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Find the Medicaid category that is best for your needs

Writer's picture: Alexandra Baig, CFP®Alexandra Baig, CFP®

 Dental and gum health, it turns out, are important to the health of the rest of our body.  So, we all need to brush our teeth.  Growing up, that meant making use of the standard-issue toothbrush the dentist handed us, along with a travel tube of toothpaste, on our way out.  Now, when I walk into Walgreens, or even my local grocery store, there is a plethora of toothbrushes.  Even the manual ones offer choices, but the electric ones excel at this.  They have multiple modes, multiple brush heads, sonic (even ultrasonic) pulses, rotating, oscillating and pulsating action.  They have timers, pacers, and pressure sensors. Some of them communicate through apps.  For a good list, see here. I am not a dentist or an engineer, but I am pretty sure they all achieve the goal of clean teeth.  Which one does that best depends a lot on the needs of the brusher and the tradeoff between features and limits, such as charge depletion.  As with toothbrushes, so with Medicaid categories.  You want to find the one that best suits your situation. (image courtesy of Wikimedia).

Medicaid is a lifeline for people with disabilities who require support to live and work in the Community.  Medicaid provides health insurance independently or as a supplement to Medicare or employer-group health.  But more importantly, Medicaid funds  or contributes significantly to the funding of almost all personal care and support services that are available to people with disabilities who have aged out—usually at age 22—of the entitlement to services, offered by the public-school systems to students in special education.  So-called Medicaid “Waivers”, which operate in every state, underwrite personal-care assistance, daytime activities, and a variety of work-readiness and employment-related supports for young adults and adults with disabilities.  To access these supports, one generally must go through a state- and sometimes program-specific application or selection process AND be eligible for Medicaid.

 

Most states, including my home state of Illinois, have multiple categories of eligibility for Medicaid.  All eligibility categories provide the same medical coverage and provide access to Waiver-funded services.  The disability-determination criteria are the same for all would-be adult beneficiaries; however, each eligibility category comes with its own financial criteria.  In many cases, an adult with a disability is potentially eligible for Medicaid under more than one category, so the trick is to determine which eligibility category comes with the most benefits and the least restrictions, based on that individual’s particular circumstances. 

 

I will start with the most recent eligibility category which is the Medicaid expansion under the Affordable Care Act that Illinois made available starting in 2014 and a number of other states also provide.  Unlike other eligibility categories, ACA Medicaid does not consider what the government terms “countable resources” and what the rest of us would identify as financial assets.  To meet ACA eligibility, a person need not even have a disability.  S/He must simply have income that falls below 138% (technically, below 133%, but there is a 5% income disregard) of the applicable Federal Poverty Level (FPL) for the size of the household that includes the applicant.  Whether the income is earned or unearned is irrelevant.  Because the ACA was interlinked with the tax code, “household” for ACA Medicaid eligibility means “tax household”.  A “tax household” includes all the people named on the same tax return.  So, if a person with a disability is still claimed as a dependent (see previous blogs) on a family member’s tax return, Medicaid compares that MAGI on the return to 138% of the FPL for all people covered by the  return. 

 

As a result, ACA Medicaid eligibility is often not available to adult children with disabilities, who are claimed as dependents, even though the income that is directly attributable to the adult child her/himself is very low.  One approach is to cease to claim the adult child as a dependent if the benefits to doing so are limited.  Another approach is to consider whether a different Medicaid eligibility category would be more appropriate and useful.  Starting with the 2014 expansion, agents processing Medicaid applications in Illinois were instructed to first consider eligibility under ACA criteria, because it was simpler.  No determination of disability was required, and it was unnecessary to evaluate assets.  Thus, most adults with disabilities who applied for Medicaid after 2014 were likely enrolled in this category.

 

ACA Medicaid eligibility is most useful for low-income adults with disabilities who are not claimed as tax dependents.  As long as their earned and unearned income is below $1,732/month (2024 limit), they are not required to provide any documentation of their disability nor any record of their financial resources.  This eligibility category certainly covers anyone whose sole income is SSI, which pays a maximum of $943/month in 2024.  It may also be adequate for adults who receive a Social Security benefit on a parent’s work record, known as a “Disabled Adult Child (DAC)” benefit or a “Childhood Disability Benefit (CBD)”.  Since a DAC/CDB benefit cannot exceed 50% of the parent’s Full Retirement Age (FRA) benefit, it may well be under $1,732/month since the maximum Social Security Retirement currently payable is just over $3,800/month, but the average is only around $2,000/month. 

 

ACA Medicaid eligibility is least appropriate for people with disabilities who work or who plan to work.  This is particularly true for young people with potential.  Initially, such youth will be earning at a level below the FPL-related threshold, especially if they are working part-time while studying or training.  As they progress in their jobs, increased hours, pay raises, and promotions may push their monthly income above the threshold.  While Medicaid as health insurance may be irrelevant at that point because the young adult has access to employer-group-health insurance, s/he may still require support services that are funded by Medicaid waivers which, in turn, requires continued Medicaid eligibility.

 

Choosing your Medicaid eligibility category—and making sure that your state’s Medicaid administrating agency accepts it—is a much bigger choice than buying a toothbrush.  Happily, though, it is not a one-time-only opportunity.  While its most efficient to pick the most applicable category the first time, you can change categories, particularly if and when your circumstances change.

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The information on this site is for educational purposes only and does not constitute investment or tax advice. 

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