Medicaid is a federally subsidized health insurance program run by state governments. Its mission is to provide basic essential health services for the poor, indigent and children of low-income families. Each state is free to set up its own guidelines for eligibility and design its own programs, within federal guidelines.
Because states have broad leeway in determining their own eligibility guidelines, there is no set national eligibility criteria for Medicaid. All states set at least some income limitations, which vary by the size of the family, the age or ages of any children involved and the nature of the program. States also set a cap on the amount of assets Medicaid applicants can own, personally. Certain kinds of assets, such as a limited amount of home equity, however, are exempt from state asset restrictions. Each state has its own rules.
Federal Poverty Line
Typically, states will define eligibilty for medicaid programs using the federal poverty line as a reference point. The federal poverty line is an estimate of basic subsistence level living expenses required to sustain a family of a given size. For 2011, the federal poverty line for a family of three living in the 48 contiguous United States was $18,530. Alaska and Hawaii have higher poverty lines, reflecting the higher cost of living in these states.
Programs for Children
The states frequently provide generous access to Medicaid benefits for pregnant mothers and mothers of very young children, regardless of asset levels. State officials will frequently allow Medicaid benefits for children below the age of five with income levels above 200 percent of the federal poverty line. As children get older, it becomes more difficult for the family to qualify. Some programs require the family income remain below 120 or 130 percent of the poverty line.
Nursing Home Programs for the Elderly
Medicaid also provides long-term care, custodial care and nursing home services for the elderly. However, prior to qualifying for Medicaid, the elderly must first spend their own assets down to $2,000 to $6,000, depending on the state and their marital assets. Total income allowable from all sources is severely restricted and is generally less than $2,000 per month. However, if only one spouse is in a nursing home, the remaining spouse is frequently allowed a higher income and allowed to retain more assets. Thorough legal planning prior to the need for Medicaid services may allow those affected to shield more assets through the use of special needs trusts, non-countable assets and Medicaid qualified annuities.