Medicaid was established in 1965 to provide health care coverage for low-income individuals and those with disabilities. It was originally an optional program that states could choose to adopt. Structured as a federal-state collaboration, Medicaid is administered by states but jointly funded with federal dollars. States must follow federal guidelines to receive funding. Today, Medicaid operates in all 50 states and five U.S. territories, providing coverage to roughly 72 million people, or about 1 in 5 Americans. 

Medicaid is administered by states but funded by a combination of federal and state dollars. The Centers for Medicare and Medicaid Services (CMS) works with states to oversee the program, and by law, each state must designate a single state agency to administer the program in order to receive the federal funding that is matched by their state dollars. In order to access those federal dollars, states have to adhere to the policies and expectations related to the Medicaid program established by the federal government.

Since the 1970's, many states have used waivers or state plan amendments to implement managed care in Medicaid, contracting with managed care organizations (MCOs) to provide services for a fixed monthly payment per member. These risk-based arrangements allow MCOs to coordinate care and build provider networks. MCOs are also financially accountable if costs exceed the set payment. Today, over 75% of Medicaid enrollees receive care through MCOs, helping states improve outcomes, manage costs and ensure financial stability.