Medicaid and Work Incentives for People with Disabilities: Background and Issues

The potential loss of health benefits under Medicare and Medicaid is a deterrent to people with disabilities entering or re-entering the labor force. Although people with disabilities are generally not "sick," they often have conditions that require greater than average use of medical and long-term care services. To address this problem, Medicaid includes several mandatory and optional provisions, including ones from the Balanced Budget Act of 1997 and the Ticket to Work and Work Incentives Improvement Act, that allow people with disabilities to work and retain coverage.

This paper describes the Medicaid work incentives and how they are being implemented at the state level. It explores the major issues involving Medicaid and work incentives, including the state fiscal crises, horizontal equity across states and groups, coverage of needed services, defining disability, and the interaction between Medicaid and Social Security Disability Insurance and Medicare. In addition, the article also analyzes more technical design issues related to the Ticket to Work and Work Incentives Improvement Act work incentives, including definition of employment, age restrictions, and use of premiums.