Using Medicaid to Support Working Age Adults with Serious Mental Illnesses in the Community: A Handbook. Overview


The “Basic Features of Medicaid Eligibility” are summarized on the next page. Medicaid eligibility is rooted in two federally financed programs of cash assistance to help support low-income individuals and families: the former Aid to Families with Dependent Children (AFDC) program, which provided income support for low-income families with children, and the Supplemental Security Income (SSI) program for older persons, blind persons, and persons with disabilities. In 1996, welfare reform legislation replaced AFDC with a new program, Temporary Assistance for Needy Families (TANF), but maintained existing Medicaid eligibility criteria based on AFDC eligibility stand-ards for dependent children and parent(s).

Like AFDC/TANF and SSI, Medicaid is a means-tested entitlement program. That is, a person qualifies for Medicaid if: (a) their income and resources do not exceed the state threshold specific to their eligibility group and (b) they satisfy all other relevant eligibility criteria.

Medicaid eligibility rules fall into two basic sets: categorical and financial. The categorical set of rules defines specific categories of persons for whom federal law permits coverage. In the case of people with serious mental illnesses, the disability categorical group usually is the most pertinent. Medicaid criteria for determining who has disabilities are generally the same as SSI criteria, as established by the Social Security Administration. To qualify in a disability category, a person must have a long lasting, severe, medically determinable physical or mental impairment. Medicaid’s eligibility rules for persons with disabilities are also built on a foundation of Social Security Administration disability determination rules. But many exceptions and variations have been enacted over the years so that low-income persons who need health care but do not qualify for cash assistance may become eligible for Medicaid. With respect to the disability categorical group, the discussion of Medicaid eligibility includes: (a) persons who qualify for Medicaid by virtue of the receipt of SSI cash assistance or under more restrictive rules in some states (see explanation of 209(b) below) and (b) options that permit eligibility expansions to other individuals.

Basic Features of Medicaid Eligibility2
There are five generic, broadly applicable parameters that govern Medicaid eligibility:
  • Categorical eligibility. In order to secure Medicaid eligibility, a person must fall into a specified category or eligibility group. There are five broad coverage groups: children, pregnant women, adults in families with dependent children, people with disabilities (adults and children), and older persons.
  • Income eligibility. Medicaid is means-tested. Individuals not only must be in one of the program's specified categories but also cannot have income that exceeds the income standard for the category. Medicaid income standards vary across beneficiary groups (and by state) and are expressed in different ways. Some standards are tied to percentages of the Federal Poverty Level while others are keyed to cash assistance programs (e.g., SSI). Some standards are set in federal law and others by the states. Some vary based on family size. It is important to point out that the income standard against which Medicaid eligibility is tested applies only to the income that remains after the application of disregards. Disregards reduce a person's or household's gross income (from all sources of countable income) to arrive at the amount of income that is countable and compared to the standard. This practice has a close counterpart in income tax rules, which exempt certain types or amounts of income from taxation and allow certain types or amounts to be deducted from otherwise taxable income. For example, in the case of people with disabilities, the first $20 of monthly income (regardless of source) is disregarded.
  • Resource Eligibility. In most cases, Medicaid eligibility also is tied to threshold amounts of resources (e.g., cash and savings). A resource standard is the maximum dollar amount of resources that a person may have and still qualify for Medicaid. A typical resource standard for people with disabilities is $2,000. As with an income standard, the resource standard is applied to the total dollar value of a person's resources after the application of rules about whether specific types of resources are countable and how resources are valued. For example, in the case of individuals with disabilities, the person's own home is not counted as a resource and, thus, is disregarded when determining eligibility.
  • Immigration Status. Most legal immigrants who entered the United States before August 22, 1996, and who meet all other financial and non-financial Medicaid requirements, are eligible for Medicaid, either because the immigrant can be credited with 40 quarters of Social Security coverage or, if not, at a state's option. The majority of legal immigrants who entered after August 1996 are ineligible for basic Medicaid benefits until they have been in the country for five years (with the exception of emergency services). Once a non-exempt immigrant meets the five-year test, a state may grant eligibility before the individual becomes a citizen and must grant eligibility if the person has 40 hours of creditable Social Security coverage. The 1997 Balanced Budget Act provided that legal immigrants who receive SSI benefits are eligible for Medicaid even though they may not have been in the United States for five years.3
  • Residency. A person must be a resident of the state in which he or she is applying for Medicaid. A state may not deny Medicaid eligibility because a person has not resided in a state for minimum period of time.

Working-age adults with serious mental illnesses also may qualify for Medicaid by being a member of a low-income family with children or under special provisions that apply to low-income pregnant women. A person’s disability is not a criterion for eligibility in these groups; instead, the applicable criteria revolve around the composition of the household (which must include one or more children in the case of adults applying for family coverage) and income. While there is no direct tie between disability and Medicaid eligibility for adults in these households, there is considerable evidence that many adults in qualifying low-income households also have serious mental illnesses.4

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