Medicaid is a means-tested entitlement program that finances the delivery of health care and LTSS to certain eligible low-income individuals. Established under Title XIX of the Social Security Act (SSA), the Medicaid program is state-operated within broad federal guidelines, and is jointly funded by the federal government and states. In response, Congress has enacted several laws aimed at limiting the ability of individuals to divest financial resources in an effort to protect them (e.g., preserve them for a family member), thereby meeting financial requirements for Medicaid and any applicable LTSS. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA, P.L. 97-248 ) was the first such legislation enacted to limit the actions of individuals who divest resources for this purpose. The Omnibus Budget and Reconciliation Act of 1993 (OBRA 93, P.L. 103-66 ) included several provisions to restrict access to Medicaid LTSS to only those individuals who were low-income or to those who applied their financial resources toward the cost of their care. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) was the most recent action taken by Congress to amend the SSA by further limiting the ability of individuals to divest their resources for the purpose of qualifying for Medicaid LTSS. This report provides an overview of the financial requirements used for determining eligibility for Medicaid LTSS. It first provides background information on the Medicaid program, including general eligibility requirements. Next, it describes federal statute as well as selected regulations and guidance regarding these financial eligibility requirements, including rules related to spousal impoverishment, asset transfers, treatment of certain assets, post-eligibility treatment of income, and estate recovery. Medicaid Financial Eligibility for Long-Term Services and Supports

Eligibility for Medicaid is determined by both federal and state law, whereby states set individual eligibility criteria within federal minimum standards. In addition to categorical and financial eligibility criteria, individuals in need of Medicaid-covered LTSS must also meet state-based functional eligibility criteria. For example, under federal Medicaid law, states are required to provide coverage to aged and disabled individuals receiving cash-assistance through the Supplemental Security Income (SSI) program. In doing so, Medicaid eligibility for aged and disabled individuals uses SSI program rules as the basis for determining financial eligibility. However, federal law also gives states the option to use financial eligibility criteria that are more restrictive than SSI (i.e., 209(b) states). States may also extend Medicaid coverage to other aged and disabled individuals, referred to as optional eligibility groups. For aged and disabled individuals eligible for Medicaid through optional eligibility groups, states may use SSI program rules or they may use more liberal standards for determining financial eligibility than those specified under SSI. Most states use these Medicaid statutory provisions to ignore or disregard certain types of income and/or resources, thereby extending Medicaid eligibility to aged and disabled individuals with higher asset levels. In contrast, the rules for determining financial eligibility for most of Medicaid's non-elderly populations (i.e., parents, children, pregnant women) use modified adjusted gross income (MAGI). These MAGI rules also apply to those individuals eligible under the ACA Medicaid expansion. According to CMS, in ACA Medicaid expansion states individuals under age 65 with disabilities who have LTSS needs are likely to continue to qualify for Medicaid under optional eligibility groups related to disability. In general, states are not required to offer LTSS for individuals in the ACA Medicaid expansion group. However, the ACA Medicaid expansion affords states options to include LTSS or otherwise make available state plan Medicaid-covered LTSS to certain newly eligible enrollees. States have further flexibility to modify SSI program rules in determining income and resource requirements for other optional eligibility groups. Payments from the trust to or for the benefit of the individual must be considered income of the individual. These rules are commonly referred to as the post-eligibility treatment of income (PETI) rules.
Medicaid is a means-tested entitlement program that finances the delivery of health care and long-term services and supports (LTSS) to certain eligible low-income individuals. Established under Title XIX of the Social Security Act (SSA), the Medicaid program is state-operated within broad federal guidelines, and is jointly funded by the federal government and states. To qualify for Medicaid, individuals must meet certain categorical and financial requirements. To qualify for Medicaid LTSS, individuals must also meet state-based functional eligibility criteria that determine need for long-term care. The rules for determining financial eligibility for persons who need LTSS under the Medicaid program are complex. Generally, individuals must have assets that are equal to or below established thresholds to be considered eligible for Medicaid. While these financial eligibility rules also vary by state, states must set these limits in accordance with certain federal requirements.
Under federal Medicaid law, states are required to provide coverage to aged, blind, and disabled (ABD) persons receiving cash-assistance through the Supplemental Security Income (SSI) program, also referred to as mandatory eligibility groups. However, federal law gives states the option to use eligibility criteria that are more restrictive than SSI. States that use this alternative to SSI program rules are typically referred to as "209(b) states." Thus, in general the Medicaid program uses SSI program rules as the basis for determining financial eligibility. States may also extend Medicaid coverage to other population groups, referred to as optional eligibility groups. For elderly and disabled individuals potentially eligible for Medicaid LTSS coverage through these optional eligibility groups, states may use more liberal standards for determining financial eligibility than those specified under SSI program rules. Section 1902(r)(2) of the SSA gives states flexibility to modify SSI program rules with respect to counting assets (both income and resources) for the purposes of determining Medicaid eligibility. Most states use these Medicaid statutory provisions to ignore or disregard certain types of income and/or resources, thereby extending Medicaid coverage to ABD individuals with higher asset levels.
In addition, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) included the ACA Medicaid expansion, which allows states to expand Medicaid eligibility beyond the historical categorical eligibility groups to individuals under age 65 with income up to 133% of the federal poverty level (FPL) (effectively 138% FPL). In general, states are not required to offer LTSS under the ACA Medicaid expansion. However, the ACA Medicaid expansion affords states options to include LTSS or otherwise make available state plan Medicaid-covered LTSS to certain beneficiaries. As of January 1, 2014, most of Medicaid's non-elderly populations (i.e., parents, children, pregnant women) now use modified adjusted gross income (MAGI) financial eligibility rules to determine financial eligibility for Medicaid, including those individuals eligible under the ACA Medicaid expansion.
Congress has enacted several laws over the years aimed at limiting the ability of individuals to divest financial resources in order to become eligible for Medicaid LTSS. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA, P.L. 97-248) was the first such legislation enacted to limit the actions of individuals who divest resources for this purpose. The Omnibus Budget and Reconciliation Act of 1993 (OBRA 93, P.L. 103-66) included several provisions to restrict access to Medicaid LTSS to only those individuals who were low-income or to those who applied their assets toward the cost of their care. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171) was the most recent action taken by Congress to amend the SSA by further limiting the ability of individuals to divest their assets for the purpose of qualifying for Medicaid LTSS.
This report provides an overview of the financial requirements used for determining eligibility for Medicaid LTSS. It first provides background information on the Medicaid program, including general eligibility requirements. Then it describes federal statute as well as selected regulations and guidance regarding these financial eligibility requirements, including rules related to spousal impoverishment, asset transfers, treatment of certain assets, post-eligibility treatment of income, and estate recovery.