New Medicaid rule allows expanded health coverage

The Department of Health and Human Services published new rules in the Federal Register to help more low-income Americans with high medical expenses gain healthcare coverage under Medicaid.

The change, which will allow states greater flexibility in determining Medicaid eligibility, will enable states to offer health coverage to low-income youth who are still in school or are making the transition to jobs, as well as to more parents leaving welfare for work. It may also help the elderly, people with disabilities and families with disabled children to obtain health coverage at home, instead of having to live in nursing care facilities.

The change addresses problems created by existing rules that limit Medicaid eligibility for certain individuals to extremely low income levels related to the levels used in the old Aid to Families with Dependent Children program, prior to welfare reform. The rule is aimed at assisting those individuals whose incomes are slightly above traditional Medicaid income limits, but who are strapped with significant medical bills.

Prior to this new regulation, under "medically needy" rules, a state could offer Medicaid coverage to such persons once they had spent so much of their income on medical bills that what was left over met the state's medically needy income standard. In more than 40% of the states, however, that standard is significantly below the poverty level, and Americans with high medical bills were often forced to keep their incomes low to qualify. Under the new rule, a state can disregard increased portions of a person's income, such as the income necessary to pay for food, clothing or housing, before determining whether the individual is eligible for Medicaid.

Help for the elderly

The new rule is of special significance for the elderly and people with disabilities. Under the old rules, people in institutions could qualify for Medicaid coverage at much higher income levels than if they lived in the community. This "institutional bias" has acted as a barrier to living in the community for many persons with disabilities. The change will allow states the flexibility to change their own rules so that the elderly and people with disabilities will not have to lose their health coverage if they move into a community setting.

"This new policy has important potential to open doors to community living for thousands of Americans who are able to live at home and do not want to be confined in nursing homes," said HHS Secretary Donna E. Shalala.

The policy change can also be used by states to help low-income people who have a disability participate in the work force and still retain health coverage under Medicaid, by allowing states to disregard certain earnings or other sources of income.

"All comments we received on the notice of proposed rule-making were very favorable," said Tim Westmoreland, director of the Center for Medicaid and State Operations in HHS's Health Care Financing Administration. "Such overwhelming support is just one indication of how important this change is to the states that already provide critical health coverage under Medicaid to millions of Americans." PR