Medicaid medically needy programs allow states the option to expand Medicaid coverage to people with high medical expenses and who otherwise would be ineligible due to income or resource limits. To qualify, individuals “spend down” into Medicaid coverage by paying out-of-pocket medical expenses to lower their income to a predetermined level.
Currently, 33 states and the District of Columbia operate medically needy programs. In 2003, more than 3.4 million people – 6.3 percent of the Medicaid population – received coverage through a medically needy program at an annual cost of $27 billion — 9 percent of total Medicaid expenditures. These programs also allow states to expand Medicaid benefits to certain populations otherwise neligible for Medicaid, notably young adults ages 19 to 21.