The federal and state governments both have a say in how the benefits program works. It breaks down like this:
The federal government sets the basic requirements that all Medicaid programs must meet, and establishes the rules of how Medicaid benefits are administrated; every state runs its own state Medicaid program.
The federal government also approves all state Medicaid plans. Under the federal guidelines, each state is able to customize enrollment, eligibility, benefits, payment and delivery, among other details of its program offerings, but it must be in compliance with federal rules.
Medicaid coverage is similar to private health insurance coverage, but may cover some services usually unavailable through private plans, such as long-term care. According to federal law, Medicaid programs must provide coverage for certain services: Coverage of physician, nurse midwife, and nurse practitioner services, inpatient and outpatient hospital services, X-rays, laboratory services, family planning services, nursing facility and home health care services (for beneficiaries age 21 and older), federally qualified health center (FQHC) services, rural health clinic (RHC) services and transportation services are mandatory. State Medicaid programs must also provide early and periodic screening, diagnostic and treatment (EPSDT) services for kids under age 21 [source: KCMU].
States may also choose to offer optional benefits. Additional services may include prescription drug coverage (and as part of that, what drugs and supplements will and won't be covered), oral health care, coverage of prosthetic devices, eyeglasses and durable medical equipment (such as blood sugar monitors, home oxygen equipment and crutches), rehabilitation therapies and hospice care. Each state must provide the same benefit package to everyone enrolled within the state -- plans vary from state to state but they don't vary within a state. Each state is responsible for determining its own health care program offerings but must have its state plan approved by the U.S. Department of Health and Human Services.