Medically Needy Income Levels for Medicaid Eligibility

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.

This article will explain what medically needy means, how and where the program works, and how it differs from traditional Medicaid eligibility and the ACA's expansion of Medicaid.

What Does "Medically Needy Mean" in Terms of Medicaid Eligibility?

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 household income and applies to people age 18-64 with income up to 138% 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 and some states have much higher limits; certain assets, such as a home, a car, and personal possessions, are not counted).

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.

Most of the states with medically needy programs also allow them to be used by aged and disabled individuals, but only a little more than half allow low-income parents to use the medically needy pathway for Medicaid eligibility.

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 need to pay high costs for prescription drugs, medical equipment, or other healthcare expenses.

Which States Have Medically Needy Programs?

All states have the option to establish a medically needy program. But according to the Kaiser Family Foundation, 33 states and the District of Columbia had done so as of 2022. 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.

MACPAC data show the maximum allowable income (after subtracting medical expenses) as a percentage of the federal poverty level. For perspective, the 2023 poverty level for a single person is $14,580 in the continental United States.

So for example, if a state requires a person's after-medical-expense income to be no more than 60% 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 $8,748 in 2023 (that's 60% of $14,580).

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 for pregnant people and low-income children, and most also extend this eligibility pathway to people who are aged or disabled. More than half also allow low-income parents to use the medically needy eligibility pathway.

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 also shown here in dollar amounts):

• Arkansas: 10%
• California: 46%
• Connecticut: 58%
• District of Columbia: 64%
• Florida: 16%
• Georgia: 28%
• Hawaii: 36%
• Illinois: 100%
• Iowa: 43%
• Kansas: 42%
• Kentucky: 19%
• Louisiana: 9%
• Maine: 28%
• Maryland: 31%
• Massachusetts: 46%
• Michigan: 36%
• Minnesota: 43%
• Missouri: 85%
• Montana: 46%
• Nebraska: 35%
• New Hampshire: 52%
• New Jersey: 32%
• New York: 82%
• North Carolina: 21%
• North Dakota: 83%
• Pennsylvania: 38%
• Rhode Island: 89%
• Utah: 100%
• Vermont: 103%
• Virginia: 47%
• Washington: 74%
• West Virginia: 18%
• Wisconsin: 100%

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 $16,800 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 or Texas would have to spend almost all of their income on medical expenses in order to qualify.

And there are also quite a few states that don't have a medically needy pathway for Medicaid eligibility at all.

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 64% from late 2013 through mid-2023. (The growth was due to both the ACA's expansion of Medicaid and the COVID pandemic.)

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% 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.

(But in some cases, these individuals will be better served by enrolling in a subsidized private plan through the health insurance exchange. If income is fairly low, the subsidies—for premiums and cost-sharing—that are available through the exchange could be quite substantial.)

It's also important for children, and for people age 65 and older (who are generally dual-eligible for Medicare and Medicaid if they qualify for Medicaid via a medically needy program). 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. Post-ACA, there is no longer an asset limit for children or pregnant people to qualify for Medicaid, and there are also no asset limits for the Medicaid expansion population.)

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% 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—well below the poverty level in most states.

What Is 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), people who are pregnant, senior citizens, and individuals who are disabled or blind.

The expansion of Medicaid under the Affordable Care Act also opened up Medicaid eligibility to low-income adults under the age of 65, regardless of disabilities or whether they have children.

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 and the District of Columbia. So unlike Medicare (which is funded solely by the federal government), Medicaid programs differ from one state to another—both in terms of benefits and eligibility rules—since the states have control over some aspects of the program.

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

• People who are pregnant
• 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 health services under its Medicaid program. 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
• certain services for children, such as dental care
• Access to services within various community health centers and rural health clinics
• Various other services

States have the option to offer Medicaid benefits that go beyond the mandatory requirements, such as adult dental services.

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

Summary

Medicaid eligibility is generally based on income, with some populations also subject to asset limits. In general, the income limits for Medicaid eligibility are fairly low, and they're especially low in states that haven't expanded Medicaid under the ACA. But 33 states and the District of Columbia also have medically needy eligibility pathways.

In these states, people with income above the normal eligibility thresholds can qualify for Medicaid if their income minus their medical costs puts them below a certain percentage of the poverty level (the specifics vary by state). The medically needy eligibility pathway does also have asset limits, which tend to be quite low in most states.

A Word From Verywell

If you or a loved one are struggling with very high medical costs, you may find that Medicaid is a possibility, even if your overall income is too high for Medicaid eligibility. It's in your best interest to reach out to your state's Medicaid agency to discuss your situation.