Medicaid’s Medically Needy (MN) Pathway to Eligibility: Income & Asset Limits

Overview of the Medicaid Medically Needy Pathway

Medicaid extends medical coverage to varying groups of low-income persons. This includes children, pregnant women, adults under 65, people with disabilities, and the elderly (65+). Within each group, there are various pathways to Medicaid eligibility. Some of these pathways are mandatory, such as the Categorically Needy “old age or disability” pathway. Other pathways are optional, which allow states to extend Medicaid coverage to persons who would otherwise not be Medicaid-eligible. The Medically Needy Pathway is one such pathway. It allows persons who would be eligible for Categorically Needy Medicaid (i.e., elderly), except that their income is too high, to qualify for Medicaid (including long-term care) by spending “excess” income on medical expenses.

Given the Medically Needy Pathway is optional, not all states offer it. If a state chooses to offer this pathway, it does not have to be available to all Medicaid coverage groups. The only groups that a state must include in this pathway, if they choose to utilize it, is pregnant women and children under 18. Tennessee and Texas are two such states that allow for a Medically Needy Pathway, but do not extend it to seniors. Furthermore, if the Medically Needy Pathway is available to seniors, it is not required that it cover all long-term care Medicaid programs for which a senior might apply.

Some states use the Medically Needy Pathway only for Regular State Plan Medicaid, which relevant to seniors, is sometimes called Aged, Blind and Disabled (ABD) Medicaid. Other states use it for ABD, but also extend this pathway to eligibility to Nursing Home Medicaid and HCBS (home and community based services) Medicaid Waivers. Missouri is a notable exception and uses the Medically Needy Pathway for Regular State Plan Medicaid and Nursing Home Medicaid, but not for HCBS Medicaid Waivers.

The focus of this article is strictly on the elderly, and therefore, the information contained below is relevant for this population.

Definition: What is the Medically Needy Pathway?

The Medically Needy Pathway is an alternative pathway to Medicaid eligibility for seniors who have income over Medicaid’s income limit, yet also have high medical expenses. Essentially, a senior can qualify for Medicaid by spending “excess” income on their medical expenses. Often called a Medically Needy Plan or an Income Spend Down Program, this program also goes by a variety of state-specific names. For instance, in Illinois, it is called the Medical Spenddown Program, in New York, it is called the Medicaid Excess Income Program, and in Wisconsin, it is called the Medicaid Deductible Program.

How Does the Medically Needy Pathway Work?

To qualify via the Medically Needy Pathway, seniors must “spend down” their “excess” income, or lower their countable income, by paying medical expenses until a state specified Medically Needy Income Limit (MNIL) is met. The MNIL might have a state-specific name. For example, in Louisiana, it is called the Medically Needy Income Eligibility Standard (MNIES).

The amount of income that must be “spent down” before Medicaid eligibility is established can be thought of as a deductible. Based on one’s state of residence, this may be called a “share of cost”, “patient pay amount”, “patient pay liability”, or “copay”. Regardless of the name, one’s “spend down” amount is calculated based on the state’s Medically Needy Income Limit and the elderly individual’s income level. Essentially, the MNIL is subtracted from one’s monthly income, and that is the amount that one must “spend down” in order to be income-eligible for Medicaid.

Each state has a spend down period, which ranges from 1 – 6 months. Once the “spend down” has been met for the period, the individual is income-eligible for Medicaid coverage for the remainder of the period. To be clear, a senior must re-qualify for Medicaid for each spend down period. This means that a senior might qualify for Medicaid during some spend down periods and be Medicaid-ineligible for others.

• Example 1:

In Florida, the MNIL is $180 / month for a single senior applicant. If an applicant has a monthly income of $690, the “spend down” amount is $510 / month ($690 – $180 = $510). Florida has a 1-month spend down. This means the senior must spend $510 / month in medical expenses in any given month before becoming income-eligible for Medicaid.

• Example 2:

In West Virginia, the MNIL is $200 / month for a single elderly applicant. The spend down period is 6 months. If the individual has $810 / month in income, the spend down is $3,660 ($810 – $200 = $610 x 6 months = $3,660). Once it has been met, the individual will be income-eligible for Medicaid for the remainder of the 6-month spend down period.

Some states, such as Illinois, New York, and Missouri, offer an alternative option to paying for medical expenses to meet one’s “spend down”. These states allow what is called a “pay-in spenddown”. This allows a senior to pay the spenddown amount directly to the state Medicaid agency each spend down period.

Which States Have a Medically Needy Pathway?

The states that allow the Medically Needy Pathway for seniors in one capacity or another include Arkansas, California, Connecticut, District of Columbia, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin.

The states that do not allow for a Medically Needy Pathway for seniors include Alabama, Alaska, Arizona, Colorado, Delaware, Idaho, Indiana, Mississippi, Nevada, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, and Wyoming.

What are Allowable Medical Expenses?

In all states, Medicare payments and other health insurance premiums are allowable ways to “spend down” one’s income on medical expenses. Other allowable expenses are state-specific and may include physician / dental bills, hospital services, prescription drugs, medical supplies / equipment prescribed by one’s doctor, nursing home services, eyeglasses, in-home medical care / personal care, therapies (physical, speech, occupational), transportation to / from medical care, and chiropractor services.

Proof of medical expenses must be provided and may include receipts, medical bills, money orders, or cancelled checks. Even if the Medicaid applicant was not the one to pay a medical bill, say an adult child or friend paid the bill, it may be possible to use the receipt towards one’s spend down. In some cases, medical expenses accrued by one’s non-applicant spouse may be applied to one’s spend down. Medical bills do not necessarily have to be paid for one to meet their “spend down”.

Medically Needy Income Limits by State

The income limits for the Medically Needy Pathway are generally very low, which means an applicant generally must have a significant amount of medical expenses to qualify via this pathway. All of the states listed below allow this pathway for the Regular State Plan Medicaid program (Aged, Blind and Disabled – ABD). The income limits listed below are relevant for this program.

In states that offer a Medically Needy Pathway to Nursing Home Medicaid, an applicant is generally not able to retain a monthly income up to the level listed below. This is because with just a few exceptions, such as a Personal Needs Allowance, which varies by state (approx. $30 – $200), all of one’s monthly income goes to the nursing home towards the cost of care.

Medically Needy Asset Limits by State

Medicaid also has an asset (resource) limit. While some states utilize the same asset limits as with their other Medicaid programs, other states set specific medically needy resource levels. Specific to Nursing Home Medicaid and HCBS Medicaid Waivers, there is a 60-month Look Back Period. This prohibits applicants from transferring assets for less than fair market value. Violations result in a Penalty Period of Medicaid ineligibility.