documenting Medicaid’s evolution and its role in our health care system today. This report reflects on Medicaid’s accomplishments and challenges and considers the issues on the horizon that will influence the course of this major health coverage and financing program moving forward.

Established along with Medicare by the Social Security Amendments of 1965, and authorized as Title XIX of the Social Security Act, Medicaid was initially designed as a federal-state program to cover medical expenses for aged, blind, and disabled individuals and parents and dependent children receiving public assistance. Medicaid’s hybrid structure, which involves a mix of federal and state financing and control, is, in many respects, the defining feature of the Medicaid program, and the contrast to Medicare, a national program governed by federal standards and rules and financed entirely by the federal government, is striking. The federal-state Medicaid partnership has served to advance a variety of both federal and state goals. However, it is also the root source of continual tensions over the balance between federal standards and state flexibility and over Medicaid costs and financing. Medicaid’s federal-state structure has also led to substantial state variation in nearly every domain of Medicaid program design and operation, with large implications for access to coverage and care for low-income Americans.

Medicaid is a voluntary program for states and not all states took it up initially. However, access to federal matching funds to provide health coverage for the uninsured proved to be a strong incentive for states, and, by 1982, all 50 states and the District of Columbia had Medicaid programs in place. Over the last five decades, both Congress and the states have expanded and reformed Medicaid significantly to more effectively cover the nation’s uninsured and underinsured citizens. The Medicaid program now provides health and long-term care coverage to nearly 70 million low-income Americans, including pregnant women, children and parents, people with a wide range of disabilities, poor seniors who are also covered by Medicare, and, in states implementing the Medicaid expansion established by the Affordable Care Act (ACA), low-income adults who were previously excluded from the program. Prior to the implementation of the ACA, Medicaid covered roughly half of nonelderly Americans living in poverty. However, because of restrictive eligibility for nonelderly adults and gaps in participation, about half of poor people went without Medicaid coverage.

Medicaid beneficiaries include many of the most disadvantaged individuals in the U.S. in terms of poverty, poor physical and mental health, disability, and lack of social supports. Between its large enrollment and the complex and costly needs of many of its beneficiaries, Medicaid represents a major commitment of federal and state spending. The Medicaid program is the second-largest item in state budgets, after elementary and secondary education, and the third-largest federal domestic program, after Social Security and Medicare. In FY 2013, combined state and federal Medicaid spending totaled $438 billion.

While Medicaid’s coverage role is its most visible aspect, Medicaid’s impact ramifies throughout our health care system. By filling gaps in coverage among people of color, the program plays a key role in advancing health equity. Its comprehensive benefits for prenatal and pediatric care provide a healthy start for millions of American children as well as access to services and supports that are essential to the well-being of children with special needs but not typically covered by commercial insurance. The Medicaid program fills holes left by the private health insurance market, covering people who are priced out of it or do not have access to job-based coverage, and providing broader coverage to many severely disabled and chronically ill individuals. Medicaid also supports poor Medicare beneficiaries and the Medicare program by bearing the high costs of long-term care. And Medicaid revenues provide core funding for our health and long-term care institutions and providers, including safety-net hospitals, emergency departments, health centers, the mental health system, and nursing homes.

Finally, the Medicaid program is a locus of innovation in the health care system. Many states are designing and implementing new models of coordinated and integrated care for people with complex needs that may provide a model for health care delivery beyond the Medicaid context. Medicaid is also the fulcrum of ongoing expansion in access to community-based long-term services and supports that enable individuals with disabilities and older adults who would otherwise require institutional care to live independently in the community.

In the pages that follow, we trace Medicaid’s evolution, discussing major legislative changes and other inflection points in the program’s history, both for the record and for perspective on Medicaid’s different roles in our health care system and how they developed. In doing so, we also show how Medicaid threads through our health care system today and take the measure of its impact. We begin by discussing Medicaid coverage for the main populations served by the program. We then discuss delivery systems and innovation in Medicaid and Medicaid spending and financing. We conclude by looking forward to consider the main issues that will concern the Medicaid program in the decades ahead and to assess how Medicaid is poised to meet the future needs of our nation.

Low-Income Pregnant Women, Children and Families, and Childless Adults

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.