Medicaid Rules Related to Asset Tests
Some states have asked to use an “asset test”, in addition to income, to determine Medicaid eligibility for non-senior, non-disabled adults. For most Medicaid applicants, federal law requires all states to base Medicaid eligibility on income alone, using a formula called “Modified Adjusted Gross Income” (MAGI) that is consistent across states. Creating a national income standard tied to how people report income on their taxes has greatly simplified the process of determining eligibility for Medicaid, so that the great majority of applicants can apply online and have their eligibility determined electronically without submitting paper documents. The move to a “MAGI” standard was part of the Affordable Care Act, and it is one of the most important and under-appreciated reasons that the number of uninsured Americans has decreased dramatically in the last four years.
Prior to the Affordable Care Act (ACA), in addition to income, states could use asset tests in making Medicaid eligibility determinations. Asset levels and which assets were counted varied from state to state, and adjudications of assets involved laborious paper submission and review. Congress passed the MAGI requirement as part of the ACA to support the Congressional objective of establishing a set of comprehensive, consistent and simple-to-administer coverage options across states.
Note: Under the ACA states can still use asset tests to determine Medicaid eligibility for seniors, (the vast majority of whom also have Medicare coverage) and people with disabilities.
Asset Tests Defined
Prior to the ACA, states were allowed to base Medicaid eligibility on both individual income and assets. Asset tests—which assets were counted and at what levels—varied by state. For example, some counted vehicles that were over a certain value, others did not count the first vehicle, values counted in savings accounts varied, etc.
Arguments against asset tests
Federal law requires states to base Medicaid eligibility on income alone for certain populations, and that requirement cannot be waived by the Secretary of HHS. Medicaid law clearly requires that states use MAGI to determine eligibility for most non-senior, non-disabled adults. Supporting sections of Medicaid law are as follows:
Social Security Act section 1902 (e)(14)(A), under the heading “Income Determined Using Modified Gross Income” states:
"Notwithstanding subsection (r) or any other provision of this subchapter, except as provided in subparagraph (D), for purposes of determining income eligibility for medical assistance under the State plan or under any waiver of such plan and for any other purpose applicable under the plan or waiver for which a determination of income is required, including with respect to the imposition of premiums and cost - sharing, a State shall use the modified adjusted gross income of an individual and, in the case of an individual in a family greater than 1, the household income of such family [emphasis added]."
The exceptions to the requirement that states use Modified Adjusted Gross Income (MAGI) standards to determine eligibility, outlined in subparagraph D include individuals who are qualifying for Medicaid as medically needy, because of a disability and those 65 and older. The exceptions do not broadly include non-senior, non-disabled adults.
- Social Security Act section 1902 (e)(14)(C), under the subheading “No asset tests,” states:
A State shall not apply any assets or resources test for purposes of determining eligibility for medical assistance under the State plan or under a waiver of the plan [emphasis added].
- Section 1902 (e)(14)(F) further clarifies that the Secretary cannot waive the requirement that a state use Modified Adjusted Income for eligibility determinations, including its prohibition on asset tests. The subheading, “Limitations on Secretarial Authority,” states: The Secretary shall not waive compliance with the requirements of this paragraph except to the extent necessary to permit a State to coordinate eligibility requirements for dual eligible individuals (as defined in section 1915(h)(2)(B) under the State plan or under a waiver of the plan and under title XVIII and individuals who require the level of care provided in a hospital, a nursing facility, or an intermediate care facility for the mentally retarded.
There is no demonstration purpose served by reinstating asset tests. For decades prior to the passage of the Affordable Care Act, asset tests were part of the Medicaid eligibility determination process. Copious data have shown the impact of using and omitting asset tests. Based on decades of experience, Congress chose to eliminate Medicaid’s asset test for most enrollees. Given the decades of experience with asset tests, there is no demonstration purpose that could possibly be served by reinstating an asset test.
Asset tests do not save states money. Even before the ACA eliminated asset tests for most Medicaid applicants, several states abandoned asset tests and based eligibility on income alone. Those states generally found that eliminating asset tests reduced administrative costs, simplified work flow for Medicaid staff, made it easier for individuals and families to enroll in coverage, and was positive for state administrators and enrollees. Experience of states that eliminated asset tests pre-ACA shows that removing asset tests from the eligibility process streamlines eligibility determinations and saves in administrative costs.