Medicaid Eligibility: Who Qualifies and What It Covers

A Program That Covers One in Five Americans—and Confuses Nearly All of Them

Medicaid enrolled approximately 92 million Americans as of early 2024, making it the single largest health insurance program in the United States by enrollment—larger than Medicare, larger than employer-sponsored coverage at any single company. Yet eligibility rules vary so dramatically by state that a family qualifying for full coverage in California may receive nothing in Texas. The program's complexity is not accidental; it reflects 60 years of federal-state negotiation, litigation, and political compromise layered onto a structure Congress designed in 1965 specifically to give states maximum flexibility.

Eligibility is not simply about income. The program's rules.

The Federal-State Funding Structure

Medicaid is jointly funded by the federal government and individual states, with the federal share determined by the Federal Medical Assistance Percentage (FMAP). The FMAP ranges from 50% in wealthier states (such as Connecticut and Massachusetts) to 77% in poorer states (such as Mississippi). In exchange for federal matching funds, states must comply with federal minimum standards for coverage and eligibility, but they retain broad authority to expand benefits beyond those minimums.

States administer the program under broad federal guidelines set by the Centers for Medicare & Medicaid Services (CMS). This means applying for Medicaid, understanding your benefits, and navigating appeals all happen at the state level, with state-specific rules, websites, and timelines.

Who Qualifies: The Mandatory and Optional Categories

Federal law requires states to cover certain mandatory eligibility groups; states may additionally cover optional groups if they choose. The mandatory groups include:

• Children under age 6 in families at or below 133% of the federal poverty level (FPL)
• Children ages 6–18 at or below 100% FPL
• Pregnant women at or below 133% FPL
• Parents and caretaker relatives meeting pre-ACA income thresholds
• Individuals receiving Supplemental Security Income (SSI)
• Certain Medicare beneficiaries with limited income (dual eligibles)

The 2024 federal poverty level is $15,060 for an individual and $31,200 for a family of four. States may use percentages of these figures to set income thresholds for different eligibility groups.

ACA Medicaid Expansion: The 138% Rule

The Affordable Care Act of 2010 originally required all states to expand Medicaid to adults under 65 with incomes at or below 138% of the FPL (approximately $20,782 for an individual in 2024). The Supreme Court's 2012 ruling in NFIB v. Sebelius made expansion optional, creating a patchwork of coverage across the country.

As of 2024, 40 states and the District of Columbia have adopted expansion. The ten non-expansion states—primarily in the South—leave an estimated 1.5 to 2 million adults in a "coverage gap": they earn too much for traditional Medicaid but too little to qualify for premium tax credits on the ACA exchanges (which begin at 100% FPL).

MAGI vs Non-MAGI Eligibility

The ACA introduced Modified Adjusted Gross Income (MAGI) as the standard income methodology for most Medicaid eligibility determinations, aligning Medicaid calculations with those used for premium tax credits. MAGI-based eligibility applies to children, pregnant women, parents, and the new adult expansion group. It does not use asset tests and does not count Social Security income differently for most groups.

Non-MAGI methodologies still apply to the elderly (65+), people with disabilities, and those seeking long-term care coverage. These groups are subject to both income and asset limits, which is where Medicaid planning—and controversy—enters the picture.

Long-Term Care: Asset Limits and the Five-Year Look-Back

Nursing home care costs an average of $95,000 to $105,000 per year in the United States. Medicaid is the primary payer for long-term custodial care for those who cannot afford it privately. To qualify, applicants must meet both income and asset limits—in most states, countable assets must be reduced to $2,000 or less for an individual (certain assets, including a primary home, personal vehicle, and household goods, are typically exempt).

Critically, Medicaid uses a five-year look-back period: any asset transfers made within 60 months of applying for long-term care Medicaid are scrutinized. Transfers made for less than fair market value trigger a penalty period during which Medicaid will not pay for nursing home care, calculated by dividing the transferred amount by the average monthly nursing home cost in the state. Proper planning requires working with an elder law attorney well in advance of need.

Spend-Down Programs

Some states offer "medically needy" programs for individuals whose income exceeds the Medicaid threshold but whose medical expenses bring their net income below the eligibility level. This is called a "spend-down." The individual must incur medical expenses equal to the spend-down amount in a defined period before Medicaid begins covering additional costs. Not all states offer spend-down programs, and rules vary significantly where they do exist.

CHIP: Coverage for Children Above Medicaid Thresholds

The Children's Health Insurance Program (CHIP) covers children in families with incomes too high for Medicaid but too low to afford private insurance—typically between 100% and 300% of the FPL, though some states set higher limits. CHIP is also jointly funded but at a higher federal matching rate. States operate CHIP either as an expansion of Medicaid, a separate program, or a combination. As of 2024, CHIP covers approximately 7 million children and provides low-cost or free coverage including doctor visits, immunizations, dental, and vision care.

What Medicaid Covers

Federal law mandates a set of minimum required services; states may add optional services at their discretion:

• Mandatory services: inpatient and outpatient hospital services, physician services, laboratory and radiology, home health services, nursing facility services for adults, early and periodic screening (EPSDT) for children, family planning
• Common optional services: prescription drugs, dental care, vision care, physical therapy, personal care services, home- and community-based waiver services

EPSDT (Early and Periodic Screening, Diagnostic, and Treatment) is particularly broad for children—it requires states to provide any medically necessary service to a child under 21, even if the service is not otherwise covered by the state's Medicaid plan. This makes Medicaid coverage for children substantially more comprehensive than adult coverage in most states.

This article is for informational purposes only and does not constitute legal or financial advice. Medicaid eligibility rules vary by state and change frequently. Consult your state Medicaid agency or a qualified benefits counselor for guidance specific to your situation.