New to Medicaid? How It Works

Medically Reviewed by Sarah Goodell on September 18, 2022
4 min read

Medicaid is government-funded health insurance for people with lower incomes. Nearly 60 million Americans use it. Medicaid can help if you:

  • Don't make much money or are on a limited budget
  • Can't work because of a disability
  • Are already enrolled in Medicare but can’t afford the payments
  • Are pregnant and don't make much money

The federal government requires that Medicaid cover certain groups of people -- like people with low incomes. The government sets the minimum benefits, too.

Your state also has a lot of say in the specifics of who gets covered. Generally, children, pregnant women, and people who are disabled get the most generous coverage.

There are 56 different Medicaid programs -- one for each state, the District of Columbia, and the U.S. territories. Each Medicaid program may help pay for different types of health care. What you pay varies, too. 

You can use Medicaid for many types of health care. Medicaid covers screening and diagnostic tests, including X-rays. It helps pay for hospital stays and doctor visits. Prescription drugs are covered and so is family planning. It also covers nursing home and long-term care services for people with lower incomes.

If you have a child who qualifies, Medicaid covers even more. You may get financial help if your child needs to see an eye doctor or needs glasses. Mental health services are covered. So is long-term care in your home if your child needs it.

You can get financial help if your spouse needs to be in a nursing home. Long-term care is costly. If you qualify, Medicaid can help make sure you have enough money to stay in your home while your spouse gets care elsewhere.

The rules about who can use Medicaid depend on the state you live in. Federal law requires that states cover certain population groups. States then have the option of expanding coverage to other groups or making the coverage more generous.

For instance, in some states, if you're disabled, you can use Medicaid no matter how much money you make. In other states, if you’re disabled, you may not be eligible for Medicaid coverage if your income is above a certain level.

Your income is important when applying for Medicaid. States usually have a cut-off based on your income. If you're below a certain level, you may qualify. Some categories of applicants, including the elderly, disabled, and children in foster care may also have to meet an asset limit, depending on their state.

You might be eligible even if you earn more. Even if your income and assets are above the cut-off level, you might still get Medicaid if your medical bills are high. You may be able to subtract those expenses from your income. This is called the spend-down process. After you subtract costs like hospital care and doctor visits, your income will be lower and may make you eligible for Medicaid.

You may be able to start using Medicaid. The Affordable Care Act is helping states make Medicaid available to more people.

The idea is to open up Medicaid to people who have low incomes and can't afford insurance on their own but who made too much to qualify for Medicaid in the past.

However, states can decide whether they will expand Medicaid to include more people. Some have. Some haven't. See your state page to find out if your state is expanding Medicaid.

States that have decided to expand Medicaid must provide coverage to everyone with incomes below 138% of the federal poverty level. That's:

  • $18,754 or less a year if you're single
  • $38,295 or less a year for a family of four

If you live in Alaska or Hawaii, you can make more money and still qualify.

Whether you're an immigrant makes a difference. Each state has rules about qualifying immigrants. Generally, lawfully present immigrants who meet income guidelines are eligible for Medicaid, but some states require them to be in the country for 5 years first. Qualified refugees do not have to wait the 5 year period, even in states that normally impose a waiting period.

If you want to apply to Medicaid, you should also know that:

Once you're approved, you'll get a Medicaid card. This is your ID card. You'll need to show it to get any Medicaid benefit, such as a doctor's visit or a prescription. You may also be required to choose a health plan if your state uses private health plans to provide Medicaid benefits.

At the beginning, your Medicaid coverage is retroactive. That means it covers your expenses for up to 3 months before you applied, if you were Medicaid-eligible at the time, although some states have received waivers from this requirement.