M edicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, to a diverse low-income population, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. Medicaid is financed jointly by the federal government and the states. Federal Medicaid spending is an entitlement, with total expenditures dependent on state policy decisions and use of services by enrollees. State participation in Medicaid is voluntary, although all states, the District of Columbia, and the territories choose to participate. States are responsible for administering their Medicaid programs. States must follow broad federal rules to receive federal matching funds, but they have flexibility to design their own versions of Medicaid within the federal statute's basic framework. This flexibility results in variability across state Medicaid programs. Most Medicaid beneficiaries receive services in the form of what is sometimes called traditional Medicaid—an array of required or optional medical assistance items and services listed in statute. However, states also may furnish Medicaid in the form of alternative benefit plans (ABPs), referred to in the Social Security Act as benchmark or benchmark-equivalent coverage. Congress originally provided for ABPs in the Deficit Reduction Act of 2005 (DRA 2005; P.L. 109-171 ) to give states flexibility to provide a Medicaid benefit that more closely resembles commercial health insurance than traditional Medicaid does. Congress modified the ABP provisions in subsequent legislation, both by expanding the scope of states' service obligations in furnishing Medicaid through ABPs and by requiring that most Medicaid beneficiaries who first became eligible as a result of the Medicaid expansion in the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) receive ABPs as their mandatory form of Medicaid coverage. This report answers frequently asked questions about Medicaid ABPs. The Appendix provides a glossary and abbreviations of selected terms. In general, under Medicaid, states are required to provide a comprehensive set of services to all categorically needy individuals, with some exceptions. The required Medicaid services are listed in the definition of medical assistance in the Social Security Act (SSA) and include a wide array of services and items, such as physician services; inpatient and outpatient hospital services; and services and items under the early and periodic screening, diagnostic, and treatment (EPSDT) benefit for individuals under the age of 21. Medical assistance also includes certain optional services—that is, services that states can choose whether to provide under their state plans—including routine dental services, prescription drug coverage, and care furnished by physical or speech therapists, among others. Among the broad federal requirements that apply to Medicaid benefit coverage, the federal law contains requirements relating to statewideness and comparability, meaning that in general, the scope of Medicaid mandatory and optional benefits must be the same statewide and the services available to the various Medicaid eligibility groups (with limited exceptions) must be equal in amount, duration, and scope. ABPs, which are referred to in Section 1937 of the SSA as benchmark or benchmark-equivalent coverage, were introduced as a form of Medicaid coverage in DRA 2005. One key difference between ABPs and traditional Medicaid benefits is that ABP coverage is defined by reference to an overall coverage benchmark that is based on one of three commercial insurance products or a fourth, "Secretary-approved" coverage option rather than as a list of discrete items and services. ABP coverage meets the requirements in DRA 2005 if (among other requirements) it either corresponds precisely to a benchmark plan selected by the state from options listed in the law or qualifies as benchmark-equivalent because the ABP has an aggregate actuarial value equivalent to the selected benchmark benefit package and meets various other requirements in the statute. A second major difference between ABPs and traditional Medicaid benefits is that states can choose to furnish ABP coverage to specific state-selected subgroups of Medicaid beneficiaries as their mandatory form of Medicaid coverage, notwithstanding the comparability and statewideness requirements. States can even design different ABPs for different beneficiary subgroups. States are nonetheless prohibited from requiring various high-needs subcategories of Medicaid beneficiaries from receiving Medicaid through ABPs. The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA 2009; P.L. 111-3 ) and the ACA with its implementing regulations made significant changes to the ABP requirements, relating both to the scope of benchmark and benchmark-equivalent coverage and to the populations that may be required to receive Medicaid through ABPs. Those changes are described below. SSA Section 1937 does not refer to alternative benefit plans; instead, it refers to benchmark or benchmark-equivalent coverage. The Centers for Medicare & Medicaid Services (CMS) introduced the term alternative benefit plan in lieu of those terms in the preamble to a July 2013 regulation. CMS decided to refer to the Medicaid benchmark and benchmark-equivalent plans as ABPs in an effort to prevent confusion regarding the term benchmark, which is used in both the SSA's Medicaid regulations and private health insurance market regulations. Although the term is used in both contexts, the benchmarks used for purposes of SSA Section 1937 ABPs and for purposes of the private health insurance market are different. In the private insurance market, CMS regulations implementing ACA requirements concerning the provision of essential health benefits (EHBs) in the individual and small-group markets use the term base-benchmark to refer to the specific health insurance plan selected by a state to determine the scope of its EHB package, in keeping with federal EHB benchmark plan guidelines. The following types of health insurance coverage constitute benchmark coverage for purposes of Medicaid ABPs (ABP benchmark options): The standard Blue Cross / Blue Shield preferred provider option service plan offered through the Federal Employees Health Benefit Program (FEHBP)-equivalent health insurance coverage. The health benefits coverage plan offered to state employees. The commercial health maintenance organization (HMO) with the largest insured commercial, non-Medicaid enrollment in the state. "Secretary-approved coverage." The fourth ABP benchmark option, Secretary-approved coverage, can be any health benefits coverage that the Secretary of Health and Human Services (HHS), upon application by a state, determines provides appropriate coverage for the proposed population. Notably, Secretary-approved coverage may correspond to the Medicaid state plan benefit package offered in the state. Alternatively, states may design and seek CMS approval for benchmark-equivalent coverage, which is coverage that a state seeks to offer as an ABP that does not correspond precisely to one of the four ABP benchmark options listed above. Benchmark-equivalent coverage must meet statutory requirements including the following: The coverage must include benefits within each of the following categories: inpatient and outpatient hospital services; physicians' surgical and medical services; laboratory and x-ray services; prescription drugs; mental health services; well-baby and well-child care, including age-appropriate immunizations; and other appropriate preventive services. The coverage must have an aggregate actuarial value equivalent to one of the ABP benchmark options. If the benchmark-equivalent coverage includes vision or hearing services, the coverage for these services must have an actuarial value that is at least 75% of the actuarial value of the coverage in that category for the benchmark plan used to measure aggregate actuarial value. The coverage included in a Medicaid ABP, in addition to qualifying as benchmark or benchmark-equivalent according to the standards described above, must meet other requirements. Some of these requirements were included with the original ABP provision in DRA 2005; others were added in CHIPRA 2009 or the ACA and its implementing regulations. The requirements are the following: Beneficiaries under the age of 21 enrolled in ABPs are entitled to the EPSDT benefit, just the same as if they were receiving traditional Medicaid benefits. EPSDT may be furnished through ABP coverage or through traditional Medicaid, as a wraparound benefit, whereby supplemental services are offered to meet the EPSDT level of coverage. Coverage under an ABP must include federally qualified health center services and rural health clinic and associated ambulatory services. Coverage under an ABP must include at least the EHBs, which non-grandfathered individual and small-group plans in the private health insurance market are required to furnish. , If coverage under an ABP includes both medical and surgical benefits and mental health or substance use disorder (SUD) benefits, then the financial requirements and treatment limitations that apply to the mental health and SUD benefits must comply with the mental health parity requirements described in the Public Health Service Act. Coverage under an ABP must include family planning services and supplies for individuals of childbearing age to the same extent that such services would be covered under traditional Medicaid. Under Medicaid regulations, if a benchmark or benchmark-equivalent plan does not include medically necessary ambulance and nonemergency medical transportation services, the state must nevertheless ensure that these services are available to beneficiaries enrolled in an ABP as a wraparound benefit. In general, states are allowed to provide additional benefits, beyond those required by the law, under an ABP. The Medicaid state plan is a document comprehensively describing a state's Medicaid program. States must administer their Medicaid programs in keeping with the state plan for the state to receive federal financial participation in Medicaid expenditures. States establish ABP coverage by amending their Medicaid state plans. CMS provides a state plan amendment "preprint," on which states provide detailed information, including the populations to be covered via ABPs, which benchmark benefit package the state selected and whether it is offering benchmark or benchmark-equivalent coverage, which base benchmark the state selected as the basis for providing the EHBs, and the scope of coverage of each of the 10 categories of EHBs. For each EHB category, the state must indicate in the state plan amendment any benefits the state has elected to substitute in lieu of those provided for in the base benchmark plan, as well as any additional benefits the state has elected to provide.