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Issue Alert - 07-08-01

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Aug 10, 2007

Program Area:

Medicaid (MA)

Issue Summary:

Michigan Medicaid policies set the age limit for a “child” too low, which may result in unlawful denial of Medicaid, or unlawfully high deductibles, for parents and siblings of children ages 18-20 who are in school

Persons Affected:

Some parents (or non-parent caretaker relatives) and minor children who have been denied Medicaid or assigned a deductible, and who have a child or sibling in the home age 18-20 who is also attending school

For More Information:

Center for Civil Justice 320 S. Washington, 2nd Floor Saginaw, MI 48607 (989) 755-3120, (800)724-7441 Fax: (989) 755-3558 E-mail:

Michigan Poverty Law Program 611 Church Street, Suite 4A Ann Arbor, MI 48104-3000 (734) 998-6100 (734) 998-9125 Fax


Federal Medicaid law prohibits the state from using income budgeting rules or “methodologies” that are “more restrictive” than the related cash program rules (resulting in more denials of eligibility or higher deductibles).   Supplemental Security Income (SSI) methodologies must be used as the baseline for Medicaid categories covering persons with disabilities and seniors.   Aid to Families with Dependent Children (AFDC) methodologies - based on the AFDC State Plan and policy prior to July 16, 1996 -  are the baseline for Medicaid categories covering parents, children, and pregnant women.  See 42 USC 1396a(a)(10)(C)(i)(III), 1396a(r)(2) and 1396u-1(a); 42 CFR 435.601(d). 

Why the definition of a “child” is important in the Medicaid Program

Medicaid eligibility, and the monthly deductible that a Medicaid recipient must meet, are based on “budgeted” income of the individuals in the applicant’s Medicaid “group.”    When budgeting the group’s income, the needs of a “child” in the care of the applicant (or of another Medicaid group member, such as the applicant’s spouse, or the parent of a minor applicant) are taken into account through exclusions or deductions, to reflect that some of the applicant/group members’ income is not available to meet their own needs because it is used to meet the needs of the child. 

Michigan’s current policies for determining eligibility for several types of Medicaid categories (SSI-related Medicaid,  Healthy Kids, Caretaker Relative, and Group 2 Pregnancy-related Medicaid) do not take into account the needs of a child who has reached age 18, even if that child is a student.  Therefore, Michigan’s policies are more restrictive than the SSI and AFDC

methodologies, which take into account the needs of some children after they turn 18, if they are students, when calculating the Medicaid eligibility of other group members. 

How Michigan’s Medicaid Program Takes Into Account a Child’s Needs

For SSI-related Medicaid categories, Michigan takes into account the needs of a child (if the child does not receive SSI or FIP payments to meet the child’s needs) by deducting a portion of the applicant/group member’s income through an “allocation” of income for each child.  PEM 541 p. 1-2.   For the Healthy Kids, Caretaker Relative, and Group 2 Pregnant Medicaid categories, Michigan excludes a pro-rated “share” of the applicant/group member’s income for each child.  PEM 536 p. 3-4.

By using definitions of a “child” that are more restrictive than the definitions used in the related cash assistance programs, Michigan’s Medicaid policies count or “budget” more of a parent’s* income when determining their Medicaid eligibility and the eligibility of their minor children.  Some parents who would get a deduction or exclusion from income under SSI or AFDC rules do not get a deduction or exclusion under Michigan Medicaid policies.  As a result, some parents have a higher budgeted income under Michigan Medicaid policies, resulting in denial of Medicaid or a higher Medicaid deductible for them and their minor children.  (*Note:  The policies for these ADC-related rules also apply to non-parent “caretaker relatives” who are raising a child, but for simplicity, we will refer to them collectively as “parents” in this Issue Alert. )  

What's Happening?

Michigan’s definition of a “child” for purposes of Medicaid budgeting in the above noted categories conflicts with the federal definition of  a “child”.

The Federal Definition of a “child” for SSI-related Medicaid – under age 21 and regularly attending school, college, or vocational training

Under federal SSI regulations, a set amount of a parent’s income is “allocated” to each “ineligible child” living in the household who does not receive cash public assistance.  (Under SSI rules, an “ineligible child” is a child who is not eligible for SSI.)   SSI regulations use this “allocation” methodology to ensure that the portion of the parent’s income set aside for needs of a child is not considered when the SSI eligibility or payment amount is calculated for the parent or his/her minor children.   20 CFR 416.1160(c).  

Under federal SSI law, a “child” includes the applicant’s child as well as the child of any person whose income is being deemed (counted as available) to the applicant (e.g. the applicant’s spouse or parent).  An amount of the parent’s income must also be allocated to any child UP TO AGE 21 if the child is a student.  20 CFR 416.1160(d) & 416.1101.   A “student” includes someone who is regularly attending school, college, or training designed to prepare him or her for a paying job.  20 CFR 416.1856. Policies and procedures for determining who is regularly attending school, college or training is contained in the Social Security Administration’s Program Operating Manual System (POMS) SI 00501.020.

Michigan’s definition of “child” for SSI-related Medicaid budgeting allocations is  unlawfully limited to children under age 18

Under Michigan Medicaid policy, a parent’s income is allocated only for a child who is under age 18,   even if that child is a student.  PEM 541 p.1 & PEM 540., p.2.   No allowance is made for students who are ages 18, 19, and 20.   This lower age limit results in a “more restrictive methodology” for Medicaid, because state policy prevents parents of students age 18, 19, and 20, who should qualify for Medicaid or have a lower deductible under the methodology prescribed by the SSI regulations, from allocating  (excluding) a portion of their income to account for the needs of these older children.   Similarly, the minor siblings of students age 18,19, or 20 may be denied Medicaid or assigned a higher Medicaid deductible because their parent(s)’ budgeted income is higher under Medicaid policy than under the SSI methodology. Therefore, the Michigan policy violates federal law.  42 USC 1396a(a)(10)(C)(i)(III) & (r)(2);  42 CFR 435.601(d). 

Definition of a “child” for AFDC – under age 19, attending secondary school, and expected to graduate before turning 19

There is a similar problem with Michigan’s Healthy Kids, Caretaker Relative, and Group 2 Pregnant Medicaid income budgeting methodology, which is more restrictive than the policy used in Michigan’s pre-July 16, 1996 AFDC State Plan.  Under that AFDC plan, 18-year-olds who were attending secondary school and expected to graduate before they reach age 19 were included in the AFDC group as a “dependent child”, as was permitted by 42 USC 606(a) (1995).   Because these 18 year old students were included in the AFDC group, their needs were taken into account in determining their parents’/caretaker relatives’ eligibility and payment amount for the AFDC program.    Federal Medicaid law requires, therefore, that the needs of these 18 year old children must also be taken into account when evaluating their parents’/caretaker relatives’ Medicaid eligibility and deductible amounts.   Markva v Haveman 317 F3d 547, 554 (6th Cir. 2003). 

Michigan’s definition of “child” for Healthy Kids, Caretaker Relative, and Group 2 Pregnant Medicaid Unlawfully Limited to Under Age 18

Under the current Michigan Medicaid policy, however, only the needs of a child under age 18 will be considered (by excluding a pro-rata share of the parent’s income) when determining eligibility and the amount of deductibles in the Healthy Kids, Caretaker Relative, and Group 2 Pregnant Medicaid programs. By failing to include the needs of 18 year old students, the state is using a more restrictive methodology in violation of federal Medicaid law. 42 U.S.C. 1396a(a)(10)(C)(i)(III) &(r)(2),  1396u-1(a); 42 C.F.R. 435.601(d).   

Example of a parent affected by the unlawful policy:

Marco receives $1,000 per month in disability benefits and his wife, Gina earns $700 per month at her part time job.  Their daughter, Lydia, turned 18 in July but she is enrolled to attend the community college in September. Marco received notice that his Medicaid was ending and he would have a  $706 monthly deductible because of his income.  The caseworker says she must count all of Marco’s income now that Lydia has turned 18. 


If Lydia continued to be counted as a child, DHS would continue to deduct $311, as a child’s allocation for Lydia, from Marco’s income and he would continue to be eligible for full Medicaid under the ADCare category.


Example of a child affected by the unlawful policy:


Harry earns $2,700 per month and lives with his 15-year old son, Sam, and his18-year old daughter, Donna, who will be a senior in high school next year and will graduate before she turns 19.  Harry received notice, after Donna turned 18,  that Sam’s Healthy Kids Medicaid would be ending because they have too much income, and that Sam has a $2,068 monthly Medicaid deductible. 


Because DHS no longer counts Donna as a child, they no longer prorate a “share” of Harry’s income for her and that share is no longer excluded from Harry’s income when determining Sam’s Medicaid eligibility.  If Donna continued to be counted as a child when budgeting the income for Sam’s Medicaid group, DHS would deduct a $430 share from Harry’s budgeted income and Sam would continue to be eligible for Healthy Kids Medicaid.


What Should Advocates Do?

Be alert to families that include young adult students who may have been adversely affected by the Medicaid policies described above.


To screen for family members (including parents, kinship caregivers,  and siblings) who may have been adversely affected by the policies, ask:

1.     Have you recently been denied or terminated from Medicaid, OR

     Do you have a high Medicaid deductible or spenddown?

2.     Does your household include a student who is age 18, 19, or 20?

3.     Is that student your child OR

A relative for whom you have acted as a parent OR

Your sister or brother, if you are under age 18?


Do a Medicaid budget using the allocations or pro-rating that would apply if appropriate SSI or AFDC definitions of a child were used, to determine whether the individual would be eligible for Medicaid or have a lower deductible using the SSI or AFDC methodology.  Community organizations are encouraged to refer their clients who may be affected to their local legal services offices.  Any legal services advocate who has questions about the Medicaid income budgeting rules should call Lisa Ruby at the Michigan Poverty Law Program or  Jackie Doig at the Center for Civil Justice.  


If you have a client who may have been affected by these policies, contact the Center for Civil Justice (see the top of the Alert) for more information.

What Should Clients Do?

Seek legal advice if you 1) live together with a child or sibling age 18, 19, or 20 who is a student, and 2) you or someone else who is a parent, kinship caregiver, or a sibling of the 18-20 year old student has received notice you have been denied Medicaid, your Medicaid is being terminated, or you have been assigned a high Medicaid deductible. See “Finding Legal Help” below.


Be sure to tell your legal advocate if you have a child, brother, or sister living with you who is a young adult (age 18-20) and is still in school.  You may want to tell the advocate about this issue alert.

Finding Help

Most legal aid and legal services offices handle these types of cases, and they do not charge a fee. You can locate various sources of legal and related services, including the free legal aid office that serves your county, at You can also look in the yellow pages under "attorneys" or call the toll-free lawyer referral number, (800) 968-0738.