Medicaid and the Elderly – Policy Brief

Medicaid and the Elderly

September 1995

Medicaid is a crucial health financing program for the elderly population, providing assistance to over 1 in 10 Americans age 65 or older. Nearly four million elderly people receive Medicaid assistance with medical and long-term care expenses. Medicaid's coverage helps low-income elderly people gain access to health care services, eases financial burdens for medical expenses, and provides a safety net for long-term care coverage.

Medicaid plays three essential roles for elderly people. First, Medicaid makes Medicare affordable for low-income beneficiaries by paying the premiums, deductibles, and other cost-sharing requirements. Second, Medicaid provides coverage of medical benefits that Medicare does not cover, such as prescription drugs. Third, Medicaid stands alone as virtually the only public source of financial assistance for long-term care.

Initially designed to provide health benefits for welfare recipients, Medicaid's role for vulnerable population groups has steadily expanded over the past three decades. Providing coverage for over 32 million Americans, Medicaid now serves as this nation's primary health insurance program for low-income families and finances acute and long-term care for low-income elderly and disabled people. At a cost of $125 billion in 1993, Medicaid has become a major budgetary commitment for both the federal and state governments. Overall, the elderly account for 12 percent of Medicaid beneficiaries and 28 percent of program expenditures.

The Medicaid program is at a crucial point in its history as the Congress looks to Medicaid and Medicare to achieve significant reductions in federal spending. Over the next five years, federal Medicaid spending is projected by the Congressional Budget Office (CBO) to grow by between 10 and 11 percent per year. Concern over rising Medicaid costs, combined with efforts to reduce public spending, have fueled discussions of major restructuring of this program. The Budget Resolution agreed to by the House and Senate in June of this year calls for $182 billion in federal Medicaid savings from 1996 to 2002, about a 20 percent reduction in projected federal Medicaid spending. Proposals for reform have centered on transforming the program into a block grant that would establish strict limits on federal financial obligations and increase state flexibility in program design and operation. If enacted, these reforms would substantially alter the structure, operation, and financing of Medicaid with major implications for the elderly people Medicaid now serves.

Overview of Medicaid

Authorized under Title XIX of the Social Security Act in 1965 as companion legislation to Medicare, Medicaid is a means