Medicaid policies to determine eligibility for long-term services and supports (LTSS) focus on finances (income and assets) and measures of functional status, rather than the existence of a specific clinical condition. In other words, people become eligible because they have low incomes and assets and meet specific thresholds for clinical and functional impairment, not because they have particular physical or mental disabilities.
Financial criteria. Unlike many Medicaid beneficiaries, who qualify for Medicaid based on the modified adjusted gross income (MAGI) methodology, most LTSS users qualify through a different pathway. Individuals qualifying on the basis of disability or age (65 and older) still must provide documentation of income and resources in order to be determined financially eligible for Medicaid services, including LTSS.
Functional criteria. Eligibility determinations for LTSS generally focus on measures of functional status―referred to as level-of-care (LOC) criteria, rather than the existence of specific clinical conditions. To make these determinations, states use functional assessment tools—sets of questions that collect information on an applicant’s health conditions and functional needs. Such tools may also be used to develop a care plan of specific services that an individual will receive upon being determined eligible for coverage. (This issue is discussed in-depth in MACPAC’s June 2016 report to Congress chapter on Functional Assessments for Long-Term Services and Supports.)
Eligibility pathways
LTSS users qualify for Medicaid based on various eligibility pathways. Some pathways require that individuals deplete their personal savings before becoming eligible. Others require that individuals contribute their income each month to help cover the cost of their care in institutional and community settings.
Because states have considerable flexibility in setting specific eligibility standards and covered benefits, eligibility policies also dictate, to some extent, the services to which enrollees are entitled. Certain LTSS are available to any enrollee who meets state-determined medical necessity and LOC criteria. Other services, including those provided through waivers and certain state plan options, may be limited to specified populations.
In general, states are required to provide Medicaid to individuals receiving Supplemental Security Income (SSI) benefits. SSI is a federal income support program for people with extremely limited income and resources who are age 65 or older, blind, or have disabilities. In 42 states and the District of Columbia, individuals eligible for SSI are automatically eligible for full Medicaid benefits, including LTSS offered under the state plan, if they meet specific functional eligibility criteria. They must generally meet SSI age and disability eligibility standards, which include being age 65 or older; or, for adults age 18 to 64, having a significant impairment that impedes their ability to do any gainful work; or, for children under the age of 18, having a significant impairment that results in marked or severe functional limitations. Some states—known as 209(b) states—establish more restrictive criteria for LTSS benefits (either income and resource thresholds or functional eligibility criteria) than SSI.
States can also use one or more optional pathways designated in federal statute to provide eligibility to people with a need for LTSS. These include:
Poverty-related pathway. This is an optional pathway allowing the state to cover individuals with incomes up to 100 percent of the federal poverty level (FPL) who have disabilities or are over age 65. This pathway and the Medicaid buy-in and medically needy eligibility pathways also use the SSI age and disability eligibility criteria. These enrollees are entitled to full Medicaid benefits including state plan LTSS if the individual meets the state’s LOC or targeting criteria. The level of income and resources that qualify an individual for the poverty-related pathway varies by state.
Medically needy pathway. This pathway allows states to cover individuals with high medical expenses relative to their income once they have spent down to a state’s medically needy income level. The income threshold and the budget period used in medically needy eligibility determinations are state specific. States may offer full Medicaid or a more limited set of state-specified benefits to this group. They may also provide institutional LTSS and home-and community-based services waiver benefits to those meeting LOC criteria.
Special income-level pathway. Under this pathway, states may cover individuals who meet LOC criteria for certain institutions and have incomes up to 300 percent of the SSI benefit rate (which is about 222 percent FPL). Functional eligibility for this pathway is determined using the state-established LOC criteria that typically require enrollees to need institutional-level services and supports. In 2021, 42 states and the District of Columbia had a special income level eligibility pathway. Most states with a special income level eligibility pathway set the income level at 222 percent FPL (MACPAC 2021).
TEFRA/Katie Beckett pathway. This pathway provides Medicaid eligibility to children with severe disabilities whose family income would ordinarily be too high to qualify for Medicaid. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA, P.L. 97-248) changed Medicaid income counting rules to allow severely disabled children like Katie Beckett, for whom the provision was named, to receive their care at home while retaining their Medicaid coverage (Smith et al. 2000). Previously, families of such children could get Medicaid coverage only by placing their child in an institution, becoming impoverished, or relinquishing custody. Under this pathway, states may elect to count only the income and financial resources of a child with a disability who needs LTSS. States may provide institutional LTSS or HCBS waiver benefits to individuals eligible under this pathway who meet institutional criteria.
Section 1915(i) state plan home and community-based services. Section 1915(i) of the Social Security Act allows states to offer HCBS as part of the Medicaid state plan to targeted groups of individuals with incomes up to 150 percent FPL. The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) amended this section to create a new eligibility pathway for individuals with disabilities who do not require an institutional level of care and expand the types of services that could be offered, while also prohibiting enrollment caps under the state plan. States may also extend this pathway to individuals with income up to 300 percent of SSI who are receiving Section 1915(c) HCBS waiver services (Stone 2011). As of 2019, 3 states use Section 1915(i) as an eligibility pathway and 14 other states use Section 1915(i) to authorize HCBS but require beneficiaries to be eligible through another coverage pathway (KFF 2019).
Medicaid buy-in pathways. There are also several pathways for states to cover people with disabilities who work and have incomes too high to qualify for Medicaid. These are referred to as Medicaid buy-in pathways. States have the option to cover individuals with disabilities who work and have incomes too high to qualify for Medicaid, thus removing a disincentive to work for individuals who are able and willing to work but might otherwise opt not to or limit their hours in order to retain their Medicaid benefits. The Medicaid buy-in pathway entitles these enrollees to pay a premium to receive full Medicaid benefits, including state plan LTSS. States may extend HCBS waiver benefits to individuals eligible under this pathway if they meet LOC criteria.
Exceptions to prevent impoverishment. States also have policies that allow LTSS users to protect portions of their income or resources and still qualify for Medicaid-covered LTSS. These include:
- Personal allowances. States must establish monthly levels of income that an LTSS user may retain to cover the cost of certain personal expenses after fulfilling any cost-sharing requirements. Enrollees using either institutional or HCBS LTSS may retain a monthly allowance to pay for goods and services not provided by the facility or covered by Medicaid (e.g., clothing or room and board costs of HCBS users).
- Income disregards. Medicaid law allows states to adopt rules that would prevent the impoverishment of a spouse of a Medicaid beneficiary receiving LTSS. Additionally, the law exempts a community-residing spouse’s income for the purposes of Medicaid eligibility and allows the institutionalized spouse to transfer income to a limited-income community spouse, up to a state-determined maximum level (but no less than $2,177.00 per month in most states and no greater than $3,435 per month in 2022) (CMS 2021). The ACA temporarily required states to apply these protections against impoverishment to spouses of individuals receiving HCBS through both state plan and waiver authorities until December 31, 2018 (CMS 2015). The Consolidated Appropriations Act, 2021 (P.L. 116-260) extended this requirement through September 30, 2023. After this date, states will continue to have the option to apply impoverishment protections to spouses of individuals receiving HCBS, as many did prior to the ACA requirement.
- Federal law allows for the establishment of certain trusts that may not be counted for the purposes of determining Medicaid eligibility, thereby allowing individuals with higher incomes or resources to qualify for Medicaid LTSS.
- Miller Trusts (also known as Qualified Income Trusts) are used in some states that offer the special income level eligibility pathway, and do not have a medically needy spend-down provision. Funds placed in a Miller Trust may be used to pay the cost of the individual’s care, up to a state-specified amount.
- “Type A” special needs trusts can also be established on behalf of an individual with a disability under the age of 65 in some states.
- Pooled income trusts are run by nonprofit associations on the behalf of individual beneficiaries.