What Does the Term "Medically Needy" Mean?

If Your State Has a Medically Needy Program, You Might Be Medicaid-Eligible

Medically needy programs cover pregnancy.
Medically needy programs cover pregnancy. Nils Hendrik Mueller/Getty Images

The term medically needy refers to individuals who:

  • Are in one of Medicaid's traditional eligibility categories—blind, aged, pregnant, disabled, a child, or the parent of a minor child.
  • Have income is too high for regular Medicaid eligibility (regular Medicaid eligibility requires the person to have low income, in addition to being blind, aged, pregnant, disabled, a child, or the parent of a minor child; note that this is different from the ACA's expansion of Medicaid eligibility, which is based strictly on income and applies to people age 18-64 with income up to 138 percent of the poverty level)
  • Have medical expenses significant enough that when subtracted from the person's income, it brings the after-medical-expense income down to a level that the state deems eligible for Medicaid under its medically needy program.
  • Have limited assets (typically around $2,000 for a single individual, although it varies by state; certain assets, such as a home, a car, and personal possessions, are not counted).

If your state has implemented a medically needy pathway to Medicaid eligibility, your medical costs can be taken into account when determining whether your income makes you eligible for Medicaid.

How Does the Medically Needy Program Work?

Even if you're blind, disabled, pregnant, elderly, a child, or the parent of a minor child, your income might be too high for Medicaid eligibility (and again, this is assuming you're not eligible for expanded Medicaid under the ACA).

But if you have to spend so much of your income on medical costs that your leftover income is quite low, you could qualify for Medicaid if your state has a medically needy program (often referred to as a "spend-down" program). Once you've spent enough on medical expenses to qualify for Medicaid, your remaining medical expenses will be covered by Medicaid until you have to qualify again, typically monthly or quarterly.

States don't have to apply their medically needy programs to all of their categories of Medicaid eligibility. For example, a state can allow elderly people, but not disabled people, to qualify for Medicaid via the medically needy program—or vice versa. But if a state has a medically needy program, it must be available to pregnant women and children.

The opportunity to subtract the money you spend on medical care from your income in order to qualify for Medicaid may be particularly useful if you are elderly and reside in a nursing home. Also, children and adults with disabilities may have high prescription drug, medical equipment, or other health care expenses.

Which States Have Medically Needy Programs?

All states have the option to establish a medically needy program. But according to the Medicaid and CHIP Payment and Access Commission (MACPAC), 32 states and the District of Columbia have done so. States can set their own rules for how low the person's income must be, after subtracting medical costs, in order to qualify for Medicaid via a medically needy program.

The MACPAC data show the maximum allowable income (after subtracting medical expenses) as a percentage of the federal poverty level. For perspective, the 2018 poverty level for a single person is $12,140.

So for example, if a state requires a person's after-medical-expense income to be no more than 60 percent of the poverty level in order to qualify as medically needy, a single person's income minus medical expenses would have to be no more than $7,284. The poverty level is adjusted each year, which means that the dollar amount based on a percentage of the poverty level will also change annually, unless the state limits it to a specific dollar amount.

The states listed below have medically needy programs; eligible applicants must have medical expenses that bring their after-medical-expenses income down to the following percentage of the poverty level in order to qualify as medically needy (for an individual or a couple, these limits are shown here in dollar amounts):

Each state's name links to more information about the state's medically needy program.

Note that in Connecticut, Louisiana, Michigan, Vermont, and Virginia, the income limit varies by region, whereas it's the same statewide in the other states.

In addition to the income limit (after subtracting medical expenses), there are asset limits that apply in each state for the medically needy eligibility pathway. The asset limit ranges from a low of $1,600 for a single individual in Connecticut, to a high of $14,850 in New York.

You can see from that list how much the rules vary from one state to another. A person in Vermont can have leftover income (after medical expenses are subtracted) above the poverty level and still be eligible for Medicaid, whereas a person in Louisiana would have to spend almost all of their income on medical expenses in order to qualify.

How ACA Medicaid Expansion & Medically Needy Programs Differ

The Affordable Care Act significantly expanded the number of people in the country who are eligible for Medicaid—total enrollment in Medicaid and CHIP (Children's Health Insurance Program) grew by 29 percent from late 2013 through early 2018. Some people who were previously only eligible for Medicaid under a medically needy program are now eligible due to the expanded income guidelines for Medicaid that the majority of states have implemented.

But the medically needy program is still an important part of Medicaid eligibility for people who earn more than 138 percent of the poverty level (the upper limit for eligibility under expanded Medicaid), but whose medical expenses are substantial and effectively reduce their income to a level allowed under the medically needy program.

It's also important for seniors (who are generally dual-eligible for Medicare and Medicaid if they qualify for Medicaid via a medically needy program) and children. The ACA's expansion of Medicaid doesn't apply to people under age 18 or over age 64, since those populations were already eligible for Medicaid pre-ACA, assuming they had income and assets in the eligible range (pre-ACA, there was no mechanism for providing Medicaid to able-bodied, non-elderly adults without children, regardless of how low their income was).

It's important to understand that Medicaid expansion under the ACA is based on income, but it doesn't matter how you spend that income. You can be perfectly healthy, with $0 in medical costs, and still qualify for Medicaid with an income up to 138 percent of the poverty level if your state has expanded Medicaid under the ACA.

Under a medically needy program, however, there isn't an upper limit in terms of your actual income. But you must be in one of the categories of Medicaid-eligible individuals, and your medical expenses have to be high enough that your income after subtracting medical expenses ends up being quite low—below the poverty level in most states.

An Overview of Medicaid

Medicaid is an insurance program specifically designed for low income and needy individuals. Medicaid has historically provided health coverage for low-income children (and in some cases, their parents), senior citizens, and individuals with disabilities.

The expansion of Medicaid under the Affordable Care Act opened up Medicaid eligibility to low-income, non-elderly adults as well, regardless of disabilities or whether they have children [There are still 19 states that have not accepted federal funding to expand Medicaid as of 2018. But Virginia will expand Medicaid as of 2019, and Maine will eventually expand Medicaid under a voter-approved ballot initiative, but the issue is tied up in the court system as of mid-2018.]

And while there are several factors that determine eligibility for Medicaid for various populations, income is a primary factor. By and large, Medicaid is designed to provide health coverage to low-income Americans (there are some exceptions, such as the Katie Beckett waiver program).

Medicaid is funded by the federal government in conjunction with all fifty individual states. So unlike Medicare (which is funded solely by the federal government), Medicaid programs differ from one state to another, since the states have control over some aspects of the program.

If your state offers a medically needy program, it must cover:

  • Pregnant women
  • Children under 19

Your state also has the option to cover:

  • Children up to 21
  • Parents and other caretaker relatives
  • Elderly individuals
  • Individuals with disabilities, including blindness

Medicaid Benefits

Each state is required to cover certain particular health benefits. Benefits that the states are required to cover by the federal government are known as mandatory benefits. Such mandatory benefits include:

  • Services of a physician, a nurse midwife, and nurse practitioner, if necessary.
  • Necessary laboratory or x-ray services
  • Outpatient and inpatient hospital services
  • Services, supplies, and information regarding family planning
  • Access to services within various community health centers and rural health clinics
  • Various other services and state options

To find the Medicaid Agency in your state, use the interactive map from the National Association of State Medicaid Directors.

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