Requires the Department of Health and Human Services (DHHS) to apply for approval from the Centers for Medicare and Medicaid Services (CMS) to adopt and implement a policy to allow a deduction from the definition of income for determining Medicaid eligibility any amount received as Dependency and Indemnity Compensation (DIC) benefit from the US Department of Veteran Affairs. Specifies that the policy only applies to populations who are not subject to the Modified Adjusted Gross Income determination methodology. Requires DHHS, if it obtains approval from CMS, to implement this policy effective January 1, 2017.

Appropriates $1,038,123 in recurring funds for 2016‑17 from the General Fund to the DHHS, Division of Medical Assistance, for costs associated with the eligibility changes required under this act. Specifies that the funds are to provide a state match for an estimated $2,081,236 in federal funds in the 2016‑17 fiscal year, and appropriates those funds to the Division of Medical Assistance.