Less Restrictive Methodologies in Calculating Medicaid Eligibility: A Survey

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2 Less Restrictive Methodologies in Calculating Medicaid Eligibility: A Survey By Sarah Jane Somers Medicaid programs vary greatly from state to state in terms of the persons covered, benefits offered, and methods of payments for services. This variation is due to the considerable flexibility that the Medicaid Act gives to states in the administration of their programs. States may choose to offer a limited list of mandatory services or may expand to include any of a number of optional benefits. States may cover only a core group of mandatory beneficiaries or may choose to cover additional, optional groups. States may create further variations in their programs by applying to waive particular federal statutory and regulatory requirements. These waiver programs, allow states to offer services to a limited group of beneficiaries, provide certain services in a limited region of a state, or disregard the Medicaid financial eligibility rules and offer services to individuals with higher incomes, or all three, among other choices. 1 States have the option of designing a state children s health insurance program (SCHIP) to offer benefits to children with higher incomes than those eligible for Medicaid. A simpler option exists. A section of the Medicaid Act, 42 U.S.C. 1396a(r)(2), provides for states to design programs that are unique to each state. Known as Section 1902(r)(2), after the section of the Social Security Act in which it appears, this provision allows states to vary their methods of determining financial eligibility with less restrictive methodologies for counting income and resources. In this article I describe Section 1902(r)(2). I discuss the Centers for Medicare and Medicaid Services 2001 guidance on how the states may make use of that section. And I include a survey of the various ways that some states have chosen to exercise this option. I. The Medicaid Act To understand the role of Section 1902(r)(2), we need to understand how the Medicaid program generally works. 2 Medicaid is the medical assistance program for low-income people Title XIX of the Social Security Act established it, and the federal government and the states jointly fund it. 3 Although states do not have to participate in the Medicaid program, they all do. The Medicaid Act spec- Sarah Jane Somers is a staff attorney, National Health Law Program, 211 N. Columbia St., Chapel Hill, NC 27514; ; somers@healthlaw.org. 1 See generally NAT L HEALTH LAW PROGRAM, AN ADVOCATE S GUIDE TO THE MEDICAID PROGRAM ch. 2 (2002) ( Federal Medicaid Waivers ), available at index.shtml. 2 For an in-depth description of the Medicaid Program, see id U.S.C. 1396a et seq.; 42 C.F.R et seq. 394 CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002

3 ifies basic requirements that states must meet as well as options that they may adopt in implementing Medicaid programs. States must meet certain minimum standards regarding administration, eligibility, scope of services, and procedural protections. Once a state chooses to participate, these minimum standards are binding upon it. 4 The federal government reimburses states for a substantial portion of their Medicaid costs. 5 Federal financial participation is available for services that are covered by the state s Medicaid plan and for costs incurred by the state to administer and operate its Medicaid program. The federal matching rate for services varies from 50 percent to approximately 80 percent 6 The actual percentage depends on the per-capita income of each state and is redetermined annually. 7 Poorer states have higher matching percentages. 8 In order to receive federal funding, each state is required to have in effect a comprehensive, written state plan for medical assistance approved by the federal government. 9 The plan must be amended to reflect changes in federal statute, regulation, or court decisions and to reflect material changes in state law, policy, organization, or operation of the program. 10 To qualify for Medicaid, an individual must fall into one of several groups specified in the federal statute. Generally these groups consist of the elderly, blind, disabled, pregnant women, and children. The Medicaid Act lists specific categories of these individuals that states must cover if they participate in Medicaid. 11 The Act provides for a number of optional coverage categories. States need not cover any of these categories of individuals or may choose to cover only some of them. 12 However, if a state chooses to provide Medicaid to an optional group, it must provide Medicaid to all eligible individuals in the group. 13 States may choose to cover individuals who fit into a category of eligibility but whose income or resources exceed the categorically needy levels. Known as the medically needy, this group may qualify after spending down a certain amount of income. 14 Below I give more detail about the various eligibility categories. Historically Medicaid eligibility was tied to eligibility for cash assistance programs, such as Aid to Families with Dependent Children (AFDC). However, over the years Medicaid eligibility has been delinked from cash benefits. Many new categories unrelated to cash assistance eligibility have been created, while eligibility for public assistance may not automatically entitle a person to Medicaid. In many states, eligibility for Supplemental Security Income (SSI) still entitles one to Medicaid. AFDC, however, has been abolished, and its successor program, Temporary Assistance for Needy Families (TANF) does not automatically entitle its recipients to Medicaid. 15 But those who would have qualified for AFDC as of when it was 4 See Schweiker v. Gray Panthers, 453 U.S. 34 (1981) (Clearinghouse No. 21,452); Wilder v. Va. Hosp. Ass n, 496 U.S. 498 (1990) U.S.C. 1396b(a), 1396d(b) 6 E.g., the matching rate for California in the 2002 fiscal year is 51.4 percent and percent in Mississippi U.S.C. 1301(a)(8) This is called the federal medical assistance percentage and must be published each year between October 1 and November 30. The percentage is published in the Federal Register. See 65 Fed. Reg (Nov. 17, 2000) U.S.C. 1396b(a)(1), 1396d(b) 9 Id Id. 1396a; 42 C.F.R U.S.C. 1396a(a)(10)(A)(i). 12 Id. 1396a(a)(10)(A)(ii). 13 Id. 1396a(a)(10)(B)(i). 14 Id. 1396a(a)(10)(C); 42 C.F.R et seq. 15 CMS (CENTER FOR MEDICARE AND MEDICAID SERVICES), STATE MEDICAID MANUAL (1997). NOVEMBER DECEMBER 2002 JOURNAL OF POVERTY LAW AND POLICY 395

4 abolished (June 16, 1996) still qualify for Medicaid. This mandatory category of eligibility is commonly referred to as Section Many children eligible for Medicaid are eligible based solely upon their income. States must cover pregnant women and children under 6 with family incomes no greater than 133 percent of the federal poverty level. 17 They must also cover children aged 6 to 19 with family incomes no greater than 100 percent of the federal poverty level. 18 They may but are not required to cover pregnant women and infants with incomes up to 185 percent of the federal poverty level. 19 States may cover optional targeted low-income children. This category of eligibility was created when SCHIP was enacted by Title XXI of the Social Security Act. 20 SCHIP was enacted to enable states to expand child health assistance to uninsured low-income children. States may offer eligibility to children with family incomes up to 200 percent of the federal poverty level. 21 States may offer coverage by expanding its Medicaid program or by establishing a separate SCHIP program. 22 States receive a higher federal matching rate for SCHIP than for Medicaid services; this gives them an incentive to participate. 23 In addition to falling into one of the above groups, applicants must meet financial eligibility requirements, which assess income and resources. Income consists of earnings, such as wages earned from employment, pension benefits distributed on a periodic basis, or tax refunds. Income also consists of in-kind income, such as the value of food and shelter received from another person living in the home. 24 Resources consist of cash or other property that can be liquidated or converted into cash-in-hand, such as real property, automobiles, stocks, bonds, savings accounts, or life insurance policies. Disregards are amounts that are deducted from income and resources to determine the countable income and resources used to determine Medicaid eligibility. Exemptions allow the applicant to exclude the value of certain income or resources, or the portion of the value, in order to calculate countable income and resources when determining financial eligibility. 25 II. Section 1902(r)(2) and Less Restrictive Methodologies Financial eligibility for Medicaid is determined by applying specific standards and methodologies. A methodology is the manner in which the state counts an applicant s income or resources. By contrast, a standard is a dollar amount or a percentage of a standard such as the federal poverty level. Even if an income standard for eligibility remains the same, a change in methodologies can enable states to cover individuals with higher income and therefore offer Medicaid eligibility to more people. For example, a state s plan may specify that pregnant women with incomes up to 150 percent U.S.C. 1396u-1(a) The less restrictive methodologies of Section 1902(r)(2) are not used for the Section 1931 category of eligibility because Section 1902(r)(2) includes separate authorization for less restrictive methodologies. Id. 1396u-1(b)(2)(C); See also CMS, Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources: Questions and Answers, Chart of Mandatory Eligibility Groups ( 2001), U.S.C. 1396a(a)(10)(A)(i)(IV) & (VI), 1396a(l)(1)(A) (C) (2001) 18 Id. 1396a(a)(10)(A)(i)(VII), 1396a(l)(1)(D) 19 Id. 1396a(a)(10)(A)(ii)(IX); 1396a(l)(1)(A) (B). 20 Id et. seq. 21 Id. 1396a(a)(10)(A)(ii)(XIV), 1397jj. 22 Id. 1397aa. 23 Id. 1397ee. 24 See, e.g., 20 C.F.R (2001) (discussing in-kind income for Supplemental Security Income (SSI)). 25 See generally ADVOCATE S GUIDE TO THE MEDICAID PROGRAM, supra note 1, ch. 3 ( Eligibility ). 396 CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002

5 of the federal poverty level may be eligible for Medicaid. This is an income standard. The state may change its plan to provide that $150 per month that a pregnant woman spends for child care should be disregarded. This is a methodology. Under this methodology, a pregnant woman may actually have an income of more that 150 percent of the federal poverty level and still be eligible. The state has therefore made more pregnant women eligible for Medicaid with this methodology change. 26 Section 1902(r)(2) establishes the general rule under Medicaid that methodologies may be no more restrictive than the methodologies used for the most closely related cash assistance program (either SSI for people with disabilities or the elderly or the former AFDC for women and children). 27 Section 1902(r)(2), however, permits states to establish less restrictive income and resource methodologies for some mandatory categories of low-income persons and for nearly all of the optional coverage categories, discussed in detail below. 28 A methodology is considered less restrictive if, through the methodology, additional individuals may be eligible for assistance and no otherwise eligible individuals are made ineligible. 29 This means that state Medicaid programs are free to disregard additional kinds or greater amounts of income or resources than are disregarded when determining eligibility for SSI or the former AFDC. Although states may not change the income or resource standards, they may change the methodologies and give themselves a wide variety of options to expand eligibility for coverage. Mandatory categories of eligibility that may be expanded by using less restrictive income and resource methodologies are qualified pregnant women 30 ; qualified children 31 ; pregnant women and children under 6, with incomes below 133 percent of the federal poverty level; 32 children between 6 and 19, born after September 30, 1983, with incomes below 100 percent of the federal poverty level; For further discussion of this issue, see Kaiser Commission on Medicaid and the Uninsured, Medicaid Eligibility for Families and Children: Policy Brief (1998); Andy Schneider et al., Medicaid Eligibility for Individuals with Disabilities (Kaiser Commission on Medicaid and the Uninsured Washington, D.C., 2000); id., Medicaid Eligibility for the Elderly (Kaiser Commission on the Uninsured, Washington, D.C., 1999), U.S.C. 1396a(r)(2)(A) (2001); 42 C.F.R (d)(2) (2001); For further discussion, see Medicaid Eligibility for Families and Children, supra note 26, at U.S.C. 1396a(r)(2)(A) (allowing states to use less restrictive methodologies in determining income and resource eligibility for individuals under 42 U.S.C. 1396a(a) (10)(A)(i)(III), (IV), (VI), and (VII); 1396(a)(10)(A)(ii); 1396a(a)(10)(C); 1396d(a); 1396a(f) and 1396d(p)); 42 C.F.R (d). ); In fact, states need not apply any resource standard to pregnant women and children eligible through poverty-level programs. 42 U.S.C. 1396a(l)(3) U.S.C. 1396a(r)(2)(B) (2001); 42 C.F.R (d)(3) 30 Qualified pregnant women are women who would be eligible for Aid to Families with Dependent Children (AFDC), as it existed before it was abolished in 1996, if their child was born. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(i)(III), 1396d(n)(1) (2001); 42 C.F.R (d)(1)(i) 31 Qualified children, or nondeprived children, are children who are under 19 and would qualify on the basis of the former AFDC income and resource standards but are not deprived of parental support. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(i)(III), 1396d(n)(2) (2001); 42 C.F.R (d)(1)(i) While this category is described in the statute, it has become superfluous. It has been subsumed by the federal poverty level categories because no state has an AFDC income standard higher than 100 percent of the federal poverty level. However, many state plans still include this category in their lists of covered groups U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(i)(IV) & (VI), 1396a(l)(1)(A) (C) (2001); 42 C.F.R (d)(1)(ii) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(i)(VII), 1396a(l)(1)(D) (2001); 42 C.F.R (d)(1)(i) NOVEMBER DECEMBER 2002 JOURNAL OF POVERTY LAW AND POLICY 397

6 QMBs (qualified Medicare beneficiaries); 34 SLMBs (specified low-income Medicaid beneficiaries); 35 QI 1 and QI 2 (qualifying individuals); 36 and aged, blind, and disabled individuals who are in 209(b) states and are Medicaid-eligible. 37 States may apply these methodologies to nearly all individuals eligible under the optional coverage categories and to all medically needy individuals. 38 States may exercise the 1902(r)(2) option by easily amending their state plans. Such plans primarily consist of preprinted form pages with boxes to check off options and blank spaces for describing aspects of the plan. A specific form page allows states to indicate more liberal methods of treating income or resources under Section 1902(r)(2) of the Medicaid Act. 39 By contrast, requesting authorization for a SCHIP expansion of the Medicaid program requires both a state Medicaid plan and an abbreviated Title XXI plan. 40 Waiver programs similarly require applications to describe in detail how the waiver will comply with numerous statutory requirements and obtain approval from the federal government. 41 III. Federal Guidance from the Department of Health and Human Services In January 2001 the Centers for Medicare and Medicaid Services (CMS) published a final regulation clarifying the states use of the less restrictive income methodologies. 42 This regulation, which became effective on May 11, 2001, lifted an administrative restriction related to federal financial participation that had discouraged states from using the less restrictive income methodologies for many eligibility categories. Generally states may not receive federal matching funds for Medicaid services provided to individuals with 34 A qualified Medicare beneficiary (QMB) is a person who is (1) entitled to Medicare Part A (hospital insurance) benefits; (2) has an income at or below 100 percent of the federal poverty level; and (3) has resources that do not exceed twice the SSI resource-eligibility standards. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(E)(i), 1396d(p)(1) (2001); 42 C.F.R (d)(1)(iii) 35 A specified low-income Medicaid beneficiary (SLMB) is a person who (1) is entitled to Medicare Part A insurance benefits; (2) has income that does not exceed 120 percent of the federal poverty level; and (3) has resources that do not exceed twice the SSI resource-eligibility standard. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(E)(ii), 1396d(s) (2001); 42 C.F.R (d)(1)(iii) 36 Qualifying individuals are individuals who fit the definition of QMBs but have higher incomes. Type 1 individuals have incomes between 120 percent and 135 percent of the federal poverty level. Type 2 individuals have incomes between 135 percent and 175 percent. This latter group pays a portion of its own premiums. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(E)(iv) (2001); 42 C.F.R (d)(1)(iii) U.S.C. 1396a(r)(2)(A), 1396a(f) (2001); 42 C.F.R (d)(1)(vi) (2001); Under 42 U.S.C. 1396a(r)(2), 209(b) states may make their income and resource methodologies less restrictive than the ones they used under 209(b) for the aged, blind, and disabled. However, states that base Medicaid coverage on SSI requirements may not exercise the 1902(r) option for individuals receiving SSI benefits. See Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note See supra note This is supplement 8a to attachment 2.6-A of the state Medicaid plan C.F.R E.g., in order to obtain a waiver under Section 1915(b) of the Act, states must show in its application that the waiver is cost-effective, efficient, and not inconsistent with the purposes of the Medicaid program; 42 U.S.C. 1396n(b) (2001); see also id. 1315(a), 1396n(c), 1396n(d). 42 See also 42 C.F.R (amended as proposed at 65 Fed. Reg. (Oct. 31, 2000) and finalized at 66 Fed. Reg (Jan. 11, 2001); but see 66 Fed. Reg (Mar. 12, 2001) (delaying effective date until May 11, 2001). 398 CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002

7 incomes above a certain level. The previous regulation required that states first determine whether a potential beneficiary s income fell below the federal financial participation level authorizing coverage and then apply less restrictive income methodologies. In other words, the state had to measure an individual s income to determine whether federal matching funds were available to match coverage of services for that individual and only then might it apply any less restrictive methodologies. This meant that states would not be reimbursed if they provided services to people with incomes above the specific level, regardless of the methodologies the state chose to use. Under the new regulation, however, the state may apply the less restrictive methodologies first and then determine whether the individuals income fell below the level necessary for federal financial participation reimbursement. 43 This means that states may receive federal matching funds for services to people for whom they might not have received federal matching funds before the new regulation was enacted. In May 2000 CMS issued a questionand-answer guidance describing the new rule and clarifying the definition of eligibility group. 44 It particularly focused on the eligibility groups based upon the optional categorical needy groups. It listed all of these groups and indicated which groups were subject to the application of 1902(r)(2). The subject groups are the medically needy; 45 pregnant women and children who are not mandatorily eligible; 46 individuals who are under 21 and are under state adoption agreements; 47 targeted low-income children; 48 individuals who would be eligible for the former AFDC if the former state AFDC plan were as broad as allowed under federal law; 49 individuals who would meet the income and resource requirements of the former AFDC if child care costs were paid from earnings rather than by a state agency; 50 individuals who would be eligible for cash assistance (SSI or the former AFDC) if not in a medical institution; 51 individuals who are receiving, or would be receiving if they were not in an institution, a state supplement payment; 52 individuals who are in a medical institution for at least thirty days and who would be eligible for SSI, optional state supplements, or the former AFDC if they were not institutionalized so long as their income does not exceed 300 percent of the SSI benefit level; Compare 42 C.F.R (2001) with id (2000). 44 See Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(C)(i)(III) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(IX), 1396a(l)(1) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(VIII) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(XIV) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(III) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(II) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(IV) (2001); 42 C.F.R (d)(1)(iv) 52 See supra note U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(V) (2001); 42 C.F.R (d)(1)(iv) NOVEMBER DECEMBER 2002 JOURNAL OF POVERTY LAW AND POLICY 399

8 JIM WEST individuals who are terminally ill and who would be eligible if they were in a medical institution and will be receiving hospice care; 54 individuals infected with tuberculosis; 55 ticket-to-work working disabled individuals; 56 medically improved working disabled individuals (under the Ticket to Work Incentives Improvement Act); 57 working disabled individuals eligible under the Balanced Budget Act of 1997 (BBA working disabled); 58 aged or disabled individuals whose income does not exceed 100 percent of the federal poverty level; 59 individuals receiving only an optional state supplement; 60 and individuals who meet the income and resource requirements of the SSI or AFDC- 96 program. 61 CMS explained that states might further subdivide the previous categories into the following eligibility groups of individuals who were not already part of a mandatory category of eligibility: (1) children under 21(or 20, 19, or 18 at the state s option); (2) caretaker relatives of dependent children; (3) individuals over 65; (4) the blind; (5) the disabled; (6) persons essential to those receiving aid or assistance based on financial need; and U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(VII) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(XII), 1396a(z)(1) (2001); 42 C.F.R (d)(1)(iv) 56 Disabled working individuals who are between 16 and 65 and meet all SSI standards except earnings. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(XV) (2001); 42 C.F.R (d)(1)(iv) See CMS, Ticket to Work and Work Incentives Improvement Act Work Incentives Eligibility Groups, 57 Individuals who previously qualified as ticket-to-work working disabled but no longer qualify as disabled under SSI because they had a medical improvement. These individuals must still have a severe medically determinable impairment under Medicaid regulations. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(XVI) (2001); 42 C.F.R (d)(1)(iv) (2001); see Ticket to Work and Work Incentives Improvement Act, supra note Individuals who have incomes under 250 percent of the federal poverty level and meet all other criteria for the mandatory category of qualified disabled and working individuals. In other words, they must (1) be entitled to Medicare Part A; (2) have resources at or below twice the SSI resource standard; and (3) not be otherwise eligible for Medicaid. 42 U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(XIII) (2001); 42 C.F.R (d)(1)(iv) See Ticket to Work and Work Incentives Improvement Act, supra note U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(X) (2001); 42 C.F.R (d)(1)(iv) U.S.C. 1396a(r)(2)(A), 1396a(a)(10)(A)(ii)(XI) (2001); 42 C.F.R (d)(1)(iv) 61 See supra note CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002

9 (7) pregnant women. 62 In other words, according to CMS, the less restrictive methodology may be applied to a subset of individuals who fall under one of the categories of optional eligibility. The subset would be one or a combination of the eligibility groups listed above. 63 While CMS acknowledged that the 1902(r)(2) regulation and the clarified definition of eligibility groups had implications for families and children, it emphasized that the May 2001 guidance was specifically intended to give information about how the regulation and the clarified definition increased state flexibility to creatively build effective longterm care systems for people with disabilities and the elderly. For example, CMS recommended that states disregard specific types of income or income used for a particular purpose. It suggested specifically that not counting the value of items such as the food or shelter or disregarding the income of a parent or spouse could make it easier for a person with a significant disability to qualify for Medicaid while the person was living at home and avoid institutionalization. 64 IV. Examples from Various States In early September 2002 the National Health Law Program reviewed all fifty states Medicaid plans to determine the nature and extent to which states were using the 1902(r)(2) option. Our source for the state Medicaid plans was CMS, which had posted all fifty state plans on its Web site. 65 A survey of state plans reveals a wide variety of options that states have exercised. Many of these options are designed as work incentives. Others seem intended to promote family unity and community (as opposed to institutional) residential settings. Some of the recent amendments appear to have been enacted in response to the new regulation and CMS guidance. 66 I discuss below some of the options that states have exercised. A. Work Incentives That Medicaid s low income eligibility threshold can act as a disincentive to individuals who wish to work is well recognized. A number of Medicaid eligibility categories (e.g., working disabled individuals) were created precisely to counteract this potential disincentive. 67 However, CMS recognized that the existing work incentive programs did not reach the majority of people with disabilities. 68 The 1902(r)(2) option, however, could allow more individuals with disabilities to earn more income and still receive Medicaid coverage. A number of states have implemented less restrictive income methodologies that act as work incentives for people with disabilities. In Vermont, all savings from earned income for individuals in the BBA working disabled category is disregarded. 69 New Mexico excludes all workrelated expenses from income for the U.S.C. 1396a(r)(2)(A) (providing that the less restrictive methodologies may be used for individuals described under 42 U.S.C. 1396a(a)(10)(A)(ii), which includes in its list individuals listed in 42 U.S.C. 1396d(a)); 42 C.F.R (d)(1)(iv); Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note 16, (question A5); see also 42 U.S.C. 1396a(a)(10)(A)(ii) (allowing states to provide Medicaid coverage to any reasonable categories of individuals who are under 18, 19, 20, or 21 and are not part of a mandatory category of eligibility). 63 Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note 16 (question A5). 64 Id. (question B1). 65 State Medicaid Plans, CMS includes on its Web site a disclaimer that it does not guarantee that the state plans on its site are up to date; however, it says that most of the state plans are current as of 2000 and that the list of state plan amendments is current as of August Some measures predate the guidance. 67 See Ticket to Work and Work Incentives Improvement Act, supra note Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note 16, (Question C1). 69 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/vt/spa/vt00_001.pdf. NOVEMBER DECEMBER 2002 JOURNAL OF POVERTY LAW AND POLICY 401

10 same individuals. 70 Less restrictive resource methodologies have also been employed since the CMS Q & A was issued. For example, Arizona amended its plan to exclude all resources for a number of categories of people with disabilities. 71 Vermont excludes all vehicles, household goods, and personal effects belonging to people eligible in the disability-related categories. 72 Illinois disregards an additional $8,000 in otherwise nonexempt assets for the ticket-to-work disabled while Wisconsin disregards $13,000 for BBA working disabled. 73 For aged, blind, and disabled individuals, Kansas exempts one vehicle regardless of value and may exempt additional vehicles if those vehicles can be shown to be essential for employment or self-support. 74 In Arkansas, for ticket-to-work working disabled, a second vehicle may be disregarded if used by the spouse to maintain employment. 75 Not all recently enacted work-incentive options apply to people with disabilities. For example, Alaska excludes the total value of a motor vehicle for all AFDC-related eligibility groups if the vehicle is necessary for transportation to work, to produce self-employment income, or to enable a family member to participate in a work activity approved by the Alaska Division of Public Assistance. 76 In Nebraska and South Dakota, 20 percent of earned income or $90, whichever is greater, may be disregarded. In Nebraska this applies to qualified children and pregnant women and children under 6 with incomes below 133 percent of the federal poverty level; in South Dakota it applies to employed caretaker parents. The District of Columbia and a number of states, including Montana, North Dakota, and South Carolina, allow an income disregard for a fixed amount of child care expenses. In North Dakota this applies to most categories of children; in the other states it applies to poverty-level pregnant women or parents of poverty-level children Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/nm/spa/nm01_001.pdf. 71 These are QMBs, SLMBs, qualifying individual types 1 and 2, and those who qualify for SSI but receive no cash benefits ( AZ/spa/AZ01_003.pdf). 72 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/vt/spa/vt00_001.pdf. 73 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/il/spa/il01_023.pdf; Need Transmittal of Notice of and Approval of State Plan Material, WI01_010.pdf. Maine disregards $8,000 of assets for the working disabled under the Balanced Budget Act of Maine State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, wwwcms.hhs.gov/medicaid/stateplans/ State_Data/ME/2.6/ 74 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/ks/spa/ks01_019.pdf. 75 Nebraska State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, A/S8a/S8a_001.pdf; South Dakota State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, State_Data/SD/2.6/Attachments/A/S8a/8a_001.pdf. 76 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/ak/spa/ak01_010.pdf. 77 Montana State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, Attachments/A/S8a/S8a_001.pdf; North Dakota State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, stateplans/state_data/nd/2.6/attachments/a/s8a/s8a_001.pdf; South Carolina State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, S8a/S8a_001.pdf; District of Columbia State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, State_Data/DC/2.6/ 402 CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002

11 Many states have also chosen to disregard specific kind of income. 78 Kansas disregards income earned by children who are under 19 and attending primary and secondary school, including a GED (general education development) program. 79 Many states opted to disregard all wages paid by the Census Bureau for temporary employment related to Census North Dakota does not treat the earned income tax credit deduction as income for many eligibility groups. 81 Kentucky disregards tobacco settlement money for certain categories of the disabled. 82 Alaska disregards educational income used for educational purposes for all AFDC-related categories. 83 Public assistance program benefits may be disregarded as well. For example, Alaska disregards a number of statespecific benefit programs for both people with disabilities and pregnant women and poverty-level children. 84 Montana excludes payments under the TANF program. 85 Connecticut disregards energy assistance payments for most recipients. 86 States may opt to disregard income intended for a particular purpose. 87 In Arkansas an approved account of up to $10,000 may be disregarded for ticket-to- 78 Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note 16 (question A14). 79 Kansas State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 80 These states include Alabama, Arizona, Colorado, Indiana, Kentucky, Massachusetts, Nevada, North Carolina, Ohio, South Carolina, Utah and Wisconsin, See Supplement 8b to Attachment 2.6A of each state s plan, More Liberal Methods of Treating Income, North Dakota State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 82 Transmittal of Notice of and Approval of State Plan Material, medicaid/stateplans/state_data/ky/spa/ky01_010.pdf. 83 Transmittal of Notice of and Approval of State Plan Material, medicaid/stateplans/state_data/ak/spa/ak01_010.pdf. 84 Cash distributions for Alaska Native Claims Settlement Act are disregarded for QMBs, working disabled individuals, and institutionalized individuals. Alaska Longevity Bonus Program payments are disregarded for QMBs and people who receive state supplementary payments. For children and pregnant women, Alaska Permanent Fund Dividend Program benefits are disregarded. Transmittal of Notice of and Approval of State Plan Material, 85 Montana State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 86 Connecticut, State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 87 This option was discussed at length in the CMS May 2001 guidance. See Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note 16 (question A15). NOVEMBER DECEMBER 2002 JOURNAL OF POVERTY LAW AND POLICY 403

12 work working disabled if an individual designated it as savings for any expense that would enhance independence and increase employment opportunities. 88 Connecticut disregards unspecified assets essential to self-support for most recipients. 89 The May 2001 guidance was specifically intended to give information about how the regulation and the clarified definition increased state flexibility to creatively build effective long-term care systems for people with disabilities and the elderly. B. Supporting Community Integration and Family Unity As CMS explained in its May 11, 2001, guidance, not counting items such as income makes it easier for a person with a significant disability to qualify for Medicaid, enabling the person to remain in his or her home rather than go to an institution to qualify for Medicaid. 90 States may choose not to count as income the value of food or shelter provided to a person by a family member or the income of a parent or spouse. A number of states choose not to count in-kind support for disability-related categories. 91 States also limit consideration of income of other members of a potential beneficiary s household for both disability-related and family-related categories. For example, Arkansas counts only the income of a disabled individual to determine eligibility. 92 Connecticut counts only the income of ticket-to-work disabled or medically improved working disabled individuals. 93 California does not count income of a spouse of an individual potentially eligible for Medicaid because of tuberculosis infection. 94 Several states, including Alabama, California, Georgia, Mississippi, North Carolina, New York, and Tennessee, do not count the income of a pregnant 88 Arkansas State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 89 Connecticut State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 90 Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources, supra note 16 (question B1). 91 Alabama and Georgia do not count in-kind support and maintenance when evaluating eligibility for QMBs and SLMBS. Alabama and Georgia State Medicaid Plans, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, Maine does not count in-kind support and maintenance for QMBs or SLMBs or the aged and disabled category. Transmittal of Notice of and Approval of State Plan Material, Pennsylvania does not count in-kind support and maintenance for the medically needy or SSI recipients. Pennsylvania State Medicaid Plan, Supplement 8b to Attachment 2.6A; see also State Medicaid Plans, Supplement 8b to Attachment 2.6A, for Indiana, South Carolina, South Dakota, and Wyoming, More Liberal Methods of Treating Income, stateplans/state_data/in/2.6/attachments/a/s8a/s8a_001.pdf, Arkansas State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 93 Connecticut State Medicaid Plan, Supplement 8b to Attachment 2.6A, More Liberal Methods of Treating Income, 94 California State Medicaid Plan, Supplement 8b to Attachment 2.6A, Methods of Treating Income That Differ from That of AFDC, CA/2.6/ 404 CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002

13 woman s parents under certain circumstances. 95 C. Expanding Poverty-Level Eligibility for Children Many states have expanded eligibility for children by choosing to disregard income amounting to a percentage of the federal poverty level to cover individuals with higher incomes. For example, Florida chooses to cover infants (children a year old) with family incomes of no more than 185 percent of the federal poverty level. The state now employs a less restrictive methodology and disregards family income in the amount between 185 percent and 200 percent when determining eligibility of infants; in other words, it disregards up to 15 percent of family income. 96 What this means in practice is that infants with family incomes under 200 percent of the federal poverty level are eligible for Medicaid. Georgia goes even further and disregards income for pregnant women and infants up to 235 percent of the federal poverty level. 97 Vermont disregards 15 percent of income for pregnant women, 115 percent of family income for infants, 177 percent of family incomes for children from 1 to 6 years old, 177 percent and 200 percent of family income for children 6 to 19 years old. This means that all children with incomes up to 300 percent of the federal poverty level and all pregnant women with incomes under 200 percent of the federal poverty level are eligible for Medicaid coverage. In California the plan provides for an income deduction that is equal to the difference between 185 percent of the federal poverty level and 200 percent of the federal poverty level for infants. The District of Columbia has a similar disregard (in varying amounts for pregnant women, infants, and children) that results in all of those individuals with family incomes less than 200 percent of the federal poverty level being eligible for Medicaid. Iowa provides that an additional 33 percent of the federal poverty level be disregarded for children 6 to 19. Again, this means that all children in that age group with incomes under 133 percent of the federal poverty level are eligible. Resource disregards have been employed for this group as well. For example, Louisiana has no resource test for any low-income families and childrelated medically needy categories. 98 MANY STATES HAVE CHOSEN TO TAKE ADVANtage of the 1902(R)(2) OPTION. HOWEVER, states could use it to a greater extent and for more innovative expansions, with much greater ease than they could obtain waivers. The new regulations lifting the limitations on federal matching funds and CMS suggestions about how to use the option should encourage even more states to pursue it. Author s Acknowledgment I would like to thank Jessica Conser, a student at the University of North Carolina Law School, for her research assistance. 95 See State Medicaid Plan, State Medicaid Plan, Supplement 8b to Attachment 2.6A., for each state, State Medicaid Plan Search Application, stateplans/map.asp. E.g., California simply provides that no income will be deemed to a pregnant woman from her parents. Georgia, by contrast, provides that no deeming of parental income shall be done when as a caretaker a pregnant woman living with her parents or living with her spouse and her parents applies for Medicaid. South Carolina provides that a married pregnant minor is automatically considered emancipated, and her parents income is not considered. 96 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/fl/spa/fl00_007.pdf. 97 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/ga/spa/ga00_006.pdf. 98 Transmittal of Notice of and Approval of State Plan Material, stateplans/state_data/la/spa/la01_016.pdf. NOVEMBER DECEMBER 2002 JOURNAL OF POVERTY LAW AND POLICY 405

14 406 CLEARINGHOUSE REVIEW NOVEMBER DECEMBER 2002