chronic illnesses and serious disabilities. 10 Consistent with Title XIX of the Social Security Act, federal law establishes requirements for states that participate in Medicaid, which all states now do. Among other services, states must cover

  • children ages 6 to 18 with family incomes at or below 100 percent of the federal poverty level (in 2001, $14,630 for a family of three) (to be fully phased in as of 2002) and

  • children under age 6 and pregnant women with family incomes at or below 133 percent of the federal poverty level.

    About 80 percent of Medicaid-enrolled children are covered under the mandatory categories. The remainder, whose families have higher incomes, are covered at the discretion of states. The optional coverage categories for children include

  • infants up to age 1 and pregnant women, who are not covered under the mandatory rules and whose family income is no more than 185 percent of the federal poverty level (with the specific percentage set by each state),

  • children under age 21 who meet the income and resources requirements for Aid to Families with Dependent Children (AFDC) that were in effect in their state on July 16, 1996, and

  • children under age 18 who qualify under complicated federal and state rules as “medically needy.”

In general, the option for “medically needy” children allows a state to extend Medicaid coverage when the family’s income is too high to qualify otherwise but the child has very high medical expenses. The family “spends down” to eligibility because the child’s medical expenses reduce the family’s income below the state Medicaid maximum. If a state has a medically needy program, it must include certain children under age 18 and pregnant women who would otherwise be eligible as “categorically needy” under the optional coverage requirements.11

Overall, children comprise just over half of Medicaid enrollees, roughly 21 million out of 40 million total in 1998. Reflecting their generally good


Unless otherwise indicated, data in this section come from HCFA/CMS (2000b; 2001d).


States may also allow families to establish eligibility as medically needy by paying monthly premiums to the state in an amount equal to the difference between family income (reduced by unpaid expenses, if any, incurred for medical care in previous months) and the income eligibility standard (HCFA/CMS, 1997;

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