Understanding Medicaid Home and Community Services: A Primer, 2010 Edition. Medically Needy Option

10/29/2010

States can cover people with too much income to meet financial eligibility criteria through the medically needy option. There is no specified ceiling on how much income a person can have and still potentially qualify if their medical bills are high enough. However, a number of requirements limit the attractiveness of the medically needy option for higher income people needing long-term care, especially home and community services, relative to the more narrowly targeted options discussed in the next section. Requirements include the following:

  • Individuals must fit into one of the Medicaid categories for coverage--for example, be age 65 or older or meet the Social Security Administration criteria for disability. If not, they cannot qualify as medically needy no matter how low their incomes or how extensive their medical need.

  • At a minimum, states choosing this option must first cover medically needy pregnant women and children. Most states that cover the medically needy also extend coverage to elderly persons or persons with disabilities.

  • States may not restrict eligibility based on medical condition, type of services needed, or place of residence.

  • Eligibility limits on resources are typically the same as for SSI.15

  • States must use a single eligibility level for income and resources for all medically needy groups they elect to cover. In the case of income levels, this single level may not exceed 133 1/3 percent of the state’s pre-welfare reform AFDC payment levels. Where these are very low, the medically needy income levels may be less than the SSI level.

  • Medically needy people with incomes above the state’s threshold must spend down before becoming eligible for Medicaid benefits.

General Eligibility Expansion Options

  • 100 percent of the Federal poverty level
    • Allows states to provide full Medicaid benefits to all elderly persons or persons with disabilities with countable income up to the Federal poverty level and assets at or below state limits.
  • Medically needy
    • Allows eligibility for those who would qualify except for income.
    • Higher income persons must spend down their income to Medicaid eligibility levels.
    • States may not cover medically needy who are elderly or have disabilities without also covering medically needy pregnant women and children.

This last, the spend-down requirement, can be a major impediment for higher income people who wish to qualify for home and community services through the medically needy provision. The reason is that medically needy people with incomes above the state’s Medicaid income threshold must spend down to that threshold on a periodic basis in order to remain eligible for Medicaid funding of the services they need.16 Until their spend-down limit is reached, they are responsible for their own medical expenses.

There is no Federal or state requirement that individuals spending down actually pay their bills. But as a practical matter, providers are unlikely to continue serving them if they fail to pay. Alternatively, states can offer people the opportunity to meet their spend-down obligation by paying it directly to the state in exchange for immediate coverage of all their medical expenses. In either case, however, people with incomes well above the state threshold may have a spend-down liability that leaves them insufficient income to cover all their expenses at their current living standards.

Hypothetical Spend-Down Situation

Assume the state’s medically needy income level for an individual is $450 per month. For individuals with monthly countable income of $950, spend-down liability is $950 minus $450 (= $500), which may be a manageable amount for those with high time-limited medical needs or those in nursing homes who do not need income to maintain a home and pay other community living expenses.

Because of these limitations, spend-down works best for people in three kinds of situations: (a) they have a one-time, short-term need for assistance; (b) they are permanently in an institution and no longer need income to maintain community residence; or (c) their income is low enough to result in a spend-down liability that is affordable to them. (Spend-down is discussed in Chapter 5 as it relates to payment of room and board in residential care facilities.)

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