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Jacques Chambers, CLU, Benefits Consultant

Medicaid is one of the least understood of any government health programs. It can be a bureaucratic nightmare, which is not surprising when the federal government and each state work together to create health insurance. While Medicaid provides healthcare coverage for many, there are many more who are eligible for and would derive some benefit from Medicaid could they but receive it.

Although not a simple process to obtain, Medicaid offers a broad range of coverage. Medicaid is one of the best supplements to Medicare coverage. Medicaid is one of the country’s leading payers of prescription drugs. Medicaid pays more for nursing home care than all the Long Term Care insurance products put together. Medicaid will even pay private health insurance premiums.

A lot of the confusion starts with the fact that, although Medicaid was created under the federal Social Security Act, there are really 50 separate Medicaid programs. Implementation of Medicaid is the responsibility of each state. In some states, it’s not even called Medicaid, e.g., Medi-Cal in California, TennCare in Tennessee.

While the federal government provides some basic requirements for determining eligibility for coverage and benefits to be provided, each state can expand Medicaid beyond that level. As a result of this flexibility each state’s Medicaid program covers a slightly different group of people with a slightly different set of benefits.


Medicaid was created to be the payer of last resort for people who had no other means of receiving healthcare. It covers anyone over age 65 and anyone who is disabled according to Social Security’s standards if they also meet Medicaid’s financial requirements. Unlike Medicare, Medicaid eligibility is based on need.

Others also may be eligible for Medicaid due to single parent family status or special children’s programs; however, this article will focus on Medicaid for persons who are disabled.

The financial requirements for Medicaid are very similar to those for Supplemental Security Income (SSI). In fact, in most states, if you qualify for SSI benefits, you will automatically get Medicaid. Those states are: Alabama, Arizona, Arkansas, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Maryland, Michigan, Mississippi, Montana, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

Persons in those states who don’t qualify for SSI or persons living in other states must apply for Medicaid separately, at their state’s Department of Health Services.

In all states, the maximum resources or assets you can have are the same as for SSI, $2,000 for an individual and $3,000 for a married couple. As with SSI, they do not count the residence you live in, one vehicle, or most personal property such as clothing and furniture.

The income limit for eligibility varies by state. In some states, you are not eligible for Medicaid if your income is higher than the federal SSI level ($552 single; $829 couple in 2003). A small number of states have even lower income limits.

Other states have higher income limits. Some states will cover people regardless of the size of their income, provided their medical bills are high enough to cause them to be what is called “medically needy.” In those states, Medicaid will pick up all medical bills above a certain level, based on income.

To summarize, in order to be eligible for Medicaid, you must:

  • Be declared disabled according to Social Security’s definition of disability; and,
  • Have less than $2,000 ($3,000 for couples) in countable assets; and,
  • Have an income that is less than the income limit in your state.

But these rules may not apply if Medicaid is needed to pay nursing home bills (See below).


The federal government requires at a minimum that the following services must be provided to Medicaid beneficiaries without charge provided they are “medically necessary”:

  • Inpatient and out-patient hospital services
  • Physician services
  • Medical and surgical dental services
  • Nursing facility services for individuals aged 21 or older
  • Home health care for people eligible for nursing facility services
  • Family planning services and supplies
  • Clinic treatment
  • Laboratory and x-ray services
  • Pediatric and family nurse practitioner services
  • Nurse-midwife services, to the extent authorized under state law; and
  • Early and periodic screening, diagnosis, and treatment services for people under age 21.

In addition to those required benefits states may opt to offer additional benefits. For example, at the present time, every state’s Medicaid program provides coverage for out-patient prescription medications.

Other optional benefits covered in most states include: optometrist services and eyeglasses, medical transportation, physical therapy, prosthetic devices, dental services and dentures.

Other benefits covered to varying degrees in a few states include: chiropractic care, podiatry, preventive care, and speech and occupational therapy.

As you can see, the benefits provided under Medicaid are fairly broad. In addition, persons covered under Medicaid programs do not pay anything towards those services, no deductible, no percentage of the bill. Only certain optional benefits will require a co-payment and virtually every state waives those for Medicaid beneficiaries with very low incomes.

The quality of care can vary widely under Medicaid. Each state determines the amount it will pay medical providers for their services. In some states the reimbursement level is sufficient enough that many providers will participate. In other states, the reimbursement level is so low that most private physicians will not accept a patient whose only coverage is Medicaid, and Medicaid beneficiaries must seek their medical care at public health clinics, free clinics, government hospitals, and non-profit medical facilities.

Medicaid HMO’s

As is popular in private health insurance, many states are looking to Managed Care Programs, usually Health Maintenance Organizations (HMOs), to provide care under Medicaid. In some states, the only option under Medicaid is an HMO-type plan, which limits your choice of medical providers and requires you to let a Primary Care Physician direct all of your care.

Some states require HMOs for certain Medicaid beneficiaries, such as single parents and children’s programs, but permit those who are disabled to remain under a fee-for-service program if they choose. If HMOs prove to be an efficient way to provide care and control costs, you may expect to see more and more states move exclusively to them.

Nursing Home (Custodial) Care

“Custodial care” is medical care, usually in a special facility such as a nursing home, where a person requires assistance and care supervised by a medical staff, but no aggressive treatment is sought and no recovery is anticipated. In addition to a housing facility, custodial care may be provided in the home through home health agencies.

Custodial care usually involves some basic medical care, but primarily the patient requires assistance with activities of daily living, such as bathing, eating, moving from bed, etc. Insurance plans and Medicare do not provide coverage for custodial care for any extended period of time. What custodial care they provide is always short term, such as under a hospice benefit.

Long Term Care insurance which is designed to cover these charges is still relatively new on the market and can be very expensive to purchase. Medicaid does cover custodial care expenses and will provide coverage for years, if necessary.

Many people, especially middle income earners, do not think of Medicaid as an option for them. However, when it comes to nursing home coverage, Medicaid can be very generous in providing coverage, especially in the situation where one member of a married couple requires custodial care in a facility, while the healthy spouse seeks to remain in the family home.

Medicaid will cover the nursing home charges, and will still allow the healthy spouse to stay at home to receive the lion’s share of the couple’s income and have assets of as high as $90,000 not counting the family home, or higher.

These rules are very complicated so if you are considering using Medicaid for this purpose, I strongly encourage you to seek the advice of an attorney who specializes in Elder Law and knows Medicaid law.

Medicaid and Medicare

Medicaid is such an effective supplement to Medicare coverage that insurance agents are routinely prohibited from selling a Medigap policy to someone who has both.

In addition to paying for prescription drugs, custodial care, and other services that Medicare does not cover, there are federal programs which are not part of Medicaid itself but are administered by Medicaid offices. These plans will pay Medicare premiums and some will pick up Medicare deductibles and co-insurance:

  • Qualified Medicare Beneficiary (QMB);
  • Special Low Income Medicare Beneficiary (SLIMB);
  • Qualified Individual 1 (QI1); and,
  • Qualified Individual 2 (QI2).

The income and resource limits for these programs vary and are higher than those for Medicaid. If you have Medicare, you may wish to explore these programs even if you do not qualify for Medicaid itself.

Medicaid and Other Health Insurance

Most states offer another benefit to those disabled persons who become eligible for Medicaid but also have some form of private health insurance. For a person incurring high medical bills, it is much cheaper for Medicaid to take over payment of the insurance premiums than it would be to pay the bills if the insurance lapsed.

Because of this cost effectiveness, most Medicaid plans have a Health Insurance Premium Payment program which will pay health insurance premiums. Each state sets its own rules for eligibility in this program.

Finding out about your state’s Medicaid coverage Because of the variety of Medicaid rules in each state, it is impossible to know whether you would be eligible for or would benefit from Medicaid coverage in your own state. Before dismissing it completely, however, you should explore more about your state’s Medicaid coverage.

The best place to start is at the website of the Centers for Medicare and Medicaid Services, the federal agency that oversees those programs. It is located at It will give you information about Medicaid in general as well provide contact information for each state’s Medicaid offices.

Also, most states have a Medicaid website as part of the state website; however, not all give helpful information on the eligibility and application process.

One of the best resources for information on your state’s Medicaid program is local non-profit organizations whose clientele utilize Medicaid and Medicare. Some states have advocacy organizations specifically for these government programs. In California, for example, HICAP ( provides assistance to people concerning Medicaid. Some web-searching and inquiries among disabled groups should guide you to the information you need.

Confused about applying for disability? Click here

[Jacques Chambers, CLU, and his company, Chambers Benefits Consulting, have over 35 years of experience in health, life and disability insurance and Social Security disability benefits. For the past twelve years, he has been assisting people with their rights, problems, and other issues concerning benefits and disability. He can be reached at or through his website at:]

Copyright March 2003 – AttorneyMind - All Rights Reserved. Permission to reprint is granted and encouraged with credit to the AttorneyMind.

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