Many people with disabilities need personal care services to support their full participation in the labor force and community. Yet personal care services are generally not covered by employer-based health insurance, Marketplace plans, or Medicare. Medicaid is the only major source of health insurance that includes coverage of personal care services and other long-term services and supports, which can be critical for persons with disabilities. The Medicaid program can also provide such services in home and community-based settings rather than institutional settings, which is key to supporting the employment of workers with disabilities. However, Medicaid income and asset eligibility thresholds mean that some persons with disabilities who are employed may not qualify.

Medicaid Buy-In (MBI) programs for working people with disabilities were first established following legislation passed by Congress in the late 1990s. The legislation aimed to encourage employment among adults with disabilities by allowing them to maintain Medicaid coverage despite increased earnings. MBI programs incentivize work and protect against a loss of long-term services and supports benefits. In many states, current eligibility restrictions based on low income and asset requirements limit access to these programs, while some people with disabilities limit their work hours and earnings to avoid losing eligibility for vital medical services.

In this report, we estimate the increased enrollment and the additional costs and savings in 2025, at both the federal and state levels, that would result if all states eliminated the income and asset thresholds that prevent more working persons with disabilities from enrolling in Medicaid.

Why This Matters

States have the option to expand eligibility for MBI programs for working adults with disabilities, and more states are considering this option. Our analysis informs states’ decisionmaking by estimating how many people would benefit from an expansion and what the costs and savings would involve.

What We Found

• We find that 218,000 people would newly enroll in Medicaid under such a program. New enrollees would come from metropolitan and rural areas of the country and would represent all races and ethnicities. Enrollment would increase in every state.
• We also estimate that new enrollees would see increases in taxable wages of $947 per year at the median and $1,720 per year on average. Wage increases represent increased hours of work, promotions, and increased opportunities for people with disabilities.
• Net total spending for the federal government would amount to $311 million in 2025, which represents offsetting savings of about two-thirds of the gross cost. While new federal spending would occur in Medicaid ($838 million) and Medicare ($46 million) and offsetting savings results from reductions in Supplemental Security Income ($219 million), increased revenue from income and payroll taxes ($156 million), reductions in premium tax credits ($148 million), SNAP ($28 million), and uncompensated care ($21 million).
• Net total spending for state governments would amount to $516 million in 2025, which includes offsetting savings of about 5 percent of the gross cost since there are fewer offsets at the state level. New state funding for Medicaid ($546 million) would be offset by reductions in uncompensated care ($13 million).

How We Did It

We produced our estimates using the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM), a detailed microsimulation model of the health care system designed to estimate the cost and coverage effects of proposed health care policy options. The model simulates household and employer decisions and models the way changes in one insurance market interact with changes in other markets. We start with HIPSM’s baseline of health coverage and costs under current law in 2025, and we identify persons with disabilities in our model using the variables captured by the American Community Survey, such as functional limitations. We first identify people in HIPSM who would newly gain eligibility for the MBI under this proposal, apply each state’s current MBI eligibility criteria, and then apply the expanded national eligibility criteria.