Medicaid is a program that provides health insurance to adults and children with limited incomes. As of November 2020, nearly 72 million people were receiving benefits, including 38 million children. In this post, we will answer the question: What is Medicaid?
In addition, we will explain the difference between Medicaid and Medicare.
Also, we will explain the eligibility requirements and how to qualify for benefits.
Next, we will talk about Medicaid expansion under the Affordable Care Act and the list of states that have expanded coverage to adults without dependents.
Additionally, we will explain the Medicaid income limits by state and how to apply.
Lastly, we will talk about Income Cap States vs. Medically Needy States and rules around how to qualify for long-term care if your income exceeds the income limits.
What is Medicaid?
Medicaid is an assistance program that provides free or low-cost health coverage to very low-income families, pregnant women, and the elderly as well as to people with disabilities.
The expansion of Medicaid under the Affordable Care Act opened up eligibility to low-income adults without dependents.
What is Medicare?
Medicare is a national health insurance program run by the federal government.
- People age 65 and older.
- Some people under age 65 who may qualify due to a disability or another special situation.
There are 4 different parts to Medicare.
Medicare Part A
Helps pay for hospital stays and inpatient care.
Medicare Part B
Helps pay for doctor visits and outpatient care.
Medicare Part C
Combines Part A (hospital insurance) and Part B (medical insurance) in one plan that often includes prescription drug coverage too.
Medicare Part D
Prescription drug coverage.
What’s the difference between Medicaid and Medicare?
On the other hand, Medicare is managed by the federal government and is mainly based on age.
However, there are special circumstances, like certain disabilities, that may allow younger people to get Medicare.
How is Medicaid Funded?
Medicaid is funded by the federal government in conjunction with all fifty individual states.
Therefore, unlike Medicare (which is funded solely by the federal government), Medicaid programs differ from one state to another, since the states have control over some aspects of the program.
Medicaid is an “entitlement” program. This means that anyone who meets eligibility rules has a right to enroll in coverage.
It also means that states have guaranteed federal financial support for part of the cost of their programs.
Who is eligible for Medicaid?
In order to receive federal funding, states must cover certain “mandatory” populations as listed below:
- Children through age 18 in families with income below 138 percent of the federal poverty line.
- People who are pregnant and have income below 138 percent of the poverty line
- Certain parents or caretakers with very low income
- Most seniors and people with disabilities who receive cash assistance through the Supplemental Security Income (SSI) program
Additionally, States may also receive federal Medicaid funds to cover “optional” populations.
The optional Medicaid populations states can choose to cover include:
- People in the groups listed above whose income exceeds the limits for “mandatory” coverage
- Seniors and people with disabilities not receiving SSI and with income below the poverty line;
- “medically needy” people (those whose income exceeds the state’s regular Medicaid eligibility limit but who have high medical expenses, such as for nursing home care, that reduce their disposable income below the eligibility limit)
- Other people with higher income who need long-term services and support
- Thanks to the Affordable Care Act (ACA) — non-disabled adults with income below 138 percent of the poverty line, including those without children.
The ACA was intended to extend coverage to all such adults without dependents.
However, a 2012 Supreme Court decision gave states the choice of whether to expand their programs.
In states that have expanded Medicaid coverage, you can qualify based on your income alone.
If your household income is below 133% of the federal poverty level, you qualify.
However, because of the way the income is calculated, it turns out to be 138% of the federal poverty level.
Additionally, a few states use a different income limit than the 138%.
The video below by AmeriHealth Caritas does a great job of explaining how eligibility works.
We highly encourage you to watch it.
Medicaid Expansion States
As of May 2021, 39 states (including DC) have adopted the Medicaid expansion under the ACA, and 12 states have not adopted the expansion.
The image below from the Kaiser Family Foundation (KFF) shows the states that have expanded Medicaid and those that have not.
The 12 states that have not expanded Medicaid so far are:
- North Carolina
- South Carolina
- South Dakota
There are several factors that determine eligibility for Medicaid for various populations.
While each state sets its eligibility requirements based on federal guidelines, generally, to be eligible for benefits in your state, you must:
- be a resident of that state
- be a U.S. Citizen or non-citizen who meets immigration status requirements
- Provide a Social Security Number (SSN) (if you have one and are applying for coverage for yourself).
Meet financial requirements
Income limits. Medicaid income limits and rules vary for different groups of individuals and household sizes.
Asset limits. Only applies to certain groups including individuals who need long-term care or are applying based on being aged, blind or disabled.
Medical Eligibility. Only applies to certain Medicaid programs, such as Long Term Care and Home and Community-Based Services (HCBS) Waivers.
Medicaid Income Limits
In order to qualify for Medicaid, you must be in need of health care/insurance assistance, and your financial situation must fall under low income or very low income.
The income limit is based on a percentage of the Federal Poverty Levels.
States generally divide Medicaid recipients into four groups.
Each of these groups has its income limit based on the Federal Poverty Level. The four groups are:
- Infants and Children
- Families with Dependent Children
- Pregnant Women
- Aged, Blind, and Disabled
- Adults – If your State Expanded Coverage under the ACA
For the income limits for your state, see our post on Medicaid Income limits by state.
You can also click on your state name below to see the income limit for your state.
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
How to Apply for Medicaid
There are three steps to applying for Medicaid.
Click here to see our step by steps process in applying for Medicaid in each state.
Income Cap States vs. Medically Needy States
Some states have a cap on the amount of monthly income a Medicaid applicant can receive and still qualify for coverage of long-term care costs.
This situation is sometimes referred to as “income-cap” states or “income test” states.
The cap can vary, but the maximum income limit for 2021 is $2,382 (300% of the monthly SSI amount in 2021).
In states with the income cap, when an applicant receives income that exceeds the monthly amount allowed by Medicaid, the applicant can become eligible by redirecting some or all of that income to an income trust.
Redirecting income simply means having a source of income directly deposited into a checking account titled in the name of the trust.
Any income coming into the income trust is not counted when determining income eligibility for Medicaid.
Because these trusts reduce the amount of income received directly by the applicant to an amount less than the income cap, they help the applicant qualify for benefits.
However, not all states allow for income trusts.
The states that do not allow for income trusts are called “medically needy” or Medicaid spend down states.
In these states, if an applicant for has income above the state limit, the applicant’s income must be “spent down” on medical costs.
Income trusts are not used in these states because applicants qualify for benefits when their health care expenses reduce their income below the state’s medically needy income standard.
The medically Needy States
Medicaid Eligibility standards vary from state to state, but, in general, you must be low-income and have few assets to qualify.
There are people who satisfy Medicaid’s categorical eligibility requirements, like being disabled, pregnant, or over 65, but who do not satisfy the financial eligibility requirements because their income is too high to qualify for benefits.
In some states, those individuals may still qualify for Medicaid if they have significant medical expenses that reduce their income below a certain level, through what are called “medically needy” programs or Medicaid Spend-down.
All states have the option of covering so-called medically needy individuals, but not all do.
How Medicaid Spend Down Program Works
Some applicants for Medicaid have too much income and/or assets to qualify for benefits initially, but they also do not have enough money to pay for the care they need out of pocket without eventually running out of money.
Under rules established by the federal government, states have the option to establish a “medically needy program” for individuals with significant health needs whose income is too high to otherwise qualify for benefits under other eligibility groups.
Under this program, most states allow individuals to “spend down” their excess income on their care until they reach the state’s income limit.
They can “spend down” their excess income on eligible medical expenses, which may include Medicare premiums, to a predetermined amount in order to qualify for benefits.
Essentially, this is called the medically needy pathway to Medicaid eligibility.
Therefore, if your state has implemented a medically needy pathway to Medicaid eligibility, here’s what you need to know:
Your medical costs can be taken into account when determining whether your income makes you eligible for Medicaid.
List of medically Needy States
The following states have a Medically Needy pathway to Medicaid eligibility.
Eligible applicants must have medical expenses that bring their after-medical-expenses income down to the following percentage of the poverty level in order to qualify as medically needy:
- Arkansas: 11%
- California: 59%
- Connecticut: 52%
- Florida: 18%
- Georgia: 32%
- Hawaii: 40%
- Illinois: 100%
- Iowa: 48%
- Kansas: 47%
- Kentucky: 24%
- Louisiana: 10%
- Maine: 32%
- Maryland: 35%
- Massachusetts: 52%
- Michigan: 100%
- Minnesota: 80%
- Montana: 52%
- Nebraska: 39%
- New Hampshire: 58%
- New Jersey: 37%
- New York: 84%
- North Carolina: 24%
- North Dakota: 83%
- Pennsylvania: 42%
- Rhode Island: 88%
- Tennessee: 24%
- Texas: 11%
- Utah: 100%
- Vermont: 110%
- Virginia: 49%
- Washington: 75%
- West Virginia: 20%
- Wisconsin: 59%
Medicaid Income Trusts (Miller Trusts)
Income trusts are a type of special-purpose trust that can be helpful to applicants in states with income caps.
These are states that have a set income limit for qualifying for Medicaid.
The trusts are used when an applicant has too much income to qualify for Medicaid but not enough to pay for nursing home care or other long-term care costs.
Income trusts are commonly referred to as Miller Trusts (based upon a court case with the same name).
Additionally, Income trusts go by a variety of names and include the following:
- Qualifying Income Trusts (QITs)
- Income Diversion Trusts
- Income Cap Trusts
- Irrevocable Income Trusts
- Income Trusts
- d4B trusts
- Income Only Trusts
Income Cap States
Here are the list of states with Income caps for Medicaid Eligibility:
- New Mexico
- New Jersey
- South Carolina
- South Dakota
If the Medicaid Applicant is Married
For Medicaid applicants for long-term care who are married, the healthy spouse is referred to as the “community spouse”.
The income of the healthy spouse living in the community is not counted in determining the applicant’s eligibility.
Only income in the applicant’s name is counted in determining his or her eligibility.
Therefore, even if the community spouse is still working and earning income, he or she will not have to contribute to the cost of caring for his or her spouse in a nursing home if the spouse is covered by Medicaid.
What is Medicaid Summary
We hope this post on the question: What is Medicaid? was helpful to you.
If you have any questions about Medicaid, you can ask us in the comments section below.
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Be sure to check out our other articles about Medicaid.
How to Apply for Coverage by State
Medicaid Income Limits by State
Medicaid Phone Number for Florida
Income limits for Florida Medicaid
Alabama Income Limits and How to Apply
Alaska Income Limits and Chart