The Tax Equity and Fiscal Responsibility Act (TEFRA) Medicaid Eligibility Option, also known as the Katie Beckett Option, was developed to allow children with disabilities from near-poor and middle-income families to qualify for Medicaid. TEFRA has been available since 1982; however, little is known about the number of children served and their qualifying disability. This first national study found that 20 states enrolled nearly 25,000 children in 2001. Only 10 of these states allowed children to qualify because of a mental health disability. Additional research is needed to understand the role of TEFRA in providing insurance to children with disabilities.