What Is the Family-Based Deeming Exception in Medicaid?

The family-based deeming exception in Medicaid is a set of federal options that let states cover a child with a significant disability based on the child’s own circumstances, ignoring the parents’ income and resources. Two pathways carry most of this work: the Katie Beckett option under Section 134 of the Tax Equity and Fiscal Responsibility Act of 1982, and the Family Opportunity Act of 2005. Both are optional for states, and most states have adopted at least one.

Why Parental Income Normally Blocks the Child

When a child under 18 lives at home with parents who don’t receive Supplemental Security Income, the Social Security Administration treats a portion of the parents’ income and resources as if the child had access to them. That process is called deeming, and it also reaches stepparents in the home.¹ If the deemed total pushes the child past SSI limits, the child loses SSI, and in most states losing SSI means losing automatic Medicaid.² A moderate salary can disqualify a child whose medical bills run into the tens of thousands. The deeming exceptions exist to solve that problem.

The Katie Beckett (TEFRA) Pathway

The main route is codified at 42 U.S.C. § 1396a(e)(3). A state that adopts this option can cover a child who meets four conditions:

The child is 18 or younger and meets the SSI definition of disability.
The child requires a level of care normally provided in a hospital, nursing facility, or intermediate care facility.
The state determines it’s appropriate to provide that care outside an institution.
The estimated Medicaid cost of home care doesn’t exceed what institutional care would cost.³

The statute treats a qualifying child as if they were already receiving SSI. Because an SSI recipient’s eligibility stands on its own, the parents’ income and resources drop out of the calculation.³ Where the state adopts this option through a state plan amendment, coverage is an entitlement for every child who qualifies. The state cannot impose a waitlist or cap enrollment. Waiver-based versions of the program, by contrast, can do both.

The Family Opportunity Act Pathway

Congress added a second route in 2005 at Section 1902(cc) of the Social Security Act. It’s sometimes called a Medicaid buy-in for children with disabilities, and it works differently from Katie Beckett in two ways. The child doesn’t have to require an institutional level of care, and the family pays income-scaled premiums.

States that adopt this option can extend Medicaid to children with disabilities in families earning up to 300 percent of the federal poverty level. For 2026, that’s $99,000 for a family of four.⁴ States can set higher thresholds, but the federal government won’t share the cost above 300 percent.⁵ There is no resource test, so family savings don’t count.

States that adopt this option must require parents to enroll in employer-sponsored family coverage when it’s available and the employer pays at least 50 percent of the premium.⁵ Medicaid then wraps around the employer plan, covering what the private plan doesn’t. The state may pay part or all of the employer premium as a medical assistance expense. Federal rules cap total premiums and cost-sharing at 5 percent of family income up to 200 percent FPL and 7.5 percent between 200 and 300 percent FPL.⁶

Who Qualifies

The Disability Standard

Both pathways use the SSI definition of disability. For children under 18, the standard is a physical or mental condition causing marked and severe functional limitations, expected to result in death or last at least 12 months.⁷ The Social Security Administration makes the determination through state Disability Determination Services offices, which review medical records and may order consultative examinations.

Age

The Katie Beckett statute applies to children 18 and younger.³ The Family Opportunity Act uses the child SSI disability standard, which generally means under 18. Some states extend coverage past 18 through separate waiver programs, but the core federal pathways are for minors.

Citizenship and Residency

The child must be a resident of the state where they’re applying and must be a U.S. citizen or a qualified non-citizen such as a lawful permanent resident.⁸

The Child’s Own Income and Resources

With parental deeming removed, only what the child holds in their own name matters. For Katie Beckett, the child’s countable resources cannot exceed $2,000, and countable income cannot exceed the SSI federal benefit rate, which is $994 per month in 2026.⁹¹⁰ Most children with disabilities have little independent income or savings, so these limits are rarely the barrier. The Family Opportunity Act has no resource test.

The Institutional Level of Care Requirement

This is the requirement that trips up the most families on the Katie Beckett path. The child must need a level of care ordinarily provided in a hospital, nursing facility, or intermediate care facility. The child does not have to be hospitalized first, though prior institutional stays can make the documentation easier. A medical professional has to certify that without the services the child receives at home, institutional placement would be medically necessary.

Each state uses its own assessment tools. Common factors include daily hours of skilled nursing needed, dependence on medical technology such as ventilators or feeding tubes, the severity of behavioral or cognitive impairments requiring constant supervision, and the complexity of the medication regimen. The state must also confirm that home care is appropriate and that the projected home-based cost won’t exceed what institutional care would cost the state for that child.³

If a state reviewer decides your child’s needs fall short of the institutional threshold, that denial is appealable. Getting the determination right usually takes detailed documentation from the full treatment team, not a single letter from the pediatrician.

What Coverage the Child Gets

EPSDT

Children under 21 on Medicaid are entitled to Early and Periodic Screening, Diagnostic, and Treatment services. States must provide any Medicaid-coverable service that is medically necessary to correct or improve the child’s condition, even if the state doesn’t otherwise cover that service for adults.¹¹ For a child with a disability, this is often where the coverage pays off: specialized wheelchairs, behavioral therapy, private-duty nursing, and medically related orthodontic work all fall under EPSDT when medically necessary.

Standard Benefits and Home-Based Services

Beyond EPSDT, Medicaid covers physician visits, inpatient and outpatient hospital services, and lab work as mandatory benefits in every state. Physical therapy, occupational therapy, prescription drugs, and durable medical equipment are optional benefits that virtually every state covers.¹² Many children who qualify through Katie Beckett also access Home and Community-Based Services, covering personal care attendants, respite care, home modifications, and therapies delivered at home.¹³ HCBS programs vary by state and often carry their own enrollment caps and waitlists.

How Medicaid Works Alongside Private Insurance

If your child has private coverage through a parent’s employer, Medicaid doesn’t replace it. Federal law makes Medicaid the payer of last resort, so every other insurance source pays first.¹⁴ The private plan processes claims first; Medicaid picks up copays, deductibles, and services the private plan doesn’t cover. In practice this arrangement covers more than either plan would alone. You’ll need to report your private plan at application and renewal.

Applying

Documents to Gather

Birth certificate, Social Security number, and proof of citizenship or qualified immigration status for the child.
Proof of state residency, such as a utility bill or lease.
Financial records. For Katie Beckett, the child’s own assets are what matter. For the Family Opportunity Act, family income is the figure the state will scrutinize.
Comprehensive medical evidence: diagnoses, treatment history, current care needs, functional limitations, specialist letters, therapy notes, and hospital discharge summaries.

Where to Apply and How Long It Takes

Most states accept Medicaid applications online, by mail, by phone, or in person. The office that handles disability-based Medicaid may not be the one that handles standard applications. Some states use a separate form specifically for Katie Beckett or TEFRA, so check with your state Medicaid agency for the correct pathway.

Federal regulations require states to complete eligibility determinations for disability-based Medicaid within 90 days of the application date.¹⁵ That includes time for the disability determination itself. Incomplete records are the usual source of delay, so submitting a thorough package the first time can shave weeks off the process.

If You’re Denied

Every Medicaid applicant has the right to a fair hearing if their application is denied or not acted on promptly. The denial notice must state the reason and explain your hearing rights. You have up to 90 days from the date the notice is mailed to request a hearing.¹⁶

Denials on deeming-exception applications most often turn on one of two findings: the disability determination or the institutional level-of-care assessment. Where the disability finding is the problem, additional evidence from specialists who know the child’s condition well can change the outcome. Where the level-of-care finding is the problem, a detailed letter from the treatment team explaining why institutional placement would be medically necessary without home-based services is often decisive. Disability rights organizations and legal aid attorneys who handle Medicaid appeals can help.

State Variation and Your Next Step

Both options are voluntary. Most states have adopted some version of Katie Beckett, whether by state plan amendment or a comparable waiver, but the details differ on income treatment, cost-sharing, covered services, and the level-of-care assessment.⁸ Some states call the program TEFRA, others Katie Beckett, others something different. Waiver-based programs can impose enrollment caps and waitlists that state plan amendments cannot.

Contact your state Medicaid agency and ask specifically about programs for children with disabilities that waive parental deeming. Don’t rely on the general Medicaid application line, which often isn’t familiar with these specialized pathways. Ask for the office that handles disability-based eligibility or home and community-based waiver programs.

1
Social Security Administration. SSI Spotlight on Deeming Parental Income and Resources
2
Social Security Administration. Understanding Supplemental Security Income SSI for Children
3
Office of the Law Revision Counsel. 42 U.S. Code 1396a – State Plans for Medical Assistance
4
HHS Office of the Assistant Secretary for Planning and Evaluation. 2026 Poverty Guidelines
5
Medicaid.gov. Family Opportunity Act Children with a Disability
6
eCFR. Medicaid Premiums and Cost Sharing
7
Social Security Administration. How Do We Define Disability
8
Medicaid.gov. Eligibility Policy
9
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
10
Social Security Administration. SSI Federal Payment Amounts for 2026
11
Medicaid.gov. Early and Periodic Screening, Diagnostic, and Treatment
12
Medicaid.gov. Mandatory and Optional Medicaid Benefits
13
Medicaid.gov. Home and Community Based Services
14
Medicaid.gov. Coordination of Benefits and Third Party Liability
15
Medicaid.gov. Ensuring Timely and Accurate Medicaid and CHIP Eligibility Determinations at Application
16
eCFR. 42 CFR Part 431 Subpart E – Fair Hearings for Applicants and Beneficiaries