Like TANF, there is a concern that Medicaid can create a disincentive to marriage because parents and/or their children are at risk of becoming ineligible for coverage in the event of a marriage. In Medicaid, eligibility is individually determined so any disincentive to marriage applies equally to cohabitating two-parent families with children in common and paternity legally established. With Medicaid, there are at least two issues to consider: (1) whether those who are financially eligible are prevented from receiving benefits due to the presence of two parents in the household, and (2) how assistance units are defined, and income and resources counted, for the purpose of determining eligibility. State practices fall into three possible scenarios:
- Two parents have children in common. If paternity has been legally established, the incomes of both parents are counted in determining eligibility, regardless of whether the parents are married or cohabiting. The eligibility issue is not marriage per se but legal responsibility to financially support the child.
- Cohabitors do not have children in common. A federal anti-deeming provision prohibits states from denying benefits to a child based on the income of someone with no legal duty to support the child. Thus, the income of the non-parent is not counted for eligibility purposes, unless the couple marries. In the event of marriage, state family law would determine whether the step-parent was legally responsible for the step-child. If so, the step-parent’s income would be counted in determining the Medicaid eligibility of the step-child and a penalty could occur if the step-parent/new spouse’s income pushed the family over the income limit.
- Cohabitors have some children in common, but not others. Income for each child would be counted as described in the above scenarios depending on his or her legal relationship to each adult in the household.
We examined whether states effectively place additional requirements on two-parent families applying for Medicaid. We also explored whether states expanded health coverage to serve more two-parent families, and whether states increased the income threshold at which Medicaid is provided to pregnant women. All but nine states had an activity in one or more of these areas.(48) (Table 8 in the detailed matrices provides additional information on state policies.)
Medicaid eligibility for two-parent families. Medicaid provides medical coverage to categorically eligible individuals, including pregnant women, children, low-income elderly, and individuals with disabilities. Prior to the 1996 welfare reform law, families receiving AFDC were automatically eligible for Medicaid. As with welfare, two-parent families faced strict eligibility rules (e.g., recent work history and the 100-hour rule). Following welfare reform, federal policy required states to delink welfare and Medicaid eligibility and create a “family coverage” category, also known as the Section 1931 eligibility group. This includes people who were eligible to receive Medicaid under the old AFDC standard. As noted above, there is concern that the stringent two-parent program rules in Medicaid encouraged single-parent families. However, states can affect Medicaid eligibility for two-parent families in a number of ways. They can eliminate the recent work history and 100-hour rules. They can disregard income and assets, thus expanding Medicaid eligibility by not counting parts of family income. States can also expand eligibility through Section 1115 waivers.
Many states have made it easier for two-parent families to get Medicaid. Thirty-six states base Medicaid eligibility for two-parent families solely on financial circumstances (i.e., the states discarded the recent work history and 100-hour rules and cover two-parent families to the same extent as single parent families).(49)
Seventeen states used Section 1931 Medicaid expansion options to increase income disregards.(50) Some states disregard a flat dollar amount (e.g., Oklahoma disregards $120). Others disregard a fixed percentage of income (e.g., Pennsylvania and Washington each disregard 50 percent). Still others disregard all income between the old AFDC standard and a specified percent of the federal poverty level. Finally, eight states used Section 1115 waivers to expand coverage to two-parent families.(51) Oregon and Delaware used waivers to cover all adults with incomes less than 100 percent of the federal poverty level. Hawaii offers full cost Medicaid buy-in for parents with incomes under 300 percent of the federal poverty level.
Medicaid eligibility for pregnant women. Medicaid will cover pregnant women who are not eligible under Section 1931 and whose incomes fall under a certain threshold. The minimum limit is the higher of the following: 133 percent of the federal poverty level or the level that the state had in place as of December 1989 (up to 185 percent of the poverty level). Women are also covered for 60 to 90 days postpartum. To the extent that a husband (but not a cohabitor) in the household increases family income, a woman would become ineligible for coverage. However, once a pregnant woman becomes eligible for Medicaid, an increase in income (even as the result of marriage) will not cause her to lose eligibility during the pregnancy or postpartum period.
Thirteen states have raised Medicaid income eligibility for pregnant woman above 185 percent of the poverty level.(52) The increased thresholds range from 200 percent of the poverty level in seven states to 300 percent in California.
Expanded health care coverage for two-parent families. Although a number of states have taken steps to address marriage penalties in the Medicaid program, some couples will not be eligible for coverage (e.g., their combined income might make them ineligible). Some states cover parents through state-funded programs. Unlike programs partially funded by the federal government, state programs are not bound by federal restrictions regarding eligibility or benefit structures. States can also extend coverage to parents through the State Children’s Health Insurance Program (SCHIP) through a waiver.
Six states cover parents through SCHIP waivers. Arizona, California, Minnesota, and New Jersey cover parents up to 200 percent of the federal poverty level; Rhode Island and Wisconsin cover parents up to 185 percent. Three states also provide coverage to parents through state-only health plans.(53)