Medicaid is a federal program that “matches” money that states spend on health insurance for the very poor. About 47 million people were enrolled in Medicaid as of June of 2008. Over 70% of these people were enrolled in Medicaid “managed care” plans run by commercial insurance companies and health-maintenance organizations (HMOs).

Medicaid primarily helps provide health benefts for children in poor families and pregnant mothers. The State Children’s Health Insurance Program (SCHIP) expands Medicaid’s eligibility to reach more children. SCHIP is discussed in detail in the next section.

The poverty guidelines were originally written by an employee of the Social Security Administration in 1964. The SSA employee took the cost of the U.S. Department of Agriculture’s economy food plan and multiplied that cost by three. This “three-times-food-cost” calculation was done in 1963 and every year since, the dollar amount has been increased for infation by the Consumer Price Index of the current year. I suppose this is better than nothing, but I think most would agree that there must be a more equitable method of assessing poverty than the simple arithmetic method that was used almost 50 years ago.

Income and assets are the primary tests for Medicaid eligibility. It is possible that a person or family may be eligible for Medicaid health insurance, but not eligible for a traditional welfare program like Temporary Assistance for Needy Families (TANF). A person who may not qualify purely on an income basis, may still qualify for Medicaid if his or her medical expenses are “excessive.”

The federal government established a minimum set of eligibility requirements for people who want to enroll in Medicaid. States must honor the minimum requirements. Fortunately, nearly all states have exercised their ability to expand the eligibility criteria beyond the minimum.