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1115 Waiver Element: Asset Tests

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. 

Asset tests should not be approved through an 1115 waivers, because they are not allowed by federal law.

States with an Asset Test Element

*Waiver Pending Approval


Update June 29, 2018: the Federal District Court for the District of Columbia vacated CMS’s approval of Kentucky’s waiver, halting implementation of work requirements in that state. See expanded details at the top of the current page.

Medicaid Waivers: Work Requirements and Beyond (Webinar video from January 31, 2018)

Update 2/1/2018: CMS approves Indiana waiver containing work requirements and lockout provisions. View our statement.

Update 1/24/2018: With CMS’s approval on January 12, Kentucky became the first state to get work requirements approved in its Medicaid program.

Update 1/12/2018: The Trump Administration announces guidance to state Medicaid directors allowing states to tie Medicaid eligibility to work status using 1115 waivers.

1115 Waiver Resources

Visit our Work Requirements Resource Page to see which states have work requirements and why we oppose this punitive policy. 

What CMS Did and Didn’t Approve in Arkansas’ Waiver—Both Tell Us A Lot

Work Requirements in Medicaid Waivers: These Aren’t About Work

Medicaid Waivers: Work Requirements and Beyond (Webinar video from January 31, 2018)

Six Reasons Work Requirements Are a Bad Idea for Medicaid

1115 Waiver Elements: What’s Been Approved?

Tools for Advocates

A waiver is a state request that the Secretary of Health and Human Services waive certain federal health care program requirements, usually in Medicaid (Section 1115 waivers) or the marketplaces (Section 1332). 

Contact Us

Our partners in the states are our best resource. If you learn about a waiver being developed in your state, please let us know. Contact Us