Medicaid Eligibility, Benefits, Financing, Administration

Medicaid eligibility has generally been tied to certain categories as well as financial circumstances. Long-standing populations covered by Medicaid include moms and children, and people who are aged, blind, or disabled. Many states have opted to cover additional populations without respect to category. However, they must follow federal standards with respect to income and assets. 

Elderly and disabled populations: Federal law generally requires states to provide Medicaid coverage to older adults with low incomes who receive cash assistance through Supplemental Security Income (SSI). An exception to this rule gives states the option—known as the Section 209(b) option—to use their more stringent state general assistance criteria instead of federal SSI rules to determine Medicaid eligibility. This option comes from section 1902(f) of the Social Security Act, which allows states to have more restrictive eligibility criteria than SSI.  

States may also cover additional populations, as approved by the federal government, such as individuals who are eligible for institutional care or home and community-based services. 

Income and assets-based eligibility: Individuals eligible under this pathway, which is based on income and assets, are sometimes known as the MAGI (i.e., “modified adjusted gross income”) population. MAGI is the methodology for determining income for Medicaid eligibility. It uses an individual’s or a couple’s gross income, with some adjustments (e.g., for foreign income and tax-exempt interest). The MAGI standard eliminates asset tests. States may still use other income and asset standards in determining eligibility for non-income-based eligibility categories, like disability and age. 

States can expand Medicaid eligibility to cover adults without dependent children with incomes at or below 138 percent of the federal poverty level. States choosing this option receive enhanced federal matching funds. Medicaid programs must also cover parents and caretakers of children, though income thresholds to qualify vary widely from state to state.  

States may also offer eligibility to individuals with high medical expenses but whose incomes are too high to qualify for Medicaid. If a state chooses, such individuals may subtract certain medical expenses from their income until they reach the eligibility threshold. This eligibility pathway is sometimes referred to as “spend down.” States that use the Section 209b option for eligibility are required to allow people to spend down until they reach income and asset levels that meet Medicaid eligibility thresholds. 

Impact of state-funded supplemental payments (SSPs) on Medicaid eligibility: Federal law allows states to provide SSPs to individuals to supplement their SSI income. These payments can be made to all individuals receiving SSI or targeted to certain groups, like those receiving care in group homes or assisted living facilities. States may also make SSPs available to individuals whose income exceeds SSI standards. In addition, states are allowed to extend full Medicaid coverage to individuals who receive SSPs. In cases where a person receives SSI and SSP, if a cost-of-living increase in their SSI payment causes them to be over income for SSP, they remain eligible for Medicaid under the Pickle Amendment. Now part of the law, this requires states that extend Medicaid eligibility to people on SSI, people receiving SSP, or both to disregard cost-of-living increases to SSI payments when determining Medicaid eligibility (see also Financial Protections and Ensuring Choice for Medicaid Beneficiaries and Their Families for an explanation of these pathways). 

Immigrants with documented status: Immigrants with documentation who have lived in the U.S. for less than five years may only access Medicaid if they need emergency services or if the state pays 100 percent of their costs. Immigrants who have not yet met this requirement have the option to buy coverage and receive subsidies through the health insurance exchanges. 

Selected U.S. territories: Territories must generally operate Medicaid within broad federal guidelines and under federally approved plans. But American Samoa and the Northern Mariana Islands have federal waivers that exempt them from federal eligibility rules. The remaining territories have some leeway in how they cover their Medicaid populations. Federal Medical Assistance Percentage for the territories is set by statute at 50 percent. 

Estate Recovery: Federal law allows states to implement estate recovery for receipt of primary and acute-care services. (It is already required for long-term services and supports.) People who enroll in the Medicaid expansion could be subject to estate recovery rules (see also Long-Term Services and Supports for more information). 

Benefits: The federal government requires states to cover some services, for example, inpatient and outpatient hospital care. States can add to their benefit packages (e.g., they may opt to include prescription drug or dental services). All states currently offer prescription drug benefits. Each state chooses which prescription drugs are covered. Most states offer some dental coverage, but which dental services are covered varies. 

Mental health benefits: The mental health parity law that requires mental health benefits to be no more restrictive than other health services also applies to Medicaid. However, states have not systematically published information on how well they are meeting the parity requirements. The Centers for Medicare & Medicaid Services (CMS) created a toolkit to help states achieve and maintain compliance with the parity law.  

Benefits for people with Medicare and Medicaid coverage: For beneficiaries who are dually eligible for Medicare and Medicaid, Medicaid can cover services beyond what Medicare covers. This includes behavioral health and home and community-based services, dental, vision, and nursing facility care (see also Long-Term Services and Supports). Medicaid may also cover Medicare cost-sharing, for example, coinsurance, copays, and deductibles (see also Medicaid Assistance for Medicare Beneficiaries with Low Incomes). 

Medicaid must cover certain clinical preventive services and recommended vaccines. States have the option to make these services available to enrollees without cost-sharing. States that do so qualify for a one-percentage-point increase in their Federal Medical Assistance Percentage (FMAP), described below.  

Financing: Under the current Medicaid financing system, federal Medicaid funding grows in response to increased enrollment, service costs, and service use. The FMAP formula determines the federal share of Medicaid financing. Set by federal statute, the FMAP is derived by comparing a state’s per capita personal income to the U.S. per capita personal income. The formula is designed so that no state receives an FMAP of less than 50 percent. Some policymakers have sought to change the current financing by limiting federal contributions. They suggest providing states an annual fixed amount of federal funding (a block grant) or a set amount of federal funding per beneficiary group (a per capita cap). 

However, any capped-funding approach to Medicaid risks that financing will not meet beneficiaries’ needs. Capped funding means the state’s Medicaid program likely would not have adequate funding to cover any enrollment increases. This may necessitate limiting enrollment or cutting important optional benefits, like long-term services and supports or dental services. These types of limits would threaten Medicaid’s role as a critical part of the social safety net, especially during economic downturns and other times of social upheaval (see also Low-Income Assistance for more information about the effects of block-grant funding structures on low-income support programs). 

Administration: Medicaid programs are jointly administered by the states and the federal government, with the state governments overseeing most of the day-to-day operations. Many changes to state Medicaid programs require federal government approval. This can be done through a state plan amendment (SPA) or through available waiver options (see this chapter’s subsection, Medicaid State Plan Amendments and Waiver Authority).  

Quality: States contracting with managed care organizations (MCOs) for their Medicaid program must meet certain requirements to ensure care quality. Specifically, they must develop and maintain a state Quality Strategy that meets CMS definitions. They also must conduct an annual External Quality Review, which is an analysis and evaluation by an external quality review organization of data on the quality, timeliness, and access to health care services offered by the MCO. It must produce an annual public report.  

To assess Medicaid program performance, states also use validated quality measures such as the Healthcare Effectiveness Data and Information Set and the Consumer Assessment of Healthcare Providers and Systems survey.  

Health homes: State Medicaid programs have the option to enroll individuals with chronic conditions in a health home. Health homes are composed of a team of health professionals who provide a comprehensive set of medical services, including care coordination. To qualify, individuals must have at least two chronic conditions, have one chronic condition and be at risk for a second, or have one serious and persistent mental health condition.