States typically follow Federal SSI rules on whether or not to count (deem) the income and resources of a parent in determining a minor childs financial eligibility.25 These rules impart a substantial institutional bias by ignoring parental income/resources when assessing eligibility for long-term care services if a minor child is living in an institution, but counting them if the minor child lives at home.26
These different deeming rules make it much more likely that a minor child will meet Medicaids financial eligibility test when living in an institution than at home. Thus, families considering how to get long-term care services for a minor child with disabilities may find that these deeming rules leave no realistic alternative to institutionalization.
States can overcome this institutional bias through two options. The first, the Katie Beckett or TEFRA option, was enacted permanently into law in 1982. This option enables states to provide Medicaid to certain children with disabilities living at home who need extensive care but who would, without the option, be unable to qualify because their parents income or resource levels put them above the financial eligibility cutoff.27
Before this option became available, children with disabilities were typically eligible for SSI--and, thus, Medicaid--only if they lived in institutional settings. This was because of deeming rules discussed above. Most state Medicaid programs followed SSI deeming rules on how income and resources are counted. Under these rules, institutionalized children were not considered part of their parents households. Parental income and assets were therefore ignored, regardless of their magnitude. But children living with their parents were considered part of the parental household, making parental income and assets deemed available to the children, and substantially reducing the likelihood that children with disabilities would be eligible for Medicaid services, no matter how great the childrens service needs might have been. This arrangement made it possible for children with disabilities in non-poor families to get Medicaid for institutional care but not for equivalent care provided at home.
The TEFRA option, which was enacted to create equity between the two settings with regard to financial eligibility, is limited in the following ways. First, home care for the child must be appropriate. Second, the estimated cost of community services for the child may not exceed the cost of institutional care. Third, the child must require the level of care normally provided in an institution, making the TEFRA option unavailable for children whose disabilities do not require this level of care. In states that use the TEFRA option, parents may choose either institutional or community care for their Medicaid-eligible children, subject to the above requirements.
Alternatively, states can elect to use institutional eligibility rules when determining a minors eligibility for an HCBS waiver program. Using institutional eligibility rules means, among other things, choosing not to deem the income and resources of parents available to minor children eligible under an HCBS waiver program. Doing so provides access to home and community services on the same financial basis as long-term care services provided in an institution.
States need to consider the following points when choosing between the TEFRA option and the HCBS waiver option for covering children with disabilities. First, states may not impose enrollment caps under the TEFRA option, as they can under the HCBS waiver option. If elected, the TEFRA option must be available to anyone who qualifies anywhere in the state. Second, states must provide to children eligible under both the TEFRA option and the HCBS waiver option the same Early, Periodic, Screening, Diagnosis, and Treatment benefits provided to all other Medicaid children in the state. However, the HCBS option allows states to offer additional services of a non-medical nature. Finally, states may impose a share-of-cost obligation on children in an HCBS waiver program but not on children eligible under the TEFRA option.