Mandatory Eligibility

• The federal government requires that certain groups be eligible for Medicaid in order for the states to obtain Medicaid funding. For example, SSI (Supplemental Security Income) recipients and children born to Medicaid-eligible pregnant women, as well as certain Medicare recipients, are covered in this category.
  
  

Optional Eligibility

• In addition to the mandatory coverage groups, states may also optionally provide Medicaid to other groups, sometimes referred to as "categorically needy." States that optionally provide coverage to individuals in the categorically needy group receive matching funds from the federal government. Examples include certain low-income children and select old, blind or disabled individuals with income exceeding the threshold for mandatory coverage but below poverty level.
  
  

Medically Needy

• States may also employ a "medically needy" program to provide Medicaid to additional persons with income in excess of that allowed under the mandatory or optional coverage groups. Under this plan, Medicaid recipients may spend their excess income on medical expenses until their income is reduced to the level that qualifies for the state's Medicaid program.