Residential Care and Assisted Living Compendium: 2007. Effect of Medically Needy Rules on the Ability to Pay for Room and Board [32]

11/30/2007

States have the option of covering medically needy beneficiaries under their Medicaid programs. The medically needy are persons who, except for income, would qualify in one of the other Medicaid eligibility categories (such as being over age 65 or meeting SSI disability criteria). Medicaid payments can begin for this group once they have “spent down” -- that is, incurred expenses for medical care in an amount at least equal to the amount by which their income exceeds the medically needy income level. Any family supplementation is considered part of the excess income that must be spent down.

The medically needy eligibility option can allow people who have income greater than 300 percent of SSI to become eligible for Medicaid services. But federal law imposes two significant constraints on the use of this option:

  • The state must cover medically needy children and pregnant women before it can elect to cover any other medically needy group. Additionally, the state may not place limits on who is eligible for Medicaid by using such characteristics as diagnosis or place of residence. Thus, it cannot use medically needy policies to extend Medicaid services only to HCBS waiver beneficiaries in residential care settings.

  • The maximum income-eligibility limit that a state medically needy program may use is based upon its welfare program for families -- levels that are typically lower than SSI. The income level must be the same for all medically needy groups in the state (i.e., states are not permitted to establish higher income-eligibility levels for selected subsets of the medically needy, such as beneficiaries in residential care settings).

These rules have several implications that states need to consider when trying to make the medically needy eligibility option work for higher income individuals in residential care settings. First, these individuals may find it more difficult to incur sufficient medical expenses to meet the spend-down requirements while living in the community than they would in a nursing home. The higher their “excess” income, the higher the amount of their spend-down -- which means only beneficiaries with extremely high medical expenses may qualify. Second, community providers are less willing to deliver services during the spend-down period, since payment cannot be guaranteed and collection may be difficult. Third, spend-down rules combined with low medically needy income-eligibility levels mean that individuals may not have enough total income to pay both the bills they incur under the spend-down provision and room and board.

In summary, room and board costs may present a barrier to residential care living for Medicaid beneficiaries unless states take specific steps to make them affordable. Several observers have suggested that the Medicaid program be allowed to pay for room and board in residential care settings as it does in nursing homes, which would require Congressional approval.


32. Some of the information in this section is taken directly from Smith, O’Keeffe, et al., Understanding Medicaid Home and Community Based Services: A Primer. HHS, Office of Disability, Aging and Long-Term Care Policy. Washington, DC. October 2000. Available at:http://aspe.hhs.gov/daltcp/reports/primer.htm.

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