Medicaid Benefits

Title XIX of the Social Security Act requires that in order to receive Federal matching funds, certain basic services must be offered to the categorically needy population in any State program:
  • inpatient hospital services;
  • outpatient hospital services;
  • physician services;
  • medical and surgical dental services;
  • nursing facility (NF) services for individuals aged 21 or older;
  • home health care for persons eligible for nursing facility services;
  • family planning services and supplies;
  • rural health clinic services and any other ambulatory services offered by a rural health clinic that are otherwise covered under the State plan;
  • laboratory and x-ray services;
  • pediatric and family nurse practitioner services;
  • federally-qualified health center services and any other ambulatory services offered by a federally-qualified health center that are otherwise covered under the State plan;
  • nurse-midwife services (to the extent authorized under State law); and
  • early and periodic screening, diagnosis, and treatment (EPSDT) services for individuals under age 21.

If a State chooses to include the medically needy population, the State plan must provide, as a minimum, the following services:

  • prenatal care and delivery services for pregnant women;
  • ambulatory services to individuals under age 18 and individuals entitled to institutional services;
  • home health services to individuals entitled to nursing facility services; and
  • if the State plan includes services either in institutions for mental diseases or in intermediate care facilities for the mentally retarded (ICF/MRs), it must offer either of the following to each of the medically needy groups: the services contained in 42 CFR sections 440.10 through 440.50 and 440.165 (to the extent that nurse-midwives are authorized to practice under State law or regulations); or the services contained in any seven of the sections in 42 CFR 440.10 through 440.165.

States may also receive Federal funding if they elect to provide other optional services. The most commonly covered optional services under the Medicaid program include:

  • clinic services;
  • nursing facility services for the under age 21;
  • intermediate care facility/mentally retarded services;
  • optometrist services and eyeglasses;
  • prescribed drugs;
  • TB-related services for TB infected persons;
  • prosthetic devices; and
  • dental services.

States may provide home and community-based care waiver services to certain individuals who are eligible for Medicaid. The services to be provided to these persons may include case management, personal care services, respite care services, adult day health services, homemaker/home health aide, habilitation, and other services requested by the State and approved by HCFA.

Amount and Duration of Medicaid Services

Within broad Federal guidelines, States determine the amount and duration of services offered under their Medicaid programs. The amount, duration, and scope of each service must be sufficient to reasonably achieve its purpose. States may place appropriate limits on a Medicaid service based on such criteria as medical necessity or utilization control. For example, States may place a reasonable limit on the number of covered physician visits or may require prior authorization to be obtained prior to service delivery.

Health care services identified under the EPSDT program as being "medically necessary" for eligible children must be provided by Medicaid, even if those services are not included as part of the covered services in that State's plan.

With certain exceptions, a State's Medicaid plan must allow recipients freedom of choice among health care providers participating in Medicaid. States may provide and pay for Medicaid services through various prepayment arrangements, such as a health maintenance organization (HMO). In general, States are required to provide comparable services to all categorically needy eligible persons.

There is an important exception related to home and community-based services "waivers" under which States offer an alternative health care package for persons who would otherwise be institutionalized under Medicaid. States are not limited in the scope of services they can provide under such waivers so long as they are cost effective (except that, other than as a part of respite care, they may not provide room and board for such recipients).

Payment for Medicaid Services

Medicaid operates as a vendor payment program, with payments made directly to the providers. Providers participating in Medicaid must accept the Medicaid reimbursement level as payment in full. Each State has relatively broad discretion in determining (within federally-imposed upper limits and specific restrictions) the reimbursement methodology and resulting rate for services, with three exceptions: (1) for institutional services, payment may not exceed amounts that would be paid under Medicare payment rates; (2) for disproportionate share hospitals (DSHs), different limits apply; and (3) for hospice care services, rates cannot be lower than Medicare rates.

States may impose nominal deductibles, coinsurance, or copayments on some Medicaid recipients for certain services. Emergency services and family planning services must be exempt from such copayments. Certain Medicaid recipients must be excluded from this cost sharing: pregnant women, children under age 18, hospital or nursing home patients who are expected to contribute most of their income to institutional care, and categorically needy HMO enrollees.

The amount of total Federal outlays for Medicaid has no set limit (cap); rather, the Federal government must match whatever the individual State decides to provide, within the law, for its eligible recipients. However, reimbursement rates must be sufficient to enlist enough providers so that Medicaid care and services are available under the plan at least to the extent that such care and services are available to the general population in that geographic area.

States must augment payment to qualified hospitals that provide inpatient services to a disproportionate number of Medicaid recipients and/or other low-income persons under what is known as the disproportionate share hospital (DSH) program. Legislation passed in 1991 has curtailed some States DSH payments.

The portion of the Medicaid program which is paid by the Federal government, known as the Federal Medical Assistance Percentage (FMAP), is determined annually for each State by a formula that compares the State's average per capita income level with the national average. By law, the FMAP cannot be lower than 50 percent nor greater than 83 percent. The wealthier States have a smaller share of their costs reimbursed. The Federal government also shares in the State's expenditures for administration of the Medicaid program. Most administrative costs are matched at 50 percent for all States. However, higher matching rates (75, 90 and 100 percent) are authorized by law for certain functions and activities. State FMAPs are listed in the chapter with financial statistics.

Medicaid Trends

Initially, Medicaid was a medical care extension of federally funded income maintenance programs for the poor, with an emphasis on the aged, the disabled and dependent children and their mothers. Over time, however, Medicaid has been diverging from a firm tie to eligibility for cash programs. Recent legislation ensures Medicaid coverage to an expanded number of low-income pregnant women, poor children, and some Medicare beneficiaries who are not eligible for any cash assistance program, and would not have been eligible for Medicaid under earlier Medicaid rules. Legislative changes focus on enhanced outreach toward specific groups of pregnant women and children, increased access to care, and improved quality of care. Legislation also continued specific benefits beyond the normal run of Medicaid eligibility and placed some restrictions on States' ability to limit some services.

In addition to the increase in numbers of beneficiaries from new legislation, the most pronounced Medicaid service-related trends in recent years have been the continued sharp increase in expenditures for intensive acute care and for home health and nursing facility services for the aged and disabled.

The most significant trend in service delivery is the rapid growth in managed care enrollment within Medicaid. In 1995 almost a quarter of all Medicaid recipients were enrolled in managed care plans. One vehicle for the expansion of managed care, and of new eligibility groups, is the 1915(b) waiver process which allows States increased flexibility to research health care delivery alternatives while controlling program costs. Another vehicle is the section 1115(b) waiver authority which permits States to implement managed care delivery systems within prescribed parameters.

Source: Health Care Financing Administration

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