Medicaid was created in 1965 to provide health insurance for Americans with limited income who couldn’t afford medical care on their own. Signed into law as part of the Social Security Act, it was designed to cover specific groups of people who were not expected to be in the workforce: the elderly poor, people who were blind, people with permanent disabilities, and low-income mothers with dependent children. Today it covers nearly 69 million people and has expanded well beyond those original categories.
Why Congress Created Medicaid
Before 1965, millions of Americans had no realistic way to pay for medical care. Private insurance was tied to employment, and people who couldn’t work due to age, disability, or caregiving responsibilities were largely left out. States ran patchwork assistance programs, but coverage was inconsistent and often inadequate.
The legislation that created Medicaid also established Medicare, and the two programs were meant to solve different problems. Medicare covered people 65 and older regardless of income. Medicaid targeted people with low incomes who fell into specific categories that state welfare programs already recognized. If a state chose to participate, it had to include all of these groups: recipients of Aid to the Blind, Aid to Families with Dependent Children, and Aid to the Permanently and Totally Disabled. The core idea was straightforward: people who society didn’t expect to earn a living still needed access to doctors and hospitals.
How Medicaid Grew Beyond Its Original Scope
For decades, Medicaid only covered people who fit into one of those original categories. A low-income adult without children or a disability generally couldn’t qualify no matter how poor they were. That changed with the Affordable Care Act in 2010, which required states to open Medicaid to all adults 18 to 65 with household incomes up to 138% of the federal poverty level, regardless of age, family status, or health. A 2012 Supreme Court ruling made this expansion optional for states, and as of now, most states have adopted it.
This shift fundamentally changed what Medicaid is for. It moved the program from a safety net for specific vulnerable categories to something closer to a general health insurance program for low-income Americans. In states that expanded, you can qualify based on income alone.
What Medicaid Actually Covers
Federal law requires every state Medicaid program to cover a set of core services in order to receive federal funding. These include hospital care (both inpatient and outpatient), physician visits, lab work and X-rays, nursing facility care, home health services, family planning, and transportation to medical appointments. Children receive an especially broad package called Early and Periodic Screening, Diagnostic, and Treatment services, which covers virtually anything medically necessary for a child’s health and development.
States can also choose to cover additional services like dental care, vision, physical therapy, and prescription drugs. Most states do cover prescription drugs, even though it’s technically optional. The result is that the exact benefits package varies from state to state, but the federal floor ensures a substantial baseline everywhere.
The Largest Payer for Long-Term Care
One of Medicaid’s most significant roles today was barely anticipated when the program launched. Medicaid is the primary payer for long-term care in the United States, covering 44% of the $147 billion the country spent on institutional long-term care in 2023 and 69% of home care costs. Medicare, by contrast, only covers short-term rehabilitation stays, not ongoing nursing home care.
This matters enormously for older Americans who need years of daily assistance. Nursing home care can easily cost $90,000 or more per year, and most people don’t have private long-term care insurance. Many middle-class families end up relying on Medicaid after spending down their savings. For people who have both Medicare and Medicaid (known as “dual eligibles”), Medicaid fills in the gaps that Medicare leaves open: paying Medicare premiums and copays, and covering long-term services that Medicare simply doesn’t provide.
Medicaid’s Role in Childbirth and Children’s Health
Medicaid pays for a striking share of births in the United States. In 2021, 41% of all deliveries were covered by Medicaid, making it the payer for roughly two out of every five babies born in the country. Only private insurance covers more, at about 52%. This makes Medicaid one of the most important programs in maternal and infant health, financing prenatal care, delivery, and postpartum services for millions of women each year.
For children, Medicaid and the related Children’s Health Insurance Program (CHIP) together covered more than 7 million children through CHIP alone as of November 2025, on top of the tens of millions of children covered by Medicaid directly. The comprehensive screening and treatment benefit for children means that kids on Medicaid can access preventive care, dental visits, hearing tests, and mental health services that many privately insured children also receive.
How the Federal-State Partnership Works
Medicaid is not a single national program. It’s a partnership where the federal government sets minimum rules and shares the cost, while each state designs and runs its own version. The federal government pays a percentage of each state’s Medicaid costs through a formula called the Federal Medical Assistance Percentage. This rate has a floor of 50% and a ceiling of 83%, with poorer states receiving a larger federal share. In 2025, ten states receive the minimum 50% match, while Mississippi receives the highest regular rate at 76.9%.
This structure means that states have real latitude in shaping their programs. They can offer benefits beyond the federal minimum, set different income thresholds for optional groups, and choose whether to expand coverage to low-income adults. It also means that your experience with Medicaid can look quite different depending on where you live.
Financial Protection for Low-Income Families
Beyond paying for medical care, Medicaid serves as a shield against medical debt. Research on the ACA’s Medicaid expansion found that gaining coverage reduced the likelihood of borrowing money or skipping bills to pay for medical care by 44%. People who gained Medicaid saw their debt sent to collection agencies drop by roughly $1,140 on average. In communities with the highest concentrations of low-income, uninsured residents, the expansion significantly reduced both the number of unpaid bills and the total amount of debt in collections.
This financial protection is central to Medicaid’s purpose. Medical bills are one of the leading drivers of personal debt and bankruptcy in the United States, and they fall hardest on people with the least ability to pay. By covering the cost of care upfront, Medicaid prevents a hospital visit or a chronic illness from becoming a financial catastrophe.
Medicaid Enrollment Today
As of November 2025, about 76 million people were enrolled in Medicaid and CHIP combined, with nearly 69 million in Medicaid specifically. That number has fluctuated significantly in recent years. During the COVID-19 pandemic, a federal requirement prevented states from removing anyone from Medicaid rolls, pushing enrollment to historic highs. When that requirement ended in 2023, states began redetermining eligibility for millions of enrollees, and many lost coverage.
Even after that unwinding process, Medicaid remains the largest source of health coverage in the country by enrollment, covering more people than Medicare and rivaling employer-sponsored insurance. What started as a program for a few narrowly defined groups now functions as a foundational piece of the American health care system, financing everything from routine checkups for children to years of nursing home care for the elderly.