Who pays for services provided by Medicaid?
Medicaid does not pay money to individuals, but operates in a program that sends payments to the health care providers. States make these payments based on a fee-for-service agreement or through prepayment arrangements such as health maintenance organizations (HMOs). Each State is then reimbursed for a share of their Medicaid expenditures from the Federal Government. This Federal Medical Assistance Percentage (FMAP) is determined each year and depends on the State’s average per capita income level. Richer states receive a smaller share than poorer states, but by law the FMAP must be between 50% and 83%. States may impose nominal deductibles, coinsurance, or copayments on some Medicaid beneficiaries for certain services. However, the following Medicaid beneficiaries must be excluded from cost sharing: • Pregnant women, • Children under age 18, and • Hospital or nursing home patients who are expected to contribute most of their income to institutional care. All Medicaid beneficiaries mus
