I am in Louisiana and I am in the process of paperwork for Medicaid but there are several types of medicaid here. I have private insurance but the cost of my daughters medical bills because of her recent being diagnosed as BPD. It is a buy in program. Kind of like a supplemental insurance.
I hope you appeal their decision. If you live with someone that pays the bills, wether its a family member or significant other, there is a way to include them but not have them count against you. I had to get a letter certified from my mom when my kids were younger, I don't know what has changed since then and what state you are applying to but good luck to you!