Illinois Medical Assistance for Long Term Care

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Author: Equip for Equality
Last updated: September 2012

Table of Contents

General Medicaid Eligibility
Financial Eligibility Rules for Medicaid Coverage of Nursing Home Care and Community Care Program Services
Medicaid Treatment of Trusts

Eligibility Penalties for Transfer of Assets
Criminalization of Asset Transfer Advice
Illinois Spousal Impoverishment Protections
Support Responsibility of Community Spouses
Liens and Estate Recoveries
Medicaid Appeals Process

General Medicaid Eligibility

There are three basic requirements for eligibility for Medicaid in Illinois. An individual must be a resident of Illinois and a citizen of the United States or an alien lawfully admitted or residing under color of law; "categorically related"; and needy.

Eligibility: Residency and Citizenship or Alienage

Only residents of Illinois are eligible for Medicaid. Anyone who is voluntarily living in Illinois, including living in a nursing facility, and has no present intention to move elsewhere in the future is considered a resident. However, according to DHS policy, if an individual maintains a house, apartment or home in another state, residency may not be established. PM 03-02-02. See generally, 42 C.F.R. 435.403. There is and can be no durational residence requirement (i.e., minimum period of residence in Illinois). 42 C.F.R. 435.403(h); PM 03-02-02. See Shapiro v. Thompson, 394 U.W. 618, 22 L.Ed. 2d 606 (1969).

In addition to Illinois residency, the applicant or recipient must be a citizen of the United States or an alien lawfully admitted for permanent residency or be otherwise permanently residing in the United States under color of law. 42 C.F.R. 435.402; 89 Il. Adm. Code 113.10 and 120.310; PM 03-01-00.

Eligibility: Categorical Relationship

In order for an individual to be eligible for Medicaid, he or she must be "categorically related." In other words, the individual must fit a particular status or category: being aged, blind, or disabled (the category of most nursing home residents receiving Medicaid) or a child or caretaker of a child. Additionally, a Medicaid applicant must meet strict financial requirements.

Persons 65 or over are considered aged and therefore "categorically related" for Medicaid purposes. 42 C.F.R. 435.520(a). The definitions of disability and blindness used by DHS are those used by the Social Security Administration in the SSI program. See 42 C.F.R. §§ 435.430, 435.540. Persons receiving Social Security or SSI benefits on the basis of disability will, therefore, be found disabled for Medicaid purposes. Persons not receiving or applying for such benefits must have their disability determined by DHS. Persons denied by DHS as not disabled are entitled to a detailed explanation of the basis for the adverse determination and have the right to appeal and the right to an administrative hearing on the merits of their claims; new evidence can be submitted during the hearing process.

Eligibility: Need

The rules regarding eligibility for Medicaid, in terms of income and resources, are complex. The rules outlined below are applicable to persons residing in nursing homes, supportive living facilities, or receiving services under the Community Care Program. Rules governing Medicaid eligibility for persons residing in the community vary significantly.

Medicaid Eligibility Process

In Cook County, applications for Medicaid made by or on behalf of a nursing home resident are filed with the Nursing Home Service of DHS which is centrally located for the entire County at:

Illinois Department of Human Service
Nursing Home Service
2036 South Michigan
Chicago, Illinois 60616
312-793-8000

If the applicant is incompetent or incapacitated, any responsible person can file on the applicant's behalf.

A facsimile of the Medicaid application is attached as Appendix A to this chapter. Eligibility will be determined as of the month the application is filed, unless the applicant specifically requests that retroactive eligibility be determined. Eligibility may be determined for the retroactive period of up to three months prior to the month of application. Applicants are advised to file applications via certified mail or delivery and to keep proof of mailing.

Unless applicants need additional time to obtain necessary documentation, determinations of eligibility are required to be made within 45 days of filing of the application.

Long Term Care - Asset Discovery Investigation Program (LTC - ADI)

The LTC-ADI project began in 1996 when the Department of Public Aid Office of Inspector General (OIG) conducted investigations of long term care medical assistance (LTC) applications meeting certain error-prone criteria as identified by Family Community Resource Centers (FCRCs) in Cook (Medical Field Operations) and DuPage counties. The program was subsequently expanded on a statewide basis effective 4/1/2005.

All LTC applicants are required to complete Additional Financial Information for Long Term Care Applicants (Form 3654). This form is used to obtain additional financial information and assess financial management. According to Department policy, at a minimum, Form 3654 must be signed. By doing so, consent is given to any investigation made by the Department to verify information on the form. Signing Form 3654 is a condition of eligibility. If the applicant or representative refuses to sign Form 3654, the Department may deny the application.

Department caseworkers as required to refer LTC applications that meet one of the following criteria to the OIG for an asset investigation:

  • An applicant who does not have a community spouse and reports more than $20,000 in assets at the time of application on Mail-In Application For Medical Benefits (Form 2378H)
  • An applicant who reports property transfers on Form 2378H (Form C) or Form 3654 (Questions 12, 13, or 14)
  • An applicant who has already transferred assets to a community spouse prior to application date on Form 2378H (Form C)
  • An applicant who has consulted with a financial manager or planner (Questions 5 or 6 on Form 3654)
  • An applicant who has not completed Questions 9, 10, 11, 12, 13, or 14 on Form 3654 in their entirety
  • An application that the caseworker deems appropriate for an investigation for any other reason

According to the Policy Memorandum dated 11/16/04 describing and implementing the LTC-ADI program, OIG is subcontracting the investigations, which are to be completed within 35 days. Applications referred for investigation cannot be approved by the local office until the investigation is completed or the local office is advised by the OIG that the referral was not forwarded for investigation. Applications referred for investigation may be denied prior to the completion of the investigation. For cases pending beyond the time limits, policy at PM 17-03-00 is applicable.

Once the investigation is completed, OIG will send the local caseworker an Asset Report and will send an LTC-ADI Recommendation Report. The report includes the investigation findings and any recommendation by the OIG. Although the OIG may make a recommendation, the local office retains the responsibility for determining eligibility, including whether an asset transfer is allowable or non-allowable. All inquiries by the applicant or representative are to be handled by the local office.

Financial Eligibility Rules for Medicaid Coverage of Nursing Home Care and Community Care Program Services

Medicaid applicants are required to disclose all available assets and income during the Medicaid application process. To qualify for Medicaid coverage of nursing home and CCP services, applicants can own no more that the "exempt" assets set forth below. Excess assets must be spent down prior to any Medicaid coverage.

Asset Limitations

Exempt Assets

DHS classifies property as "exempt" and "non-exempt" for purposes of determining whether a nursing home resident or potential resident is eligible for Medicaid. Exempt property is not counted in determining eligibility while the value of the non-exempt property is counted. See generally, PM-07-02-00.

The following property is considered exempt and therefore, is not considered when determining Medicaid eligibility. Thus, an applicant for Medicaid may keep the following assets and still be eligible for the Medicaid:

$2,000 in cash or other assets. The $2,000 allowance is referred to as the "asset disregard." The asset disregard can be held as cash or as the value or a non-exempt asset.

Homestead Property. An individual's homestead property is a dwelling (together with any adjoining and related real estate) that is owned and occupied by that individual.

Homestead property is exempt if:

  • A nursing home resident intends to return to his/her home;
  • The property is occupied by: the resident's spouse, the resident's sibling, or the resident's minor or disabled child.

If the nursing home resident completely abandons the property with no intention of returning, the property becomes non-homestead property and is, therefore, not exempt. See PM-07-02-04-a.

Deficit Reduction Act of 2005 Changes:

Section 6015 provides for a denial of benefits for an individual who has equity in a home that exceeds $500,000. It allows states to increase the $500,000 limit to an amount no greater than $750,000 and the state may treat homestead equity differently throughout the state. The $500,000 limit is to be increased annually, starting in 2011, based on a percentage increase in the consumer price index.

There are exceptions relating to individuals whose spouse or child under twenty-one, blind or disabled, is lawfully residing in the home.

Individuals may use reverse annuity mortgage or home equity loans to reduce their total equity.

The law requires a process to waive the application of the denial of eligibility due to home equity in cases of demonstrated hardship.

The change in Medicaid eligibility rules as to Substantial Home Equity shall apply to individuals whose eligibility is based upon a Medicaid application filed on or after January 1, 2006.

Personal Effects and Household Goods. Although federal Medicaid law clearly exempts personal effects and household goods of an unlimited value owned by nursing home residents applying for or receiving Medicaid coverage, DHS's implementation of this federal provision restricts the value.

PM-07-02-06-b provides that personal effects and household goods of reasonable value are exempt. Wedding rings and engagement rings and items required because of an individual's medical or physical condition are exempt regardless of value.

Reasonable value is defined as an equity value in personal effects and household goods not exceeding $2,000.00. However, the manual does not limit the value of personal effects and household goods if owned by a nursing home resident and then transferred to the community spouse. However, if such household goods and personal effects are not transferred to the community spouse, the exempt value of these items is limited to $2,000.

Motor Vehicle. Federal law clearly exempts one motor vehicle of unlimited value owned by a nursing home Medicaid applicant or recipient. DHS has implemented this exemption similarly to the implementation of the personal effects and household goods exemption.

PM 07-02-05 provides that one motor vehicle is exempt regardless of value if:

  • It is necessary for employment;
  • It is necessary for transportation for medical treatment of a specific or regular medical problem;
  • It is modified for operation by or transportation of a handicapped person;
  • It is necessary because of climate, terrain, remoteness, or similar factors to provide necessary transportation to perform essential daily activities.

A motor vehicle owned by a nursing home resident is exempt regardless of value, but only if it is transferred to a community spouse. If the motor vehicle is not transferred to the community spouse, and does not qualify under numbers 1 through 4 above, it is exempt up to a value of $4,500. Excess value is applied towards the $2,000 asset disregard. PM 07-02-05.

For a table of fair market values for vehicles, see WAG 25-03-07.

Life Insurance. Life insurance polices with a total face value of $1,500 or less are exempt for a client and/or spouse. Both the client and their spouse can each have exempted life insurance with a total face value of $1,500 or less. If the total face value of the client’s or spouse’s life insurance is more than $1,500, the policy is not exempt. The cash value is applied to the asset limit.

The following life insurance policies are also exempt:

  • Term polices with no cash value
  • Group policies provided by an employer
  • Group policies required for employment
  • Policies on the life of an ineligible family member who is not the client’s responsible relative
  • Policies on the life of the eligible client owned by someone other than the client

PM 07-02-07.

Burial Funds. Certain amounts set aside as a burial fund to cover the funeral and burial expenses of a client and/or their spouse are exempt. In order to be exempt, the money set aside must be separate and identifiable as a fund to cover funeral and burial expenses.

There are four different types of burial funds recognized by the Department:

- Money Set Aside in a Bank Account. Up to $1,500 of money set aside in a bank account, payable on death for funeral and burial expenses, or otherwise identifiable as a burial fund, is exempt. Apply any amount in excess of a $1,500 to the client's asset limit. The $1,500 burial limit on money set aside in a bank account is reduced by the amount of funds held in an irrevocable burial fund.

- Revocable Prepaid Burial Contract Funded by Trust. Money in a revocable prepaid burial contract with a funeral home can be withdrawn. $1,500 in a revocable prepaid contract is exempt. In addition to the $1,500, all amounts designated for burial space and exempt burial merchandise are exempt. The $1,500 burial fund limit on a revocable contract is reduced by the amount funds held an irrevocable burial fund, or any other your revocable arrangement which is available for burial expense, and the face value of any exempt life insurance (face value $1,500 or less).

- Irrevocable Burial Contract Funded by Trust. In 2008, $5,219 in an irrevocable prepaid burial contract is exempt. In addition to the $5,219 prepaid burial limit for an irrevocable contract, additional amounts designated for exempt burial space and merchandise is exempt. Any remaining amounts are applied to the Medicaid applicant’s asset disregard.

- Prepaid Burial Contract Funded by Life Insurance. Prepaid burial contracts which are funded by a life insurance policy where ownership of the insurance policy is assigned to the funeral home are not considered available assets. With the assignment of ownership of an insurance policy, the policy no longer belongs to the Medicaid applicant. According to Department policy, the assignment of the insurance policy represents the transfer of an asset. The Department is to determine whether or not the Medicaid applicant has received fair market value in return for the assignment. If the total value of the funeral goods and services to be received at the time of death is comparable to the face value of the life insurance policy, it is presumed that fair market value was received. It is the Department’s position that to be valid, the assignment of ownership of the insurance policy must be acknowledged by the insurance company. If the assignment is not acknowledged by the life insurance company, the policy is treated as the applicant’s policy.

PM 07-02-08.

Exempt Burial Space and Merchandise. Burial spaces intended for the use of a Medicaid applicant, his or her spouse, or any other member of their immediate family are exempt. Burial spaces are defined as: conventional grave sites, crypts, mausoleums, urns, caskets, vaults, burial plot, niches, and other places that are customarily and traditionally used for the burial of deceased persons. Also exempt are any additions to or improvements on the burial spaces such as: vaults, head stones, markers, plaques, burial containers, and arrangements for opening and closing the gravesite. PM 07-02-09.

Interest on Burial Funds and Burial Spaces. Interest earned on burial funds, funds for burial spaces and appreciation in the value of burial arrangements are exempt. The increased value of the exempt burial funds and burial merchandise due to this added interest is also exempt. PM-07-02-10.

Resources Needed for Self-Support. Property used as part of an applicant’s trade, business, or non-business that is essential to the client’s means of self support is exempt. PM 07-02-11.

Nonexempt Assets or Available "Resources"

A Medicaid applicant owning assets in excess of the exempt assets will be required to liquidate and spend such assets before Medicaid will cover his or her nursing home care. Cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his or her support or maintenance is considered to be an available asset for Medicaid eligibility purposes. If the individual has the right, authority, or power to liquidate the property or his or her share of the property, it is considered a resource. If a property right cannot be liquidated, the property will not be considered a resource of the individual. 20 C.F.R. 416.1201 (1987).

Joint Accounts. The entire amount of jointly held non-exempt personal property is considered available to a Medicaid applicant unless the applicant documents that he or she does not have access to the asset, or that his or her legal interest in the asset is less than the entire value of the asset. PM 07-02-02.

If the applicant for Medicaid claims that the asset or a portion of the asset is not owned by the Medicaid applicant, the Department requires the following as proof of the Medicaid applicant's ownership/interest in the asset:

  • Proof of who initially purchased or obtained the asset or opened the account
  • Proof of which person's assets were used and to what extent when the asset was first purchased, obtained, or the account first opened
  • Proof of who made any additional deposits, payments, or withdrawals
  • Proof that accessibility to the other joint owner's verified interest is changed. The Medicaid applicant's accessibility may be changed by transferring the other holder's verified interest from the jointly held asset or by restricting the Medicaid applicant's access to the portion of the asset not belonging to the Medicaid applicant.

If the Medicaid applicant does not provide the needed proof, the entire amount of the jointly held nonexempt asset is determined to be available.

Joint Real Estate. The Medicaid applicant’s legal interest in jointly held real property is counted as a proportionate share based on the number of owners.

Life Estates. Life estate interests held by a Medicaid applicant in real property or personal property are not considered available assets. However, Department policy provides that the Department may file a lien on a real property life estate. The creation of a life estate is subject to the Department’s asset transfer policy. WAG 07-02-14.

Deficit Reduction Act of 2005 Changes:

Inclusion of Transfers to Purchase Life Estates (Sec. 6016(D)).

Section 6016(d) amends 42 U.S.C. § 1396p(c)(1) to provide that funds used to purchase a life interest in the home of another individual will be regarded as assets which have been transferred unless the purchaser resides in the home for a period of at least one year after the date of purchase.

Effective Date. Section 6011(d) contains no specific effective date provision. See Section 6016 regarding the general effective date.

Income Eligibility. The income eligibility rules applicable to residents of long term care facilities, recipients of Community Care Program Services and aged persons in state mental hospitals are significantly different from those applicable to persons residing in the community. To qualify for Medicaid coverage, the nursing home Medicaid applicant's monthly countable income must be less than the nursing home's monthly private pay rate. Countable income is calculated by adding all income in the resident's name and subtracting certain deductions - a personal needs allowance of $30.00, dependent spouse and child allowance, medical bills not paid by Medicaid, medical insurance premium payments, and ongoing medical expenses for medical necessities not paid for by Medicaid. PM 8-02-00 et seq.

For purposes of determining eligibility, income in the community spouse's name is not considered available to the institutionalized spouse from the first full month in which an individual is institutionalized in a long term care facility. PM 09-02-04-a. (However, if the community spouse's monthly income is in excess of $2,610 in 2008, DHS may seek a monthly contribution payable to the Department towards the cost of care, discussed below.)

To determine what income belongs to which spouse, the "name on the instrument rule" applies - the income belongs to the party whose name is on the check. In the case of income where there is no instrument to determine ownership, such as periodic gifts, one-half of the income is considered available to each spouse. If an instrument such as a pension or annuity check provides for income to both spouses, but does not specify an amount to each, one-half of the income is considered available to each spouse. If the payment of income is in the names of one or both spouses as well as another person, the income is considered available to each spouse in proportion to their interest. If no interest is specified on the instrument, or can be clearly established, the Department will consider one-half available to each spouse.

Allowable Deductions from Income

Once a nursing home applicant is determined eligible for and receives Medicaid to pay for his or her nursing home care, DHS requires all nonexempt income in his or her name to be paid to the nursing home to contribute to the cost of the care except for certain deductions. The remaining amount due to be paid towards cost of care is referred to as the "income spend down" calculated by allowing the following deductions from available income:

-For nursing home cases, a personal needs allowance of $30.00 each month or $90 Veteran’s benefit disregard, whichever is appropriate. There is a different standard for SLF and CCP services. PM 15-04-04-e.
-A community spouse monthly income allowance, as described below, but only to the extent the nursing home spouse makes it available to (or for the benefit of) the community spouse. This is from non-SSI income. PM 15-04-04-a.
-A Family Maintenance Needs Allowance described below. PM 15-04-04-b.
-Maintenance for a Dependent Child(ren) under age 21 who does not reside with the Community Spouse as described below. PM 15-04-04-c.
-Amounts to cover Medicare and other health insurance premiums. PM 15-15-03.
-Amounts to cover over-the-counter drugs or other medically necessary items ordered by a physician but not paid for by Medicaid and amounts to cover incurred expenses for medical or remedial care for the institutionalized spouse not paid for by Medicaid. PM 15-08-06.
-Amounts necessary to cover medical transportation. PM 15-08-06.
-Amounts to maintain a home in the community if a person who has no spouse and/or dependent children at home is admitted to a facility for what is expected to be a temporary period (6 months or less). PM 15-04-04-d.

Community Spouse Maintenance Needs Allowance

The community spouse is able to receive a contribution from the nursing home spouse's income to bring his or her total monthly income up to the amount of a predetermined monthly needs allowance, $2,610 in 2008. There are provisions for annual adjustments of this figure like the asset figure that is tied to the consumer price index of the previous year. The income is arrived at through DHS regulations that define certain deductions and exemptions (i.e., earned income deductions, unearned income deductions such as foster care payments, value of Food stamp coupon allotment, etc.) PM 15-04-04-a. After these deductions and exemptions are accounted for, the level of contribution from the nursing home spouse to the community spouse is calculated.

DHS makes a determination of the community spouse's maintenance needs standard. If the community spouse disagrees with the determination he or she may request a fair hearing to establish a greater amount of maintenance allowance. For instance, if regular heath care costs exceeding $2,610 per month can be proven at a fair hearing to increase the needs standard, the allowance from the nursing home spouse's income may be increased. Additionally, if the community spouse has a court order for support or maintenance which, in combination with the community spouse's income, exceeds the $2,610 standard, DHS must abide by the court order. 42 U.S.C. § 1396r-5(d)(5); PM 15-04-04-a.

Example: Mr. Green resides in a long term care facility and receives Social Security in the amount of $1,000 per month and a pension in the amount of $900 per month. Total monthly income is $1,900. Mr. Green's spouse resides in the community and receives Social Security in the amount of $600 per month.

The Community Spouse Maintenance Needs Allowance is equal to the standard of $2,610 less the gross income of the community spouse ($600). Therefore, $2,010 is deducted as the Community Spouse Maintenance Needs Allowance and is not available to apply to the cost of long term care, if it is actually contributed to the community spouse. The remainder, less other allowable deductions, such as $30 personal needs allowance and amounts needed to pay for health insurance premiums, is the amount of the resident's income available to apply to the cost of long term care.

Dependent Family Member Allowance

Deductions from the nursing home resident's income are also made for the benefit of dependent family members. This includes children under age 21, dependent adult children, dependent parents or dependent siblings of either spouse who are living with the community spouse. DHS will look to see if the nursing home resident or the community spouse declares the dependent on his or her income tax return.

The amount of this deduction is equal to one-third (1/3) of the difference between the Family Maintenance Needs Standard of $1,750 (for 2008) for each dependent family member and the amount of net income of the dependent family member.

Example: Mr. Green resides in a long term care facility. Mr. Green's dependent child lives with Mrs. Green and receives a Social Security check for $300 per month.

Family Maintenance Needs Std.             $1,750
Non-exempt monthly income of child     - $300
                                                      = $1,450
One-third                                              X 1/3
Amount of Family Maintenance Needs    = $483

Deduction for the Maintenance of Dependent Children Who Do Not Reside with the Community Spouse

This deduction is based upon the Temporary Assistance to Needy Families (TANF) needs standard. Children under age 21 who do not live with the community spouse and do not have enough income to meet his or her needs (as set by the TANF standard) are entitled to receive a contribution from the nursing home spouse's non-SSI income up to the TANF standard.

Medicaid Treatment of Trusts

Inter Vivos Trusts Settled by Medicaid Applicant/Recipient and/or Spouse

In general, assets of inter vivos trusts settled by a Medicaid applicant or his or her spouse are considered available to the Medicaid applicant if the trustee has any discretion to distribute principal to or for the benefit of the Medicaid applicant. Department policy provides as follows:

The following applies if assets of the person and/or spouse were used to form all or a part of the principal and the trust is created (other than by will) by:

  • The client
  • The client's spouse
  • Any other person with legal authority to act on behalf of the client or client's spouse

Under this policy, a trust is a legal device, or a similar legal instrument that is created with the client's and/or spouse's assets. The person transfers assets to a trustee(s) in order that the assets be held, managed, or administered for the benefit of the person, or beneficiaries.

Revocable Trusts

These trusts can be changed. Treat the principal and payments from the trust as follows:

  • Count the principal as an available asset;
  • Count as income any payments actually made to or for the benefit of the client;
  • Treat any other payments as a transfer of assets.
Irrevocable Trusts

These trusts cannot, in any way, be changed. Some irrevocable trusts permit payments to be made and some do not. Count the principal and payments from the trust based on whether the terms of the trust permit payments from a portion of the trust as follows:

Payments Permitted by the Irrevocable Trust

-Count the part of the principal, from which payments to or for the benefit of the client may be made, as an available asset;
-Count as income, any payments actually made to or for the benefit of the client;
-Treat any other payments as a transfer of assets.

Payments Not Permitted by the Irrevocable Trust

-Count the part of the principal, from which no payment may be made, as a transfer of assets;
-The date of the transfer is the date the trust was created or, if later, the date payment to the person was stopped under the terms of the trust. PM 07-02-15-a.

Exempt Trusts (OBRA Trusts)

Section 13611 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) amended § 1917 of the Act by adding new requirements for treatment of trusts which created three new categories of Medicaid exempt trusts, although only two are relevant to the Illinois Medicaid system. These two trusts are described at 89 Ill. Adm. Code 120.347(d):

OBRA Disability Pay Back Trust

An irrevocable trust containing assets of a disabled person (as described in Section 120.314):

  • Under age 65;
  • That is established by a parent, grandparent, legal guardian, or court for the benefit of the disabled person;
  • If language contained in the trust stipulates that any amount remaining in the trust (up to the amount expended by the Department on medical assistance) shall be paid to the Department upon the death of the person.

This exclusion continues after the person reaches age 65 as long as the person continues to be disabled but any additions made by the person to the trust after age 65 will be treated as a transfer of assets under 89 Ill. Adm. Code 120.387.

If the trust contains proceeds from a personal injury settlement, any Department charge (as described at 89 Ill. Adm. Code 102.260) must be satisfied in order for the trust to be excluded under this subsection. (This requirement that a Department lien be paid prior to the transfer of proceeds of a personal injury settlement to an exempt OBRA Pay Back Trust was upheld by the Appellate Court in the Estate of Calhoun 684 N.E.2d 842 (1st Dist. 1997).)

These trusts settled with the assets of an under 65 disabled person are often referred to as OBRA Pay Back Trusts or D(4)(A) trusts (42 U.S.C. 1396p(b)D(4)(A)).

OBRA Pooled Trust

An irrevocable trust containing assets of a disabled person (as described in Section 120.314):

  • That is established and managed by a non-profit association that pools funds but maintains a separate account for each beneficiary;
  • That is established by the disabled person, a parent, grandparent, legal guardian or court for the benefit of the disabled person;
  • If language contained in the trust stipulates that any amount remaining in the trust (up to the amount expended by the Department on medical assistance) that is not retained by the trust shall be paid to the Department upon the death of the person.

If the trust contains proceeds from a personal injury settlement, any Department charge (as described at 89 Ill. Adm. Code 102.260) must be satisfied in order for the trust to be excluded under this subsection (d).

The trusts managed by non-profit associations for the benefit of disabled persons are often referred to as OBRA Pooled Trusts or D(4)(C) trusts.

Currently the author is aware of two pooled trusts, exempt for Medicaid purposes, that may be established by a person with a disability of any age to qualify for Medicaid or to preserve eligibility: the Illinois Disability Association Pooled Trust (Contact Howard Berk (312-332-4622); and Life Plan, Inc. Pooled Trust (630-620-2222).

Third Party Settled Trusts

The provisions of 89 Ill Adm. Code 120.347 do not apply to a trust that is not settled by the Medicaid applicant or his or her spouse, referred to here as "third party" settled trusts. There is no clearly written Department policy on the effect of third party trusts on Medicaid eligibility.

Financial eligibility for Medicaid is based upon whether an applicant's resources are below state resource limitations. If assets are considered "available" to the applicant they are counted as belonging to the applicant for eligibility determination.

Case law holdings in the area of availability of trust assets for Medicaid eligibility purposes distinguish between support trusts and discretionary trusts.

The Illinois Trust and Trustee’s Act at 760 ILCS 5/15.1 provides that a third party settled discretionary trust for a person who has a disability is not considered to be under the control of the beneficiary, and is not liable to pay the State for any public agency for financial aid or services to the individual.

20 C.F.R. 416.1201 provides that a trust in which the beneficiary has no right to demand interest or principal is not counted as an available resource to that individual when determining his eligibility for Medicaid and SSI. Under the analysis of 20 C.F.R. 416.1201, a support trust (where distributions are made for the support, health and welfare of the beneficiary) would be considered an available asset to the beneficiary as he or she could legally compel payment from the trustee in accordance with the standards for distribution. A discretionary trust where the trustee may withhold income or principal, and make distributions in his sole discretion, would not be considered an available asset to the beneficiary as he or she could not compel payment.

Testamentary Trusts

The provisions of 89 Ill Adm. Code 120.347 do not apply to a testamentary trust. Therefore, the analysis set forth above at C would be applicable to testamentary trusts which has the effect of allowing a spouse to establish by will a discretionary special needs trust for the benefit of his or her surviving spouse.

Eligibility Penalties for Transfers of Assets

Transfers of Assets Resulting in Medicaid Ineligibility

Section 13611 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) amended § 1917(c) of the Act by incorporating new requirements for treatment of transfers of assets for less than fair market value. The following applies to asset transfers made subsequent to the applicable date of OBRA - August 11, 1993.

Illinois excludes from eligibility aged, blind, and disabled persons who have transferred, or whose spouse has transferred, a non-exempt asset or an exempt homestead in order to qualify for nursing home medical assistance. Such rules do not apply to any other form of medical assistance outside of group care or the Medicaid waiver program, Community Care Program.

DHS imposes a penalty on nursing home residents applying for or receiving Medicaid who, during the sixty month period immediately before or anytime after he or she applies for Medicaid, transfers assets for less than fair market value. The transfer rules also apply to persons who are receiving home services under the Illinois Community care Program.

Transfer Penalties

DHS will deny eligibility to any nursing home resident who transferred, or whose spouse has transferred any non-exempt asset or made a non-allowable transfer of his or her homestead for less than fair market value during or after the 60 month period immediately before application for Medicaid. The number of months of ineligibility is determined by dividing the uncompensated value of the property transferred by the monthly private pay cost of the nursing home in which the Medicaid applicant is residing. The monthly private pay cost of the nursing home multiplied by 30 is used as the cost of care in the calculation of penalty periods for nursing home coverage. For SLF or CCP Program coverage penalty calculations, contact the Bureau of Long Term Care at 217-782-0545 for the long term care private rate for use in the calculation.

According to the Policy Manual, a transfer of assets occurs when a recipient buys, sells or gives away real or personal property. In addition, if an applicant or recipient changes the way real or personal property is held, this also may be a transfer of assets. PM 07-02-20.

The Worker Action Guide at 07-02-20-d describes the formula for calculating a penalty period:

1. Determine the month of the first non-allowable transfer.

2. Determine if any other non-allowable transfers were made in this month.

3. Calculate the uncompensated amount of all non-allowable transfers made during this month.

4. Calculate the number of months in the penalty period. Do this by dividing the total uncompensated amount of all transfers made during the month of the first non-allowable transfer by the monthly (30-day) private pay rate. Drop any partial months and the remaining amount of the transferred asset.

5. Determine if there was a prior penalty period that has not expired.

6. Determine the beginning and end dates of the penalty period. If there was no prior penalty period, begin penalty period with the month of the first non-allowable transfer. If there was a prior penalty period that has not expired, begin the penalty period with the month following the month a prior penalty period ends.

7. Repeat this process for each month that a non-allowable transfer(s) was made.

Deficit Reduction Act of 2005 Changes:

Lengthening Look-Back Period. Section 6011(a) makes the look-back period 60 months for all transfers (outright transfers as well as transfer to and from certain Trusts.)

Effective Date. The change in the look-back period would affect transfers made on or after the date of enactment of the Act.

Availability of Hardship Waivers. Section 6011(d) requires each State to include a hardship waiver procedure to include a potential hardship imposed by the application of the transfer of assets provisions. In order for such hardship provisions to apply, the application of the transfer of assets provisions would need to deprive the individual of either medical care such that the individual’s health or life would be endangered, or of food, clothing, shelter, or other necessities of life. Such procedure must provide for notice to recipients that an undue hardship exception exists, a timely process for determining whether an undue hardship waiver will be granted, and a process under which an adverse determination can be appealed.

The ACT enables a facility in which the institutionalized individual is residing to file an undue hardship waiver on behalf of the individual with the consent of the individual or the personal representative of the individual.

While an application for an undue hardship waiver is pending, provided the application meets criteria established by the Secretary, the State may provide for payments for nursing facility services in order to hold the bed for the individual at the facility for a maximum of 30 days.

Impose Partial Months of Ineligibility (Sec. 6016(a)). Section 6016(a) provides that States are no longer allowed to round down the penalty period to the lowest whole number. Rather, the penalty will, in essence, be a per diem penalty. For example, if a transfer is made creating a transfer penalty period of 4.25 months, the applicant will be ineligible for 4 months and 8 days.

The per diem penalty applies to transfers made "before the date of the enactment of the Deficit Reduction Act of 2005" and "after the date of the enactment of the Deficit Reduction Act." Section 6016(e)(2)(B) states that "The amendments made by this section shall not apply . . . with respect to assets disposed on or before the enactment of this Act." In short, there seems to be a conflict as to whether the per diem penalty applies to transfers made before the date of the Act.

Multiple Transfers Into One Penalty Period (Sec. 6016(B)). Section 6016(b) adds a new paragraph (H) to 42 U.S.C. §§ 1396p(c)(1). It applies to "multiple fractional transfers of assets in more than 1 month for less than fair market value" by the community spouse or institutionalized spouse after the enactment date. The term "multiple fractional transfers" is ambiguous but presumably it applies to transfers made in successive months. For purposes of determining the period of ineligibility, Paragraph (H) gives states discretion to treat as one transfer, the total cumulative uncompensated value of all assets transferred by the individual or spouse during all months on or after the look-back date in 42 U.S.C. §§ 1396p(c)(1)(B). The period of ineligibility begins on the earliest date which would apply under 42 U.S.C. §§ 1396p(c)(1)(D).

Effective Date. There is no specific effective date provision, so the general provisions of Section 6016 control.

Annuities

The purchase of an annuity by a Medicaid applicant will be considered allowable if the annuity pays benefits in approximately equal periodic payments over the term of the annuity and the department determines that the Medicaid applicant received fair market value in return for the purchase of the annuity. The department uses its Life Expectancy Table at WAG 25–03–12 to determine the life expectancy of the Medicaid applicant. For annuities that pay for life, the department multiplies the equal periodic payments to obtain a yearly amount. Then, the yearly amount is multiplied by the life expectancy of the applicant. The result is the expected return on the annuity.

For annuities that pay for a fixed number of years, the department multiplies periodic payments to obtain a yearly amount and then multiplies the yearly amount by the fixed number of years. However, if the applicant’s life expectancy is less than a fixed number of years the department uses the number of years of expected remaining life under its life expectancy table. The result is the expected return on the annuity.

If the expected return as calculated above is equal to the lump sum premium amount paid by the applicant, the department considers the applicant to have received fair market value. If, however, the expected return is less the lump sum premium amount paid by the applicant, the department will determine that fair market value has not been received and the difference between the premium amount paid and the expected return on the annuity will be considered a non-allowable transfer resulting in a penalty period calculated as set forth above.

Deficit Reduction Act of 2005 Changes:

Disclosure and Treatment of Annuities. For purpose of being eligible for long term care services under Medicaid, the applicant or his or her spouse must disclose any interest in an annuity or similar financial instrument. The application or recertification form for Medicaid covered long term care services shall include a statement that the State becomes a remainder beneficiary under such annuity or similar financial instrument. The State shall notify the issuer of the annuity of the right of the State to be a preferred remainder beneficiary in the annuity.

State Names as a Remainder Beneficiary. The purchase of an annuity will be treated as a transfer of assets for less than fair market value unless the State is named as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the annuitant, or, the State is named as a second beneficiary after the community spouse or minor or disabled child and is named in the first position if such spouse or a representative of such child of any such remainder for less than fair market value.

Balloon Annuities. The purchase of balloon annuities will be treated as asset transfers.

Effective Date. The change in the annuity rules shall apply to transactions occurring on or after the date of the enactment of the Act.

Life Estates

Department policy provides that for transfers establishing a life estate (transfers of the remainder interest in property) for which no compensation is received, the difference between the equity value and the value of the life estate is the amount that the Medicaid applicant is considered to have transferred for less than fair market value. To determine the value of the life estate the Department uses its Life Estate Table at WAG 25–03–11. The value of the life estate is calculated by multiplying the equity value of the asset by the amount in the Life Estate Table corresponding to the Medicaid applicant’s age at the time of the transfer.

Deficit Reduction Act of 2005 Changes:

-Inclusion of Transfers to Purchase Life Estates (Sec. 6016(D)).

-Section 6016(d) amends 42 U.S.C. §§ 1396p(c)(1) to provide that funds used to purchase a life interest in the home of another individual will be regarded as assets which have been transferred unless the purchaser resides in the home for a period of at least one year after the date of purchase.

Effective Date. Section 6011(d) contains no specific effective date provision. See 6016 regarding the general effective date, which is the date of enactment.

Allowable Transfers for Less than Fair Market Value

Certain transfers made within the applicable 60 months prior to application for medical assistance are allowed:

  • Transfers on or after 08/11/93 made more than 60 months before application, or more than 60 months before entry into a nursing home or more than 60 months before receipt of or application for CCP program services;
  • Transfers on or after 08/11/93 from a revocable trust made more than 60 months before the date of application, or more than 60 months before entry into a nursing facility, or more than 60 months before receipt of or application for CCP program services;
  • Transfers on or after 08/11/93 from an irrevocable trust made more than 60 months before the date of application or more than 60 months before entry into a nursing facility or more than 60 months before receipt of or application for CCP services;
  • Transfers funding an irrevocable trust that does not permit payment to, or for the benefit of, the person if:

-The trust is created on or after 08/11/93;
-The trust is created more than 60 months before application, more than 60 months before entry into a nursing facility or more than 60 months before receipt of or application for CCP services.

  • Transfers funding an irrevocable trust that does not permit payment to, or for the benefit of, the person at some point after the trust is created if:

-The trust is created on or after 08/11/93;
-The date the payment was stopped is more than 60 months before application, more than 60 months before entry into a nursing facility or more than 60 months before receipt of or application for CCP services.

  • Transfers for fair market value;

Note that the policy manual states that services can represent value when deciding whether fair market value was received, if the person provides written proof that payment for services was agreed to when the services were provided.

  • Transfers to a community spouse or to another person for the sole benefit of the community spouse and the amount transferred does not exceed the Community Spouse Asset Allowance (See PM 07-02-22 set forth below);

In addition to the amount permitted as the Community Spouse Asset Allowance, a client may transfer personal effects, household goods, and one motor vehicle for the sole benefit of the client’s community spouse, regardless of the dollar value. The transfer does not affect eligibility.

  • Transfers from the community spouse to another person for the sole benefit of the community spouse;
  • Transfers to the person’s child of any age, or to a trust created solely for the benefit of the person’s child, who is blind or disabled as determined by the Social Security Administration or the department’s determination review unit, or to another person for the sole benefit of person’s child;
  • Transfers on or after 08/11/93 to a trust created solely for the benefit of person under age 65 who is disabled as determined by the Social Security Administration or the department’s determination review unit;
  • Transfers that the person intended to make for fair market value;
  • Transfers where it is decided that denial of payment for nursing home or community care program services would create an undue hardship, such as but not limited to:

-Where the person is mentally unable to explain how the assets were transferred;
-Forcing the person to move from the nursing facility;
-Preventing the person from joining their spouse in a facility;
-Preventing the person from entering a facility near their family.

  • Transfers made exclusively for her reason other than to qualify for benefits;
  • Transfers to the person’s community spouse that were the result of the court order;
  • Transfers for less than fair market value that are returned to the person.
Allowable Homestead Transfers

DHS will not deny eligibility based on the transfer of a homestead by the Medicaid Applicant or recipient to one of the following persons:

  • A spouse
  • A child under that age of 21
  • A child of any age who is blind or permanently and totally disabled as determined by the Social Security Administration or the Department’s Determination Review Unit
  • A sibling who has an equity interest in the homestead and resided in the home for at least one year before the date of the nursing home resident's admission to the nursing home or applied for CCP program services
  • A child (other than one described above) who provided care (either nursing or support) to the applicant/recipient who has resided in the homestead for a period of at least two years prior to the date the individual entered the nursing home or applied for CCP program services and which enabled the individual to reside at home rather than in a nursing home

PM 07-02-20-b.

Criminalization of Asset Transfer Advice

The Health Insurance Portability and Accountability Act of 1996 amended 42 U.S.C. § 1320a-7b by adding at § 217 criminal penalties for certain transfers of property which were made to qualify for Medicaid. This amendment quickly became known as the "Granny Goes to Jail Law."

Subsequent to the passage of § 217 many legal and consumer groups called for the repeal of the law because of technical defects and the law’s potential negative effects on persons otherwise eligible for Medicaid. However, instead of repealing the law, the Balanced Budget Act of 1997 amended § 217. Section 4734 of the Balanced Budget Act of 1997 amended § 217 by limiting criminal liability to persons who, for a fee, counsel or assist a Medicaid application to make transfer for purposes of becoming eligible for Medicaid. This provision became effective on August 5, 1997 when the Balanced Budget Act was passed, and was immediately dubbed as the "Granny’s Lawyer Goes to Jail Law."

Shortly after its passage, the New York State Bar Association filed a class action suit against Janet Reno in her capacity as the Attorney General of the United States seeking to enjoin the enforcement of Section 4734 alleging it violated the First Amendment. The District Court for the Northern District of New York entered an order on October 20, 1998 declaring Section 1128B(a)(6) of the Social Security Act as amended by Section 4837 of the Balanced Budget Act of 1997, 42 U.S.C. 1320a-7b(a)(6) unconstitutional under the First Amendment to the United States Constitution, and permanently enjoining the United States, its agents, servants, employees, attorneys and all persons in active concert and participation with the Attorney General from enforcing the provisions. The Attorney General filed a notice of appeal, but later withdrew it.

Illinois Spousal Impoverishment Protections

The Illinois Department of Human Services implemented the federal spousal impoverishment standards, passed by Congress in 1988, differently than the federal law contemplates. Most notably, unlike the federal law and most other states, Illinois does not deem the separately held assets of the community spouse as being available to the nursing home spouse for Medicaid eligibility purposes. The standard Community Spouse Asset Allowance operates not as a cap on the assets that a community spouse may own without affecting the Medicaid eligibility of the nursing home resident spouse, but as an exception to the transfer of asset rules causing penalty periods for Medicaid eligibility. Further, unlike the federal law, Illinois penalizes certain transfers of assets between spouses. Because Illinois deviates significantly from the federal rules, certain planning techniques which are effective in other states do not work in Illinois, and certain techniques that are appropriate and effective in Illinois are neither appropriate nor effective in other states.

Note that the Department of Human Services has indicated that it is considering changing its method of calculating the Community Spouse Asset Allowance to be more consistent with federal law, and to discontinue its practice of allowing the community spouse to refuse to disclose asset. The applicable regulations are likely to change in the future depending in part on the changes at the federal level.

Illinois Department of Human Services Survey of Assets

Department policy provides not for a “snapshot” as contemplated in the federal spousal impoverishment provisions, but for an assessment to determine the amount of an allowable transfer to the community spouse from the nursing home resident.

PM 07-02-20 provides:

The asset survey applies only to long term care and supported living facility clients with a community spouse and to medical assistance clients applying for or receiving Department on Aging services with a community spouse.

When a person enters a long term care facility or supportive living facility or applies for or begins receiving Department on Aging services, a survey of assets is used to determine the total combined nonexempt assets for the client and their community spouse. The survey helps the couple plan for the use of their assets. The survey also identifies the amount of assets the client can transfer to the community spouse without affecting eligibility.

The term "community spouse" means the spouse is living in the community and is not applying for or receiving Department on Aging Services. For persons applying for or receiving Department on Aging services, the community spouse may be living with, or apart from the client.

Only complete a survey when the spouse of the client is considered a community spouse. Complete the survey when a person enters a long term care facility or supportive living facility, when notified that one spouse has applied for or receives Department on Aging Services, and any other time when requested by either spouse or by a representative acting on behalf of either spouse.

Advise both spouses of any information needed to complete the survey process. Information needed includes proof of ownership and the current value of nonexempt assets. The client’s eligibility is not affected if the community spouse refuses or fails to cooperate in disclosing information about the community spouse’s assets during the survey process.

The Community Spouse Asset Allowance (CSAA)

Relevant state law is as follows:

Illinois Administrative Code

The transfer of property is allowed, as determined in subsection (b) of this Section, by the client to the community spouse or to another individual for the sole  benefit of the community spouse in an amount that does not exceed the Community Spouse Asset Allowance (CSAA). The CSAA for 2008 is an amount up to but not greater that $104,400 that the individual may transfer, without affecting eligibility, to the community spouse or to another individual for the sole benefit of the community spouse. For 2008, the amount of assets an individual may transfer to his or her community spouse is $104,400 minus any nonexempt assets of the community spouse. The amount established as the CSAA shall be provided for calendar years after 2008 by the Department of Health and Human Services. The CSAA may exceed the standard annual figure established by the U.S. Department of Health and Human Services only in one of the following circumstances:

  • In a legal proceeding, a court approves the transfer of income-producing assets to the community spouse in an amount greater than the standard CSAA;
  • As the result of an appeal hearing (described in 89 Ill. Adm. Code 104.1), the Department determines that the transfer of income-producing assets to the community spouse in an amount greater than standard CSAA is necessary to raise the community spouse’s income to, but not more than, the Community Spouse Maintenance Needs Allowance (described in subsection (f) of this Section).

The Department will measure the amount of an allowable increase in the CSAA by the cost to purchase an actuarially sound single premium life annuity producing monthly payments that, when added to the community spouse’s income, will be sufficient to raise the community spouse’s income to, but not more than, the Community Spouse Maintenance Needs Allowance. If assets are insufficient to purchase such an annuity, the Department will measure the amount of an allowable increase in the CSAA by the cost to purchase an actuarially sound single premium life annuity producing monthly payments using available assets.

It is the appellant’s responsibility to provide the Department with an estimate from a reputable company of the cost to purchase the annuity.

The Department may compare the estimate with available information on the cost of other single premium life annuities.

In calculating the amount of the community spouse’s income after approval of an increased CSAA, the Department shall deem the amount of the annuity payments as being available to the community spouse, although it will not require the actual purchase of an annuity.

The appeal hearing, described in subsection (d)(2) of this Section, shall be held within 30 days after the date the appeal is filed.

Deductions are allowed from the MANG client’s non-SSI income for a Community Spouse Maintenance Needs Allowance and a Family Maintenance Needs Allowance for each dependent family member who is living with the community spouse and who does not have enough income to meet his or her needs. Family members include dependent children under age 21, dependent adult children, dependent parents or dependent siblings of either spouse. The amount of the deduction is determined as follows:

-The deduction for the Community Spouse Maintenance Needs allowance, as of 2008, is equal to the community spouse maintenance needs standard ($2,610) less any nonexempt monthly income of the community spouse. The amount established as the community spouse maintenance needs standard shall be provided for calendar years after 2008 by the Department of Health and Human Services. The deduction is allowed only to the extent the income of the individual is contributed to the community spouse. However, the deduction for the Community Spouse Maintenance Needs Allowance shall not be less than the amount ordered by the court for support of the community spouse or the amount determined as the result of the fair hearing. 89 Ill. Adm. Code 120.379 Subchapter b.

Illinois Department of Health and Human Services Policy Manual 07-02-21

Community Spouse Asset Allowance. The Community Spouse Asset Allowance (CSAA) applies only to long term care clients with a community spouse, and to MANG clients applying for or receiving DoA Services with a community spouse.

The CSAA is the amount of nonexempt assets that a client may transfer (without affecting eligibility) to their community spouse, or to another person for the sole benefit of the community spouse. The amount of the transfer is an allowable transfer that does not affect the client’s eligibility.

The CSAA is an amount not to exceed $104,400 except as specified below. The amount of assets that a client may transfer to their community spouse as the CSAA, is figured by subtracting the community spouse’s nonexempt assets from the $104,400 asset allowance standard. To exclude these assets when figuring the client’s eligibility, the assets must be transferred to or for the sole benefit of the community spouse. The client does not have to transfer their assets to the community spouse. Do not require the client to transfer the CSAA amount to the spouse. If the client chooses to not transfer assets to their spouse, count the assets towards the client’s eligibility.

In addition to the CSAA amount a client is allowed to transfer for the sole benefit of their spouse: personal effects, household goods, and one motor vehicle, regardless of their dollar value. In order for the transfer to not affect the client’s eligibility, the personal effects, household goods, and motor vehicle (if not exempted by PM 07-02-06-b) must be transferred to or for the sole benefit of the community spouse.

If the community spouse’s nonexempt assets exceed $104,400, do not allow a CSAA.

If the community spouse fails to disclose information about their assets, do not allow a CSAA.

Notify each spouse of the amount of nonexempt assets the client can transfer to their community spouse.

The amount allowed as the CSAA may only exceed the asset allowance standard of $104,400:

  • Because of a court order;
  • When an appeal decision determines that the transfer of income-producing assets in excess of the standard CSAA is needed to raise the community spouse’s income to the maximum amount permitted as the Community Spouse Maintenance Needs Allowance (CSMNA). See PM 15-04-04-a.

Appeal of Community Spouse Asset Allowance (CSAA). The appeal decision bases the amount of an allowable increase in the CSAA, on the cost of a single premium life annuity with fixed monthly payments equal to the amount needed to raise the community spouse’s income to the maximum amount permitted as the Community Spouse Maintenance Needs Allowance (CSMNA). See 15-04-04-a. Diversion of income from the client as the CSMNA is not considered in the appeal decision.

The appellant must provide a quote of the cost to buy the single premium life annuity. The quote must be from a company that offers annuities. If assets are less than the amount needed to buy the annuity, the appellant must provide a quote of the monthly annuity payments using available assets.

The appeal decision informs the local office of the amount to permit as the CSAA and of the amount of the fixed monthly annuity payments to treat as available to the community spouse, whether or not the annuity is purchased.

The actual purchase of the annuity is not required Count the monthly amount the annuity would pay as available to the community spouse, starting with the month following the month the assets are transferred. The monthly amount the annuity would pay is fixed and does not change.

Assets for the Community Spouse - Planning Options

It is critical for the practitioner to obtain accurate and detailed information on the value of and title to assets of the community and nursing home resident spouse as well as detailed income information, including investment income, in order to evaluate the planning options available for a community spouse.

Always remember that exempt assets (homestead property; two automobiles, personal and household goods, etc) may - and in most instances should - be transferred to the community spouse. In addition, joint assets may be spent to purchase joint exempt property and then later transferred to the community spouse.

Be careful not to transfer homestead property solely to the community spouse before expenditure of joint money on improvements, mortgage pay downs, etc. Do not apply for Medicaid until all expenditures have been made.

Refusal to Disclose Assets

DHS's current practice is to consider the assets of the community spouse in determining the eligibility of the institutionalized spouse only if the Medicaid applicant has transferred assets to the community spouse and wants a determination of the spousal asset allowance.

Where there have never been transfers from the nursing home spouse to the community spouse, the refusal to disclose assets option is the obvious choice. However, even where there have been transfers within the 36 months prior to applying for Medicaid, the refusal to disclose may be the best option. Be sure to calculate the penalty period for the transfer of assets to determine whether the expiration date has passed, or is acceptable to the client. The penalty period is calculated as any other penalty period.

Transfers to the Community Spouse


Spousal Asset Allowance Calculation.
Please note that in Illinois the Community Spouse Asset Allowance operates as an exception to the transfer of asset penalty rules, and is not a cap on the amount of nonexempt assets a community spouse may own.
 
The Community Spouse Asset Allowance is the amount of non-exempt assets the resident of a long term care facility may transfer (without affecting eligibility) to his or her community spouse or to another individual for the sole benefit of his or her spouse. This amount is considered an allowable transfer and is not considered in the determination of eligibility for the resident of the long term care facility.

The Community Spouse Asset Allowance is calculated by deducting non-exempt assets of the community spouse from the asset allowance standard of $104,400 in 2008. However, in order for assets to be excluded in the eligibility determination of the resident, the amount must actually be transferred to or for the sole benefit of the community spouse.
 
If the nursing home resident intends to transfer the assets and the assets cannot be transferred immediately, the resident is allowed up to 90 days from the date of application to make the transfer. If a court order is required, additional time may be granted.

Increased Community Spouse Asset Allowance (CSAA). Fair Hearing - The Illinois Annuity Model.

As described above, in Illinois, for a Community Spouse to obtain an increased CSAA through the administrative fair hearing process, the community spouse must obtain a quote for an annuity which would provide lifetime monthly income in the amount that is the difference between the spouse’s regular monthly income and the standard CSMNA, currently $2,610. The total amount of the CSAA which is allowed is the amount which would be the cost to purchase the annuity. The annuity amount includes the $104,400 (2008) standard CSAA amount. Although the spouse is not required to purchase the annuity, the monthly income which would be produced by the quoted annuity will be deemed to be paid to the community spouse thereby making the spouse ineligible for a diversion of income from the nursing home spouse.

Transfer by Court Order. Transfers to the community spouse by order of court are allowable regardless of the amount transferred.

Income for the Community Spouse - the Community Spouse Maintenance Needs Allowance

In general, once an individual is determined eligible for Medicaid coverage of long term care, his or her income, less certain allowable deductions, must be contributed toward the cost of care. One allowable deduction from income is the Community Spouse Maintenance Needs Allowance, which is an amount, calculated as set forth below, which the nursing home Medicaid recipient is allowed (but not required) to contribute to his or her spouse as support.

PM 15-04-04 Use of Income. Beginning with the first full month that a person is a long term care resident, or applies for or receives DoA services, the community spouse’s income is not considered available to meet the needs of the client.

The payment of nonexempt income from any source (including income from a trust) is considered available to the client and their community spouse as follows:

  • Nonexempt income paid solely to one spouse is considered available only to that person;
  • If income is paid to both spouses, ½ is considered available to each;
  • If income is paid in the names of one or both spouses and to another person(s), the income is considered available to each spouse in proportion to their share.

If the client can prove that the ownership interests in income are different than those listed above, use that proportion.

PM 15-04-04-a Community Spouse Maintenance Needs Allowance. Allow a deduction from income to meet a community spouse’s needs when the community spouse does not have enough income to meet their own needs. Do no allow this deduction from SSI. If the client has SSI and another income source, only allow a deduction up to the amount of the other income.

The Community Spouse Maintenance Needs Allowance (CSMNA) is the maintenance needs standard of $2,610 minus the community spouse’s gross income. This amount applies unless a court order requires support in a greater amount or as the result of a fair hearing. This deduction is not mandatory and is only allowed to the extent income is actually contributed to the community spouse.

Deduct the amount established as the Community Spouse Maintenance Needs Allowance when determining the amount of countable income to apply to medical care costs.

For a client applying for or receiving DoA services, do not allow a deduction for the Community Spouse Maintenance Needs Allowance if:

  • The client would be enrolled with a spend down, and countable monthly excess income to apply to medical care costs is greater than $1,800 (after allowing for the Community Maintenance Needs Allowance and/or the Family Maintenance Needs Allowance);
  • The client would be enrolled with a spend down, and excess nonexempt assets are greater than $8,000 (after allowing for the Community Spouse Asset Allowance and the $2,000 asset limit).

Support Responsibility of Community Spouses

Regulations governing DHS’s recovery of support from responsible relatives are set forth at 89 Ill. Admin. Code 103.10.

Community spouses of nursing home residents receiving Medicaid benefits are referred to the IDHS Field Recovery Unit for support enforcement action in the following circumstances:

  • The income of the community spouse is in excess of the standard Community SpouseMaintenance Needs Allowance ($2610 in 2008) per month;
  • The community spouse fails to disclose information regarding his/her income. PM 09-02-04-b.

Once referred, the Field Recovery Unit determines the monthly contribution it expects from a spouse of a nursing home Medicaid recipient based upon the spouse's gross monthly income as reflected on his or her most recent Federal Income Tax return. The Department applies its Table A to the adjusted gross income figure reflected in the tax return. DHS's Table A (schedule of responsible relative monthly support payments based on gross income and family size) is attached as Appendix B and can be found at WAG 09-02-02.

The administrative procedure and subpoena and enforcement powers of DHS to collect spousal support payments are set forth in the Public Aid Code, 305 ILCS 5/10-1 et. seq.

Liens and Estate Recoveries

Estate Recovery

Illinois statute authorizes DHS to make a claim on the probate estate of a deceased Medicaid recipient or the deceased Medicaid recipient's surviving spouse (but see Hines v. Department of Public Aid below) for all medical assistance payments made on behalf of the recipient while the person was over sixty-five (65) years of age or who was a resident of a long term care facility for at least 120 days. The amount of the State's claim includes:

  • All financial assistance paid to or on behalf of recipient;
  • All medical assistance paid out (except for Community Care Program Services) prior to October 1, 1993, for a recipient while 65 years of age or older;
  • All medical assistance paid out on or after October 1, 1993 for a recipient while 55 years of age or older;
  • All medical assistance paid out at any time for an medical assistance recipient who resided for at least 120 consecutive calendar days in one or more long term care facilities and the Department has a lien on the real property.

305 ILCS 5/5-13.

Under the Probate Act, DHS's claim constitutes a sixth (6th) class claim against the estate. However, an estate claim cannot be enforced while the Medicaid recipient's spouse, minor child, or disabled adult child survives. 42 USC 1396p(q).

In Hines v. Department of Public Aid, 358 Ill.App.3d 225, 831 N.E.2d 641, 294 Ill.Dec. 691, (3rd Dist. 2005) the Appellate Court ruled that state law at 305 ILCS 5/5-13 authorizing the state to recover Medicaid payments from the estate of a surviving spouse violates federal law. The court in Hines held that the state statute authorizing the Department to recover from the estate of a surviving spouse exceeded the authority granted by 42 U.S.C. 1396p(b). According to the court, 42 U.S.C. 1396p(b) expressly prohibits recovery of medical assistance except in three specific circumstances. Because recovery against the estate of spouse is not one of those circumstances, 42 U.S.C. 1396p(b) prohibits the state from recovering from a surviving spouse's estate. See, also, 89 Ill. Adm. Code 102.200; PM 23-09-00.

Imposition of Liens against Real Property

The Illinois Department of Healthcare and Family Services will file a lien on real property owned by a client who has received medical assistance and has resided for as least 120 calendar days in one or more long term care facilities. A person who has resided in a long term care facility for at least 120 days is presumed not to be reasonably expected to be discharged and return to his home. This presumption is for purposes of filing a lien only and does not affect the status of the client's homestead property as an exempt asset.

Day one of the 120 consecutive day period is the day the person first enters a long term care facility. A transfer to a hospital stay or another long term care facility does not interrupt the 120 day count.

The amount of the lien includes all financial assistance paid out at any time plus payments made by the Department to file the lien and keep the lien valid.

Exceptions

A lien will not be filed against the real property of a nursing home resident receiving Medicaid where the property is being occupied by:

  • The resident's spouse;
  • The resident's minor, disabled or blind child;
  • The resident's sibling who has an equity interest in the property and has legally resided in the property for a least one year before the resident entered the nursing home.

A lien will not be filed against the real property of a nursing home resident who is residing in the nursing home temporarily and the Department is allowing a deduction for the resident to maintain his residence in the community.

The State's lien may be enforced:

  • At any time there is a transfer of the person's real property;
  • In cases of fraud;
  • At the time of the death of the owner. See, generally, PM 23-09-00.

Note that the enabling statute allowing the Illinois Department of Healthcare and Family Services to file liens against the real estate owned by a public recipient only permits liens against real property interests and does not provide for liens against beneficial interests in land trusts. As interests in land trusts have been held to be personal property, the statute arguably does not authorize IDPA to lien interests in land trusts or other trusts. Kress Rd. Partnership v. Chicago Title & Trust Co., 134 Bankr.292 (Bankr. N.D. 1991).

Medicaid Appeals Process

Notice

Medicaid applicants and recipients are entitled to notice of any action affecting their claims or benefits. Community spouses of Medicaid applicants or recipients are also entitled to notice of any action affecting their community spouse asset or income allowances. In cases where DHS proposes to reduce, suspend, or terminate assistance, the notice must be at least ten days in advance of the proposed action (except in certain narrow circumstances, such as where the agency has factual information confirming the death of the recipient, or a change in the level of medical care has been prescribed by the recipient's physician). The notice must state action being taken, the decision of DHS, the supporting regulations, the right to hearing and the possible continuation of benefits pending hearing. In advance notice situations, if a recipient requests a hearing within the ten day prior notice period, DHS may not suspend, reduce, discontinue or terminate his or her benefits until a decision is rendered after hearing, unless the hearing examiner determines that the sole issue is one of law or unless the recipient has lost the benefits due to a separate change. 45 CFR 205.10(a)(6); 89 Ill. Adm. Code 102; PM 1-06-01.

Fair Hearings

A Medicaid applicant or recipient whose Medicaid benefits are denied, terminated, or reduced is entitled to a "fair hearing," which is a de novo review of the initial DHS decision. The applicant or recipient has 60 days to appeal a DHS decision, whether or not it is an "advance" notice situation. The 60 days runs from the issuance of the written notice. The time to appeal, however, is tolled when there is no written notice. The claimant is entitled to due process, to representation, and judicial review of the hearing decision.

The applicant/recipient should file the hearing request at the local DHS office making the decision or with the Assistance Hearings Section. A recipient may also telephone a request to the Assistance Hearings Section’s toll free number for filing appeals; however, there would be no proof of request for hearing if the Department lost the telephone request. 89 Ill. Adm. Code 104.10. DHS has hearing request forms, but any written request for a hearing will suffice.

The hearing must be conducted at a reasonable time and place, with adequate preliminary written notice, by an impartial official. If a person is disabled or hospitalized, DHS will, on request, hold the hearing in the appellant's home or hospital room. The request should be made when the appeal is filed. PM 01-07-10.

Prior to the hearing the claimant or his or her representative may examine the claimant's case file at the agency, as well as all documents and records to be used by the agency at the hearing. At the hearing itself, which is conducted by an IDHS hearing officer who did not participate in the agency's decision, the claimant or representative may present witnesses, evidence, and arguments and may confront and cross-examine adverse witnesses. The decision of the hearing officer must be based exclusively on the evidence at the hearing. Unless there is delay by the claimant, the decision must be issued, and (if favorable) implemented within 90 days of the request for the hearing. 42 C.F.R. 312.244(f); 89 Il. Adm. Code 104.70. (NOTE: the Department rarely, if ever, issues hearing decisions within 90 days. Expect 6 month or longer delays.)

Practice in Administrative Hearings

Regulations governing practice in Administrative Hearings are set forth at 89 Ill. Adm. Code 104 and policy is set forth at PM 01-07-10.

An appeal hearing is conducted by an impartial hearing officer authorized by the Department Director to consider the issue under appeal. The hearing is conducted in the county in which the appellant resides - in nursing home cases, the county where the nursing home is located.

The Assistance Hearing Section notifies the appellant and the local office of the time and place of the scheduled hearing.

The appellant and/or his representative have the right to present evidence and witnesses in their behalf and to refute testimony or other evidence and cross-examine witnesses.

The hearing is not bound by rules of evidence or rules of procedure but is conducted in a manner best calculated to conform to substantial justice.

Subpoena may be requested by the appellant and/or his representative prior to and/or at the hearing, and are granted at the discretion of the hearing officer. The hearing officer may defer ruling on a request for a subpoena until after available evidence has been gathered and heard at the hearing.

The appellant or the appellant's representative must appear at the scheduled hearing. If an appellant dies before the date of the hearing, the appeal may be continued by a representative. PM 01-07-10. A signed statement to authorize a representative is not required if the appellant dies before the date of the hearing.

During the hearing the appellant or the appellant's representative may request a continuance. The continuance may be granted for a reasonable period at the discretion of the hearing officer.

The appellant may request a postponement in writing to the local office or the Assistance Hearings Section before the scheduled hearing date. A verbal request may be made when the hearing is convened.

If the request is approved, the Assistance Hearings Section will send the appellant and/or the appellant's representative and the local office a letter (with the original appeal number), re-scheduling the hearing.

Judicial Review

Appeal of a Final Administrative Decision is made under the Illinois Administrative Review Act, 735 ILCS 5/3-101 et seq., by filing a complaint in the Circuit Court within 45 days from the date of the Decision. Under the Administrative Review Act, the Final Decision of the Department will only be reversed if it is against the manifest weight of the evidence or erroneous as a matter of law.

In the care of a transfer of assets made before the date of enactment of the Act the current law applies. Change in Beginning Date for Period of Ineligibility. Section 6011(b)(2) adds a new clause in the case of a transfer of assets made on or after the date of enactment of the Act, providing that the beginning date for the period of ineligibility is the first day of a month during or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance under the State plan and would otherwise be receiving institutional level of care based on an approved application for such care but for the application of the penalty period, whichever is later, and which dos not occur during any other period of ineligibility.

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