Understanding Medicaid: A Comprehensive Guide

If you’re young, healthy, and employed, you likely receive your health insurance through your employer or your spouse’s employer. However, for more vulnerable populations, the government offers affordable, subsidized health care coverage. One such program is Medicaid, a crucial resource for millions of Americans.

How Does Medicaid Work?

Health insurance and medical care can be prohibitively expensive, leaving many Americans without coverage or burdened by medical debt. Medicaid exists to provide free or low-cost health care for eligible children and adults with limited income, disabilities, or certain circumstances who can’t otherwise afford it. It’s funded jointly by the federal government and the states, and it’s administered at the state level, meaning programs and eligibility requirements can vary from state to state.

Who Qualifies for Medicaid?

Medicaid has strict eligibility requirements since it’s intended only for those with limited resources. Under federal law, the following groups are eligible for Medicaid coverage:

• Low-income families
• Qualified pregnant women and children
• People who receive Supplemental Security Income (SSI)
• People with disabilities

Additionally, states may offer coverage to other groups, including:

• Children in foster care who aren’t otherwise eligible for health coverage
• People receiving home and community-based services

You must either be a U.S. citizen or national or have an eligible immigration status. You can complete an online screening on HealthCare.gov to find out if you’re eligible for Medicaid.

What Is the Income Limit to Qualify for Medicaid?

The federal poverty level (FPL) is used to calculate Medicaid eligibility, though most states use an optional higher threshold to extend coverage to more people. If you’re in a state that has expanded Medicaid, you can qualify for coverage based on income alone. Your household income must be under 138% of the FPL.

Here are the annual income limits by household size for states that have expanded Medicaid:

Note: Income limits are higher in Alaska and Hawaii.

Some states may offer Medicaid to individuals with significant health conditions under a “medically needy program,” even if their income is too high to otherwise qualify. If your state hasn’t expanded Medicaid, rules vary and may be determined based on factors such as household income, family size, family status (such as if there’s a pregnancy), your age, and any disabilities. The only way to determine if you will qualify in these states is to apply.

What Money Does the Government Consider as Income?

To determine Medicaid eligibility, the government uses modified adjusted gross income (MAGI). To calculate your MAGI, add up the following for all tax-paying members of your household:

• Your federal taxable wages, tips, and/or self-employment income
• Nontaxable Social Security benefits
• Retirement or pension income
• Capital gains, investment income (including tax-exempt interest), and rental and royalty income
• Unemployment compensation
• Untaxed foreign income

MAGI doesn’t include Supplemental Security Income, gifts, workers’ compensation, veterans’ disability payments, or child support.

Medicaid vs. Medicare: What’s the Difference?

Medicaid is a joint state and federal program intended to provide care for specific populations: children and adults who need assistance obtaining health care coverage, primarily due to low income or disabilities. Medicaid coverage is either free or low-cost; there are no enrollment fees or premiums, and usually no fees for covered medical expenses. However, there may be small copays for certain costs. It may also offer benefits not covered by Medicare, such as personal care services and nursing home care. Since it’s administered by states, eligibility and coverage can vary.

Medicare, on the other hand, is solely a federal program. Medicare is administered by the federal government with the same coverage across states. Rather than being available only to those with limited resources, Medicare is available to all Americans ages 65 and older. It’s also available to some younger people with specific conditions or disabilities. Unlike Medicaid, the Medicare health insurance program requires participants to pay premiums, deductibles, and copays. Medicare is also different in that it’s split up into four parts which offer different types of coverage (for example, one part is for hospital coverage, while another is for prescription drug coverage).

Some Americans qualify for dual eligibility, meaning they can enroll in both Medicare and Medicaid. For example, an American over 65 who also has a disability or low income may qualify for both Medicare and Medicaid. The two plans work together to provide more extensive coverage. This is especially useful since Medicaid covers some costs Medicare won’t. If you have both types of coverage, Medicare pays first and then Medicaid pays any remaining costs it can cover. When you’re eligible for both, you also get access to some special plans that can cost less money.

How to Apply for Medicaid

Medicaid is run at the state level, so you’ll have to apply for Medicaid through your state government’s Medicaid agency. You can find the links and contact information for your state on Medicaid.gov. You may be able to apply online, by phone, or by mail.

Alternatively, you can apply through the federal health insurance marketplace at HealthCare.gov. Select “yes” when you’re asked if you’d like to get help paying for coverage. If you or someone in your household is likely eligible for Medicaid, the website will send the application to your state. Your state’s Medicaid agency will review your eligibility and make a final decision. You can call the marketplace instead at 800-318-2596, or for TTY users, 855-889-4325.

One of the benefits of applying through the federal marketplace is even if your income is considered too high for Medicaid, you’ll find out if you’re eligible for other low-cost options. If your income is just above the Medicaid threshold, for example, it’s likely you can qualify for private health insurance with low premiums and costs through the marketplace.

The Bottom Line

Medicaid can be confusing, especially since eligibility and coverage vary by state. But for those who qualify, it can be a literal lifesaver, providing access to health care that may otherwise be unaffordable.

Even if you’re not sure that you’ll qualify, there’s no harm in applying for Medicaid to find out, especially since you might be eligible for other money-saving programs. This may be particularly worth exploring if you’re struggling with medical bills or debt, which can wreck your budget and have negative impacts on your credit score.

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