The medically needy program gives states the option to provide Medicaid to people that have large medical expenditures and would be eligible for Medicaid through another category of coverage but have higher incomes.
To better understand the sentence above– let’s go back to the time before Medicaid expansion (or lets go to a state that didn’t expand coverage). Say a parent living in the state would isn’t eligible for Medicaid because the parent eligibility level is 51% of poverty and they make 70% of poverty. They get some severe cancer or get hit by a bus and require extensive coverage they would now would be eligible for Medicaid through the medically needy program. States set their own income level for the medically needy category too.
The program helps 2.8 million people (5% of the Medicaid program in 2009) but 11 perecnt of the cost ($36.7 billion). These medically needy are the most frail among us — the elderly and disabled.
It’s a difficult program to get into and requires extensive coverage.
The maintenance of effort rules that are still in effect prevent states from lowering the eligibility for medically needy categories for children, but they can lower the levels for adults. This would mean that some adults may qualify for Medicaid through the newly eligible population instead of the medically needy. This probably isn’t the program they want to be in because they probably need more specialized long-term care needs, but it could defray some of the costs from the state to the federal government- because the federal government pays 100% of the cost of the newly eligible population and never less than 90% in out years.