17.1 Medicaid and Other Government Programs
Key Takeaways
- **Medicaid** is a joint federal-state, needs-based program; eligibility turns on income and (for some groups) assets, unlike age-based Medicare.
- **ACA Medicaid expansion** covers adults to **138% of the Federal Poverty Level (FPL)** and carries a permanent **90% federal match (FMAP)**.
- **Dual eligibles** have both Medicare and Medicaid; Medicare pays first and they auto-qualify for the Part D **Low-Income Subsidy (Extra Help)**.
- **Spend-down** lets an over-income applicant qualify by incurring medical bills equal to the income excess, functioning like a deductible.
- Other programs each have a payer order: **CHIP** is primary for eligible children, while **TRICARE** is secondary to most coverage and **IHS** is payer of last resort.
Medicaid: A Needs-Based Federal-State Partnership
Medicaid is a jointly funded program run by states within federal rules set by the Centers for Medicare and Medicaid Services (CMS). Where Medicare is age- or disability-based and uniform nationwide, Medicaid is needs-based and varies by state. The producer exam tests this contrast directly.
The federal government reimburses each state a share called the Federal Medical Assistance Percentage (FMAP). Poorer states draw a higher match. The matching structure is the lever Congress uses to set state behavior.
Funding and Match Rates
Match rates differ by category, which is a favorite exam distinction:
| Category | Federal match (FMAP) |
|---|---|
| Traditional Medicaid | 50% to about 77% (by state income) |
| ACA expansion adults | 90% (permanent) |
| CHIP | Enhanced rate, above traditional FMAP |
A wealthy state floors at 50%; a low-income state can reach roughly 77%. The expansion 90% rate is fixed and does not slide with state wealth, which is why it is so often miskeyed on the exam.
Eligibility: MAGI vs. Non-MAGI
Most applicants are screened on Modified Adjusted Gross Income (MAGI) with no asset test. This covers children, pregnant individuals, parents, and expansion adults.
| Pathway | Income basis | Asset test? |
|---|---|---|
| MAGI groups | Tax-household income | No |
| Aged/Blind/Disabled (SSI-related) | Special income rules | Yes (~$2,000 individual) |
| Long-term-care/nursing facility | Special rules | Yes (~$2,000 individual) |
Trap: MAGI does not apply to the aged and disabled. They still face an asset test. Choosing "no asset test for everyone" is the planted wrong answer.
ACA Medicaid Expansion
The ACA invited states to extend Medicaid to adults 19-64 earning up to 138% of the FPL. NFIB v. Sebelius (2012) made expansion optional, so not every state adopted it. Expansion enrollees carry the 90% FMAP.
| Household size | 100% FPL | 138% FPL (expansion ceiling) |
|---|---|---|
| 1 | $15,060 | $20,783 |
| 2 | $20,440 | $28,207 |
| 4 | $31,200 | $43,056 |
Note the gap problem: in non-expansion states, an adult below 100% FPL may be too poor for marketplace subsidies yet ineligible for Medicaid — the "coverage gap."
Long-Term Care and the Spend-Down
Medicaid is the nation's primary payer for long-term care — a key reason LTC insurance is sold to protect assets. Applicants over the income limit can still qualify through spend-down: they incur medical expenses equal to the income excess, then Medicaid pays the rest. It behaves like a monthly deductible.
Worked example. Maria earns $1,500/month; her state's medically-needy limit is $1,000.
- Excess income = $1,500 − $1,000 = $500 spend-down.
- After Maria incurs $500 in medical bills that month, Medicaid covers her remaining covered costs.
The spend-down is the difference, never her full income.
Frank earns $2,000 per month; his state's medically-needy Medicaid income limit is $1,300 per month. How much must he spend down before Medicaid begins paying his remaining covered medical costs?
Dual Eligibles and Medicare Coordination
About 13 million Americans are dual eligible — enrolled in both Medicare and Medicaid. Medicare pays first as primary; Medicaid is secondary and picks up premiums, deductibles, and coinsurance Medicare leaves behind. Dual eligibles automatically receive the Part D Low-Income Subsidy ("Extra Help"), slashing drug costs.
Medicare Savings Programs (MSPs) help lower-income Medicare beneficiaries who are not fully dual:
| Program | Helps pay |
|---|---|
| QMB (Qualified Medicare Beneficiary) | Part A & B premiums plus deductibles/coinsurance |
| SLMB | Part B premium only |
| QI | Part B premium only |
Trap: Only QMB covers cost-sharing; SLMB and QI cover the Part B premium alone.
Other Government Programs and Payer Order
Knowing who pays first when coverage overlaps is heavily tested:
| Program | Population | Payer position |
|---|---|---|
| CHIP (Children's Health Insurance Program) | Children above Medicaid limits, ~200–400% FPL | Primary |
| TRICARE | Active duty, retirees, dependents | Secondary to most coverage (employer pays first) |
| VA / CHAMPVA | Veterans; dependents of 100%-disabled vets | Coordinates with other coverage |
| IHS (Indian Health Service) | American Indians/Alaska Natives | Payer of last resort |
CHIP bridges families earning too much for Medicaid but unable to afford private coverage. TRICARE pays before only Medicaid and IHS. IHS always pays after every other source to preserve limited funding.
A TRICARE beneficiary also has health coverage through her civilian employer. Which plan pays first?