Medicaid is a US health plan developed by the federal government in 1965 as a companion to the Medicare programme. The programme is for low-income residents of the US and is addressed particularly to families with children, pregnant women, children, the aged, the blind and the disabled. To be eligible for Medicaid, a person must belong to one of these groups and meet certain financial criteria. There are optional groups also, such as the 'medically needy', which allows states to extend eligibility to others with too much income to qualify otherwise. Eligibility for the programme is through a means test that reviews the income and resources of those applying for coverage. A state qualifies for federal Medicaid matching funds only if its programme meets specific federal requirements such as the inclusion of specific population groups, coverage for certain medical services and medical providers, and adherence to specific rules relating to payment methodologies, payment amounts and cost-sharing.
Medicaid provides open-ended federal contributions according to a statutory formula. Each state is reimbursed for a portion of actual computed expenditure from a formula that takes into account the average per capita income for each state relative to the national average. By law, this portion (known as Federal Medical Assistance Percentage) cannot be less than 50 per cent.