Medicaid was created to give low-income Americans access to medical care they otherwise couldn’t afford. Before 1965, roughly 30 percent of people under 65 had no hospital insurance, and the situation was far worse for the elderly poor, with more than half of seniors lacking surgical coverage. President Lyndon B. Johnson signed Medicaid into law on July 30, 1965, as part of the Social Security Amendments, making it a cornerstone of his broader effort to reduce poverty in the United States.
The Problem Medicaid Was Built to Solve
In the early 1960s, health insurance was almost entirely private and tied to employment. Blue Cross-Blue Shield plans, private insurance companies, and a handful of prepaid health plans were the main options. If you had a steady job with a large employer, you likely had coverage. If you didn’t, you were largely on your own.
CDC survey data from 1962 to 1963 shows that about 72 percent of people under 65 had hospital insurance, leaving tens of millions without it. Among seniors 65 and older, only about 54 percent had hospital coverage, and just 46 percent had surgical coverage. The poorest Americans faced the harshest reality: they were the least likely to have insurance and the most likely to need care. Families receiving government cash assistance had almost no pathway to affordable medical treatment. Charity hospitals and local clinics existed, but they were unevenly distributed and chronically underfunded.
Johnson’s War on Poverty
Medicaid didn’t emerge in a vacuum. It was part of a wave of social legislation known as the Great Society, a set of domestic programs President Johnson championed to fight poverty, expand civil rights, and improve education and healthcare. The idea was that poverty wasn’t just a personal failing but a structural problem the federal government had a role in addressing.
Healthcare was central to that vision. Being too poor to see a doctor meant minor illnesses became serious ones, working-age adults lost income to preventable conditions, and children grew up without basic medical attention. Johnson and Congress saw federal health insurance for the poor as both a moral imperative and a practical investment in the country’s workforce and economic stability.
What the 1965 Law Actually Did
The Social Security Amendments of 1965 (Public Law 89-97) created two programs at once. Medicare, under Title XVIII, provided hospital and medical insurance for Americans 65 and older, regardless of income. Medicaid, under Title XIX, took a different approach: it offered federal funding to states so they could provide medical coverage to specific groups of low-income people.
At first, Medicaid gave medical insurance to people already receiving cash assistance from the government. That primarily meant families getting welfare benefits and certain elderly, blind, or disabled individuals who qualified for existing aid programs. The law was deliberately broad in its language, giving states the opportunity to receive federal funding for services provided to many groups of “categorically eligible needy people,” as the original legislation described them.
This was a key design choice. Rather than creating a single national program with uniform rules, Congress built Medicaid as a federal-state partnership. The federal government would pay a significant share of the costs, and states would administer the program, set specific eligibility standards (within federal guidelines), and decide which optional services to cover beyond a required minimum.
How the Federal-State Funding Works
The cost-sharing formula at the heart of Medicaid is called the Federal Medical Assistance Percentage, or FMAP. It’s designed so that poorer states get more federal help. The formula compares each state’s per capita income to the national average: the lower a state’s income, the higher the federal share of its Medicaid costs.
By law, the federal government covers at least 50 percent of a state’s Medicaid spending, so even the wealthiest states get a dollar-for-dollar match. The maximum federal share is 83 percent. In practice, this means a state like Mississippi receives a much larger federal contribution per Medicaid dollar than a state like Connecticut. The formula was intended to reflect the simple reality that states have very different abilities to fund healthcare from their own tax revenues.
Why Medicaid Was Separate From Medicare
People often confuse Medicare and Medicaid because they were born on the same day and have similar names. But they were designed for different populations with different funding structures. Medicare is a federal program funded through payroll taxes, premiums, and general revenue. It covers seniors (and later, people with certain disabilities) regardless of how much money they make. Medicaid is a means-tested program, meaning eligibility depends on income. It’s jointly funded by the federal and state governments, and each state runs its own version of the program.
The two programs can overlap. A low-income senior might qualify for both Medicare and Medicaid simultaneously, with Medicaid covering costs that Medicare doesn’t, like long-term nursing home care. But the original intent was distinct: Medicare addressed the fact that older Americans were aging out of employer-sponsored insurance, while Medicaid addressed the fact that poor Americans of all ages were locked out of the insurance market entirely.
How Medicaid Has Grown Since 1965
What started as a program for people on cash assistance has expanded dramatically over six decades. Congress gradually extended eligibility to pregnant women, children in families above the original income thresholds, people with disabilities, and eventually low-income adults without children. The most significant recent expansion came through the Affordable Care Act in 2010, which gave states the option to cover all adults with incomes up to 138 percent of the federal poverty level.
The scale of that growth is striking. As of January 2026, about 68 million people were enrolled in Medicaid, with an additional 7.2 million children covered by the closely related Children’s Health Insurance Program (CHIP). Combined, that’s more than 75 million Americans, making Medicaid the single largest source of health coverage in the country. It now pays for roughly 40 percent of all births and covers a large share of nursing home residents.
The program Johnson signed in 1965 was modest by comparison, initially reaching only those already deemed eligible for welfare. But the underlying logic has remained the same: that access to medical care shouldn’t depend entirely on whether you can pay for it out of pocket, and that the federal government and the states share responsibility for filling that gap.