What is Medicaid?

Medicaid is a federal program that provides states with matching funds to offset some of the costs of health care for eligible individuals.

Who is eligible for Medicaid?

Medicaid currently provides health care for certain low-income individuals. These include pregnant women, parents and children, people with severe disabilities and what's known as "dual eligibles," low-income seniors and younger persons with disabilities who are enrolled in both Medicare and Medicaid.

To determine eligibility for Medicaid, a person's income is compared to the federal poverty level. Some states add a "medically needy" category that allows people with incomes too high to qualify for Medicaid to become eligible via a "spend down" process that allows them to subtract their medical expenses from their income.

When fully implemented, health care reform will expand coverage to everyone under age 65 — whether they're parents or not — with income up to 133 percent of the poverty level. This expanded coverage, which will bring 16 million more people into the program, will begin in 2014.

Is Medicaid run by the federal government or by the states?

State Medicaid agencies administer their own plans, but must meet federal guidelines set by the Centers for Medicare and Medicaid Services (CMS). CMS is an agency within the U.S. Department of Health and Human Services.

Does every state have a Medicaid program?

Yes, each state, territory and the District of Columbia has its own Medicaid program. As long as they meet the federal government's minimum eligibility levels for coverage, states are allowed to decide who is eligible, what services to cover and how to run their programs. That means there are 56 different Medicaid programs. 

Are Medicaid beneficiaries entitled to psychological services?

No. While some benefits are mandatory under the federal guidelines, states are not required to include optional benefits, including psychological services, in their Medicaid plans.

There is one exception, however. Some states contract with private companies to run their Medicaid programs. These so-called Medicaid managed care programs are subject to a federal law that gives enrollees equal access to both mental health and substance use services and medical and surgical services.

Do the states that do include psychological services in their optional benefits all provide the same level of coverage?

No. States that offer psychological services in their Medicaid programs vary widely in what — and how much — they cover. While some states cover psychological treatment, for example, others cover only psychological evaluations. In addition, some states only cover psychological services provided at a community mental health center and exclude services provided by psychologists in private practice. States can also limit the number of visits an individual makes each year.

What about psychological services for children?

All states must give Medicaid enrollees under age 21 access to early and periodic screening, diagnostic, and treatment services, including screening and treatment for mental conditions.

How do Medicaid and psychology work together?

Medicaid doesn't give beneficiaries the money to pay for the care they receive. Instead, the program pays participating psychologists, physicians, pharmacists, hospitals and other providers for the care beneficiaries receive.

Could cuts in state spending affect psychological services?

Definitely. During hard times, states have reduced optional benefits, including mental health and psychological services.

How can I find out more about Medicaid in my state?

To see if you're eligible for your state's Medicaid program, to find out what services are covered, or just to learn more, contact your state's Medicaid or medical assistance office. You can find a list of state Medicaid program websites on the program list (PDF, 159KB) and more information on the Centers for Medicare & Medicaid Services website.

Additional Resources

Medicaid: A Primer (Kaiser Family Foundation)

Thanks to psychologist Stacey Larson, JD, PsyD. who assisted with this article.
Revised, October 2011