Medicaid was established in 1965 to provide basic medical services to certain low-income populations. It is a means-tested entitlement program that financed the delivery of primary and acute medical services, as well as long-term services and supports, to more than an estimated 72 million people in FY2012. The estimated annual cost to the federal and state governments for Medicaid was roughly $432 billion in FY2011. Each state designs and administers its own version of Medicaid under broad federal rules. State variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are delivered and reimbursed. Not everyone enrolled in Medicaid has access to the same set of services. Different eligibility classifications determine available benefits, as described below. This report begins with a summary of major Medicaid eligibility pathways. Then traditional Medicaid benefits and benchmark coverage are described. The final section provides an analysis of state experiences with benchmark benefit packages as of late 2012. Additional CRS resources on the Medicaid and Children's Health Insurance Program are provided at the end of this report. Historically, eligibility for Medicaid was subject to "categorical restrictions" that generally limited coverage to the elderly, persons with disabilities, members of families with dependent children, certain other pregnant women and children, among others. Recent changes in federal law established Medicaid eligibility for poor non-elderly, childless adults who do not fit into these traditional categories. In addition, to qualify for Medicaid, applicants must have income (and sometimes assets) that meet financial requirements. These financial criteria are typically tied to certain federal cash assistance program rules or to specific percentages of the federal poverty level (FPL). Below is a description of services available for Medicaid beneficiaries by eligibility classification. First, "categorical needy" individuals represent the vast majority of people enrolled in Medicaid, most of whom receive traditional Medicaid benefits (described in more detail below). The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) requires that a newly established categorically needy group consisting of poor nonelderly, non-pregnant adults with income below 133% FPL receive Medicaid benchmark benefits, an alternative to traditional Medicaid benefits. However, on June 28, 2012, the United States Supreme Court issued a decision in National Federation of Independent Business v. Sebelius . The Court held that the federal government cannot terminate current Medicaid federal matching funds if a state refuses to expand its Medicaid program to include non-elderly, non-pregnant adults with income under 133% of the federal poverty level. If a state accepts the new ACA Medicaid expansion funds, it must abide by the new expansion coverage rules, but based on the Court's opinion, it appears that a state can refuse to participate in the expansion without losing any of its current Medicaid matching funds. Other benefit rules apply to individuals classified as "medically needy," including people who meet the main categorical restrictions described above but may have higher income. States electing the medically needy option must provide coverage to certain pregnant women and children under age 18. For the medically needy, states may offer a more restrictive benefit package than is available to most categorically needy individuals. Finally, states also use the authority in Section 1115 of the Social Security Act to tailor benefits to state-specified subpopulations that can include both currently authorized groups and/or new groups not specified in federal statute. Each such waiver delineates the unique terms and conditions that are negotiated between a given state and the federal Centers for Medicare & Medicaid Services (CMS). Table 1 provides examples of Medicaid benefits available by selected eligibility classifications. As illustrated, different Medicaid subpopulations may have access to benefit packages that can be quite varied. Additional details are described further below. Like eligibility, under traditional Medicaid, states must cover certain benefits, while other services may be offered at state option. Examples of benefits that are mandatory for most Medicaid groups (i.e., categorically needy populations) include inpatient hospital services, physician services, laboratory and x-ray services, early and periodic screening, diagnostic and treatment services (EPSDT) for individuals under 21, nursing facility services for individuals aged 21 and over, and home health care for those entitled to nursing facility care. Examples of optional benefits for such Medicaid groups include prescribed drugs, physician-directed clinic services, services of other licensed practitioners (e.g., chiropractors, podiatrists, psychologists) services, nursing facility services for individuals under age 21, physical therapy, and prosthetic devices. Table 2 provides additional information for selected optional benefits covered by most states under the traditional Medicaid program. The breadth of coverage for a given benefit can and does vary from state to state, even for mandatory benefits. In general, in defining a covered benefit, federal guidelines require that (1) services be sufficient in amount, duration and scope to reasonably achieve their purpose; (2) the amount, duration, and scope of services must be the same statewide; and (3) with some exceptions, beneficiaries must have freedom of choice of providers among health care practitioners or managed care entities participating in Medicaid. States can modify these rules via existing waiver authority provided in Section 1115 of the Social Security Act. As an alternative to providing all the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) gave states the option to enroll state-specified groups in benchmark and benchmark-equivalent benefit packages. These plans can exist in sub-state areas and can be limited to specific subpopulations. States can require "full benefit eligibles" (or specific subgroups of these individuals) to enroll in Medicaid benchmark benefits. A full benefit eligible is someone who is eligible for all the mandatory and optional services that a state covers under its traditional Medicaid program. Medically needy and certain spend-down populations (e.g., individuals whose Medicaid eligibility is based on a reduction of countable income for costs incurred for medical or remedial care) are excluded from the definition of a full benefit eligible. Specific groups are exempt from mandatory enrollment in benchmark benefit packages (e.g., those with special health care needs such as disabling mental disorders or serious and complex medical conditions). Table 3 provides a description of each of these exempted populations. These exempted groups may get traditional Medicaid benefits or may be offered voluntary enrollment in benchmark benefit plans. In such cases, states must describe the differences between traditional Medicaid and benchmark plans to these beneficiaries in order to facilitate an informed choice. In general, benchmark benefit packages may cover fewer benefits than traditional Medicaid, but there are some requirements, such as coverage of EPSDT and transportation to and from medical providers (as per a 2010 regulation ), that might make them more generous than private health care insurance. The benchmark options include the Blue Cross/Blue Shield standard provider plan under the Federal Employees Health Benefits Program (FEHBP), a plan offered to state employees, the largest commercial health maintenance organization (HMO) in the state, and other Secretary-approved coverage appropriate for the targeted population. Benchmark-equivalent coverage must have the same actuarial value as one of the benchmark plans identified above. Such coverage must include (1) inpatient and outpatient hospital services; (2) physician services; (3) lab and x-ray services; (4) emergency care; (5) well-child care, including immunizations; (6) prescribed drugs; (7) mental health services; and (8) other appropriate preventive care (designated by the Secretary). Such coverage must also include at least 75% of the actuarial value of coverage under the applicable benchmark plan for vision care and hearing services (if any). For children under age 21 in one of the major mandatory and optional Medicaid eligibility groups, benchmark and benchmark-equivalent coverage must include EPSDT. Also, Medicaid beneficiaries enrolled in such coverage must have access to services provided by rural health clinics and federally qualified health centers. Starting in 2014, both benchmark and benchmark-equivalent packages must cover at least the essential health benefits that will also apply to plans in the private individual and small group health insurance markets. The 10 essential health benefits include (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services (including behavioral health treatment), (6) prescribed drugs, (7) rehabilitative and habilitative services and devices, (8) lab services, (9) preventive and wellness services and chronic disease management, and (10) pediatric services, including oral and vision care. Many of these essential health benefits are currently coverable under benchmark packages. All benchmark plans must also cover family planning services and supplies. The federal mental health parity requirements, as established in the Public Health Service Act (Section 2726), generally require that, under a given insurance plan, coverage of mental health services (if offered) should be on par with coverage of medical and surgical services in terms of the treatment limitations (e.g., amount, duration and scope of benefits), financial requirements (e.g., beneficiary co-payments), in- and out-of-network covered benefits, and annual and lifetime dollar limits. Managed care plans under both traditional Medicaid and benchmark packages must comply with all federal mental health parity requirements. Benchmark packages that are not managed care plans are only required to comply with federal requirements for parity in treatment limitations and financial requirements. However, these plans are deemed to comply with federal mental health parity requirements if they offer EPSDT, which they are statutorily required to cover. As noted above, states have had the authority to implement benchmark benefit packages in their Medicaid programs since the Deficit Reduction Act of 2005. A summary of state and territory experiences with benchmark benefits as of December 2012 is provided in Table 4 . Of the 12 states and one territory (Guam) with approved benchmark plans, 10 had only one such plan and 3 (Idaho, Kentucky, and Wisconsin) had more than one benchmark plan.