The Buy-In Program was established in the Social Security Amendments of 1965 and was made effective along with the Medicare program on July 1, 1966.

Under the Buy-In Program, States may enroll certain groups of needy people under the Supplementary Medical Insurance Program (also referred to as SMI or Medicare Part B) and pay their Medicare premiums. The purpose of Buy-in is to permit the State, as part of its total assistance plan, to provide SMI protection to certain groups of needy beneficiaries. It transfers some medical costs for this population from the Title XIX Medicaid program, which is partially State financed, to the Title XVIII Medicare program, which is funded by the Federal Government and beneficiary premium payments. Federal Financial Participation (FFP) is available through the Medicaid program to assist the States with the premium payments for certain groups of beneficiaries (i.e., those needing cash assistance or deemed cash beneficiaries). The legal authority for the Buy-In Program is Section 1843 of the Social Security Act.

Generally, States Buy-in for beneficiaries who are cash assistance or are “deemed” cash assistance beneficiaries (see HI 00815.012 for information on deemed cash beneficiaries), are categorically needy under the Medicaid program, and meet the eligibility requirements for Medicare Part B. States may also include in their Buy-in agreement those Part B-eligible beneficiaries who are not beneficiaries of cash assistance, but are eligible for Medical Assistance Only (MAO) and those federally approved as part of the State's Medicaid plan.

A beneficiary’s enrollment under a State Buy-in agreement is involuntary. The State may enroll the beneficiary even though he does not wish to enroll, or has enrolled individually. A beneficiary cannot voluntarily terminate State Buy-in coverage. Prior beneficiary or Buy-in enrollments have no effect on Buy-in eligibility and the State pays the standard premium regardless of the date the beneficiary first became eligible for Medicare Part B.