Medicaid and CHIP Explained

People often say “Medicaid” as if it were one program. It’s closer to 50-plus programs that share a federal rulebook. Each state runs its own, with its own eligibility limits, benefits and managed care plans, which is why a question like “does Medicaid cover adult dental?” only has one honest answer: it depends on the state.

This post explains how Medicaid is funded, who qualifies, what states must and may cover, and where CHIP fits.

Federal money, state programs

Medicaid is funded jointly by the federal government and the states and run by each state within federal rules. The federal government pays a share of each state’s costs through the Federal Medical Assistance Percentage (FMAP), which is higher for poorer states. For adults added under the Affordable Care Act (ACA) expansion, the federal share is 90%.

That split explains most of Medicaid’s quirks. Federal rules set a floor; states decide how far above it to go.

Who qualifies

Medicaid is need-based. The main groups are:

• low-income adults, in states that adopted the ACA expansion;
• children, pregnant people and parents in low-income families;
• people with disabilities;
• older people with low incomes and few assets, often alongside Medicare.

For most adults and children, income is measured using MAGI (modified adjusted gross income), a figure based on taxable income from the tax return. MAGI-based rules came in with the Affordable Care Act in 2010 and replaced a patchwork of state income tests. In expansion states, adults with MAGI up to 138% of the federal poverty level qualify. Applicants must also live in the state where they apply, and meet citizenship or qualifying immigration requirements.

Some groups, such as older people and people with disabilities who need long-term care, are judged on income and assets instead of MAGI.

What it costs members

Very little. Premiums are zero or very low, and copays and deductibles are minimal. States set the amounts within federal limits. Some services are exempt from any cost sharing at all:

• emergency services;
• family planning;
• pregnancy-related care;
• many preventive services.

Unlike Medicare, there’s no fixed enrollment window. You can apply for Medicaid at any time of the year.

Mandatory and optional benefits

Federal law requires states to cover a set of mandatory benefits, including:

• inpatient and outpatient hospital services;
• physician services;
• lab and X-ray services;
• home health services;
• nursing facility care;
• EPSDT (Early and Periodic Screening, Diagnostic and Treatment) for children under 21, which covers check-ups, screenings and any treatment found necessary. Many states deliver part of this through school-based services.

States can add optional benefits, such as:

• prescription drugs (every state covers them, though it’s technically optional);
• adult dental and vision care;
• physical and occupational therapy;
• home- and community-based long-term care services.

Medicaid is the largest payer for long-term care in the US. That’s a big difference from Medicare, which doesn’t cover long-term custodial care at all.

Managed care: Medicaid run by insurers

Most Medicaid members don’t deal with the state directly. Their state contracts with private managed care organisations (MCOs), insurers that receive a monthly payment per member and run the plan: networks, prior authorisation, claims and member services.

So a Medicaid claim usually goes to an insurance company, not the state, and that insurer may run commercial and Medicare Advantage plans too. States still run fee-for-service Medicaid for some groups and services, with their own claims systems, called MMIS (Medicaid Management Information Systems).

CHIP

The Children’s Health Insurance Program (CHIP) covers children in families whose income is too high for Medicaid but too low to afford private coverage. Like Medicaid, it’s jointly funded and run by the states. States can run CHIP as part of Medicaid, as a separate program, or as a mix of the two. It gets a higher federal match than Medicaid.

Renewals and churn

Members must have their eligibility redetermined regularly, typically once a year, using data the state already has where possible. When income rises or paperwork goes missing, people lose coverage, and many re-enrol a few months later. That churn is a big operational cost for states, payers and providers alike.

That cycle got much more visible after the COVID-19 emergency ended and states restarted renewals, and the 2025 One Big Beautiful Bill Act makes some adults renew every six months starting at the end of 2026.

Why it matters for systems

• Eligibility is volatile. Check it at every visit, because coverage can lapse between appointments.
• Every state is different. Benefits, prior authorisation rules and claim formats can differ, through each state’s or MCO’s companion guide.
• Payer of last resort. Medicaid pays after every other coverage, including Medicare, so coordination of benefits matters.
• Retroactive coverage. Medicaid can cover bills from before the application date, so providers can sometimes bill Medicaid for earlier visits.

Conclusion

Medicaid is a federal framework with state-run programs inside it. Eligibility is based on need, mostly measured by MAGI, and members pay little or nothing. Most care runs through private managed care plans, and CHIP fills the gap for children just above the Medicaid line.

Next: how Medicare and Medicaid compare, and what happens when someone qualifies for both.

Further watching

From the HealthTech Decoded channel:

• Medicare and Medicaid overview and their differences

References

• Medicaid.gov: Eligibility
• Medicaid.gov: Mandatory and optional Medicaid benefits

Where this fits

Level 1 · Foundations › Government programs

• Previous: Medicare Explained: Parts A, B, C and D
• Next: Medicare vs Medicaid, and Dual-Eligible Members