Medicaid and Employer Benefit Options

Medicaid Structure, Benefits, and Interaction with Medicare

Medicaid is a public health coverage program designed for eligible individuals with low income. Established in 1965 under Title XIX of the Social Security Act, Medicaid is jointly funded by the federal government and individual state governments. The federal government establishes broad minimum standards and guidelines, while each state designs and administers its own Medicaid program within those federal parameters. Because each state administers its own program, Medicaid eligibility criteria and covered benefits vary by state. Eligibility depends on the specific eligibility category and income level, with limits on assets or other financial resources applying to some eligibility categories but not all.

To receive federal matching funds, states must provide certain mandatory Medicaid benefits under federal law. These mandatory benefits include inpatient and outpatient hospital services, physician services, laboratory and X-ray services, home health services, and nursing facility services for individuals age 21 and older. States also have the option to cover additional benefits, such as prescription drugs, dental care, and physical therapy. One critical distinction between the two public programs is that, unlike Medicare, Medicaid may cover long-term custodial care in a nursing facility when an individual meets applicable financial and care requirements.

Individuals who qualify for both Medicare and full Medicaid coverage are referred to as dual eligibles. For Medicare-covered services provided to dual-eligible beneficiaries, Medicare generally pays before Medicaid, although another insurer may pay before Medicare depending on the situation. Medicaid operates as a payer of last resort. This means that other available health coverage usually pays before Medicaid, subject to limited exceptions.

Consider an everyday client scenario: an elderly individual qualifies for both Medicare and full Medicaid. When this individual receives covered physician care, Medicare processes the claim first as the primary payer. Medicaid then reviews the remaining balance as the secondary payer of last resort. If the individual eventually requires long-term custodial care in a nursing facility and meets the necessary financial and care requirements, Medicaid may step in to cover that custodial care, which Medicare does not provide.