The Medicaid Trap: Why Disabled Workers Can't Afford to Get Ahead

Erica Carter is good at what she does. As a finance manager for the Omaha Nation school district in Nebraska, she chases down grants that fund everything from student paychecks to a seven-acre teaching garden where kids get their first real job experience. She's a 41-year-old woman paralyzed from the chest down since her early 20s, with an accounting background and a master's degree in human resource management. She built a real career.

Then, in November 2023, she got a letter from Iowa's Department of Health and Human Services. Her income was too high to stay on Medicaid. She had two weeks to figure it out.

Carter was making $110,000 a year. Iowa's income limit for disabled workers on Medicaid buy-in programs was $36,450.

That gap isn't a typo. It's policy. And it forced her to make a choice that shouldn't exist: keep the job or keep the health coverage that pays for disability-related care her employer's plan wouldn't touch.

Why This Matters

This isn't just Carter's problem. Forty-seven states run Medicaid "buy-in" programs designed to let disabled workers stay covered while earning. On paper, that sounds good. In practice, most states cap how much you can earn or save before you lose benefits. The result: disabled people who want to work more, earn more, or build savings face a cliff. Cross the income line and you lose everything.

The timing is grimly ironic. Federal officials are now requiring states to enforce work rules for Medicaid, essentially punishing people for not working. Meanwhile, the same system punishes people for working too well.

This is the machinery of a broken system: policies that look humane on the surface but trap people in poverty by design. Carter had to leave a six-figure job to keep her medical benefits. A few states, Massachusetts, Minnesota, New Jersey, Rhode Island, have quietly fixed this by eliminating the income limits. The fact that most haven't tells you something important about who holds power in state capitals.

The Real Cost

For disabled Americans, this isn't abstract. Seventy million Americans have a disability. The employment rate gap between disabled and non-disabled workers is 43 percentage points. When the system itself penalizes you for earning more, those numbers don't surprise anyone living it.

Carter had options, sort of. She could have taken a much lower-paying job. She could have dropped Medicaid and relied on her employer's plan, but employer plans don't cover the disability-specific care Medicaid does. Neither option was really a choice.

She chose to keep her job and leave Medicaid. That made sense for her. But it shouldn't be the only path that makes sense. A country this wealthy doesn't need to trap its people like this.