No. 30945 (Amendment): R414-305. Resources

DAR File No.: 30945
Filed: 02/01/2008, 12:20
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this change is to clarify the spousal impoverishment resource assessment rules governing institutionalized married persons, to make changes to trust provisions for excluded trusts for disabled persons, to add provisions concerning the treatment of annuities in the determination of countable resources and transfers of assets, to clarify the time period the individual has to modify existing annuities to name the state as preferred remainder beneficiary, and to modify the process for undue hardship determinations due to a transfer of asset penalty.

Summary of the rule or change:

This change clarifies Medicaid policy for the division of assets among institutionalized and community spouses, clarifies policy for the transfer of resources from the institutionalized spouse to the community spouse, clarifies rules for excluded trusts for disabled persons in either individual special needs trusts or in pooled trusts, clarifies that annuities must meet the provisions of Subsection 1917(c) of the Social Security Act to have fair market value, clarifies that the state gives individuals a period of time to bring annuities into compliance and specifies the consequences of noncompliance, includes a provision to count annuities that an individual or spouse owns as an available resource unless the annuity meets certain criteria defined under the Internal Revenue Code, and modifies the requirements for requesting an undue hardship in the case of a transfer of asset penalty.

State statutory or constitutional authorization for this rule:

Section 26-18-3

Anticipated cost or savings to:

the state budget:

The department anticipates a savings as a result of these changes. The first savings will be in nursing home costs for people who have annuities valued at more than the allowed resource limits. While it is difficult to assess exactly how many individuals may not be eligible based on these changes, the department estimates an annual savings of $644,700 for nursing home care, of which $193,400 will go the General Fund, and $451,300 will be in federal dollars. The changes in trust rules may increase the amount of funds remaining in special needs and pooled trusts that the state may recover under the repayment agreement, but the state cannot predict what it will recoup.

local governments:

There is no impact on local governments because local governments do not determine Medicaid eligibility and they are not Medicaid providers.

small businesses and persons other than businesses:

Individuals who own annuities may be ineligible for months or even years depending on the value of the annuities they own. This will cause them to pay for their own nursing home care. Based on the estimated savings to the state and the difference in private pay costs, individuals denied Medicaid could incur costs around $936,000.

Compliance costs for affected persons:

An individual who cannot receive Medicaid because his own annuities cause him to fail the resource limit will have to pay for his own medical costs. It is difficult to determine the cost he may incur for noninstitutional care, but the estimate for institutional care is around $6,000 a month for private care. A disabled individual who has a special needs trust or pooled trust will incur no additional costs because the changes primarily affect the repayment requirement that takes effect when the person dies. There are no compliance costs for any other persons or small businesses.

Comments by the department head on the fiscal impact the rule may have on businesses:

Any fiscal impact maintaining the cost of long term care with the individual when resources exist to pay for that care is appropriate. Businesses that serve these individuals will be paid privately until the resources are exhausted. David N. Sundwall, MD, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Health
Health Care Financing, Coverage and Reimbursement Policy
CANNON HEALTH BLDG
288 N 1460 W
SALT LAKE CITY UT 84116-3231

Direct questions regarding this rule to:

Craig Devashrayee at the above address, by phone at 801-538-6641, by FAX at 801-538-6099, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

03/17/2008

This rule may become effective on:

03/24/2008

Authorized by:

David N. Sundwall, Executive Director

RULE TEXT

R414. Health, Health Care Financing, Coverage and Reimbursement Policy.

R414-305. Resources.

R414-305-3. Spousal Impoverishment Resource Rules for Married Institutionalized Individuals.

(1) This section establishes the standards for the treatment of resources for married couples when one spouse is institutionalized and the other spouse is not institutionalized.

(2) To determine the value of the total joint resources of an institutionalized individual and a community spouse, and the spousal assessed share, the provisions of 42 U.S.C. 1396r-5, which are commonly known as the spousal impoverishment rules, shall apply.[

(2) To determine the countable resources of an institutionalized individual who has a community spouse, the Department adopts Section 1924(a), (c) and (f) of the Compilation of the Social Security Laws, in effect January 1, 1999, which is incorporated by reference. The Department adopts section 6013 of Pub. L. 109-171 which is incorporated by reference.] Insofar as any provision of this rule is inconsistent with applicable federal law, the applicable federal law governs over the inconsistent rule provision.

(3) The resource limit for an institutionalized individual is $2,000.

(4) At the request of either the institutionalized individual or the individual's spouse and upon receipt of relevant documentation of resources, the Medicaid eligibility agency shall assess and document the total value of resources using the methodology described in Subsection R414-305-3(5) as of the first continuous period of institutionalization or application for Medicaid home and community-based waiver services. The Medicaid eligibility agency shall notify the requester of the results of the assessment. The individual does not have to apply for Medicaid or pay a fee for the assessment.

(5) The assessment is a computation of the total value of resources in which the institutionalized individual or the community spouse has an ownership interest. The spousal share is equal to one-half of the total value computed. The resources counted for the assessment are those the couple has on the date that one spouse becomes institutionalized or applies for Medicaid for home and community-based waiver services, and the other spouse remains in the community and is not eligible for Medicaid for home and community-based waiver services.

(a) The community spouse's assessed share of resources is one-half of the total resources. However, the protected resource allowance for the community spouse may be less than the assessed share.

(b) Upon application for Medicaid, the Medicaid eligibility agency sets the protected share of resources for the community spouse when countable resources equal no more than the community spouse's protected share as determined under 42 U.S.C. 1396r-5(f) plus the resource limit for the institutionalized spouse.

(c) The Medicaid eligibility agency sets the community spouse's protected share of resources at the community spouse's assessed share of the resources with the following exceptions.

(i) If the spouse's assessed share of resources is less than the minimum resource standard, the protected share of resources is the minimum resource standard.

(ii) If the spouse's assessed share of resources is more than the maximum resource standard, the protected share of resources is the maximum resource standard.

(iii) The Department uses the minimum and maximum resource standards permitted under 42 U.S.C. 1396r-5(f) to determine the community spouse's protected share.

(d) In making a decision to modify the community spouse's protected share of resources, the Department follows the "income first" rule found at 42 U.S.C. 1396r-5(d)(6).

(6) The Department counts any resource owned by the community spouse in excess of the community spouse's protected share of resources to determine the institutionalized individual's initial Medicaid eligibility.

(7) After the Medicaid eligibility agency establishes eligibility for the institutionalized spouse, the Department allows a protected period lasting until the time of the next regularly scheduled eligibility redetermination for an institutionalized individual to transfer resources to the community spouse to bring the resources held only in the name of the community spouse up to the amount of the community spouse's protected share of resources and to bring the resources held only in the name of the institutionalized spouse down to the Medicaid resource limit.

(8) The Department does not count resources held in the name of the community spouse as available to the institutionalized spouse beginning the month after the month in which the Medicaid eligibility agency establishes eligibility.

([4]9) If an individual[ client] is otherwise eligible for institutional Medicaid, the Department does not count the community spouse's resources as available to the institutionalized individual[but is unable to comply with spousal impoverishment rules and claims undue hardship] because of an uncooperative spouse or because the spouse cannot be located[, the client may obtain institutional Medicaid by assigning support rights to the State of Utah] if all of the following criteria are met:[.

(5) "Undue hardship" in regard to counting a spouse's resources as available to the institutionalized client means:]

(a) The [client]individual assigns support rights to the State.

(b) The [client]individual will not be able to get the medical care needed without Medicaid.

(c) The [client]individual is at risk of death or permanent disability without institutional care.[

(6) The agency will determine the client's eligibility for institutional Medicaid without regard to the spouse's resources if both of the following conditions are met:

(a) The spouse cannot be located or will not provide information needed to determine eligibility.

(b) The client meets the undue hardship criteria including assigning support rights to the State.

(7) The assessed spousal share of resources shall not be less than the minimum amount nor more than the maximum amount mandated by section 1924(f) of the Compilation of the Social Security Laws in effect January 1, 1999.

(8) Any resource owned by the community spouse in excess of the assessed spousal share is counted to determine the institutionalized client's initial Medicaid eligibility.

(9) A protected period, after eligibility is established, lasting until the time of the next regularly scheduled eligibility redetermination is allowed for an institutionalized client to transfer resources to the community spouse.

(10) After eligibility is established for the institutionalized client, those resources held in the name of the community spouse will not be considered available to the institutionalized client to determine the countable resources of the institutionalized client.]

 

R414-305-4. [Medicaid Qualifying]Treatment of Trusts.

[The Department adopts Section 1902(k) of the Compilation of the Social Security Laws, 1993 ed., which is incorporated by reference.]This section defines requirements for the treatment of assets held in a trust to determine eligibility for Medicaid. The Department applies all provisions of 42 U.S.C. 1396p(d) dealing with trust assets in determining Medicaid eligibility. This section provides additional provisions for particular types of trusts.

(1) Medicaid Qualifying Trusts established before August 11, 1993. The Department applies the criteria in Section 1902(k) of the Compilation of the Social Security Laws, 1993 ed., in determining the availability of trusts established before August 11, 1993. This section of the Social Security Act was repealed in 1993, but the provisions still apply to trusts created before the date it was repealed. The requirements of that section are as follows; however, if there is a conflict between the 1993 provisions of Section 1902(k) and the provisions of Subsections R414-305-4(1)(a), (b), and (c), the 1993 provisions of Section 1902(k) control.

(a) A Medicaid qualifying trust is a trust, or similar legal device, established (other than by will) by an individual (or an individual's spouse) under which the individual may be the beneficiary of all or part of the payments from the trust. The distribution of such payments is determined by one or more trustees who are permitted to exercise some amount of discretion with respect to the distribution to the individual.

(b) The amount of the trust property that is counted as an available resource to the applicant or recipient who established the trust (or whose spouse established the trust) is the maximum amount that the trustee is permitted to distribute under the terms of the trust for such individual's benefit. This amount of property is counted as available whether or not it is actually disbursed by the trustee or received by the beneficiary. It does not matter whether the trust is irrevocable nor whether it is established for a purpose other than to qualify for Medicaid.

(c) Payments made from the available portion of the trust do not count as income because the available portion of the trust is counted as a resource. If payments are made from any portion of the trust that is not counted as a resource, the payments are counted as income in the month received.

(2) Trust for a Disabled Person under Age 65 established in compliance with 42 U.S.C. 1396p(d)(4)(A). These trusts are commonly known as a special needs trust for a disabled person. Assets held in a trust complying with the provisions in Subsection R414-305-4(2) and (4) do not count as available resources.

(a) The individual trust beneficiary must meet the disability criteria found in 42 U.S.C. 1382c(a)(3). The trust must be established and assets transferred to the trust before the disabled individual reaches age 65.

(b) The trust must be established solely for the benefit of the disabled individual by a parent, grandparent, legal guardian of the individual, or the court.

(c) The trust may only contain the assets of the disabled individual. The Department treats any additions to the trust corpus with assets not belonging to the disabled trust beneficiary as a gift to the trust beneficiary. Such additions irrevocably become part of the trust corpus and are subject to all provisions of Medicaid restrictions that govern special needs trusts.

(d) The trust must be irrevocable. No one may have any right or power to alter, amend, revoke, or terminate the trust or any of its terms, except that the trust may include language that provides that the trust may be amended but only if necessary to conform with subsequent changes to the requirements of 42 U.S.C. 1396p(d)(4)(A) or synonymous state law.

(e) The trust cannot be altered or converted from an individual trust to a "pooled trust" under 42 U.S.C. 1396p(d)(4)(C).

(f) The trust must terminate upon the death of the disabled individual or exhaustion of trust corpus and must include language that specifically provides that upon the death of the beneficiary or early termination of the trust, whichever occurs first, the trustees will notify Medicaid and will pay all amounts remaining in the trust to the State up to the total amount of medical assistance the State has paid on behalf of the individual. The trust shall comply fully with this obligation to first repay the State without requiring the State to take any action except to establish the amount to be repaid.

(g) The sole lifetime beneficiary of the trust must be the disabled individual, and the Medicaid agency must be the preferred remainder beneficiary. Distributions from the trust during the beneficiary's lifetime may be made only to or for the benefit of the disabled individual.

(h) The Department continues to exclude assets held in the trust from countable resources after the disabled individual reaches age 65. Subsequent additions to the trust other than interest on the corpus after the person turns 65 are not assets of an individual under age 65 and the Department treats the transfer as a transfer of resources for less than fair market value which may create a period of ineligibility for certain Medicaid services.

(i) A trust that provides benefits to other persons is not an individual special needs trust and does not the meet the criteria to be excluded from resources.

(j) A corporate trustee may charge a reasonable fee for services.

(k) The trust may compensate a guardian only as provided by law. The trust may not compensate the parent of a minor child from the trust as the child's guardian.

(l) Additional trusts cannot be created within the special needs trust.

(3) Pooled Trust for Disabled Individuals. A pooled trust is a specific trust for disabled individuals established pursuant to 42 U.S.C. 1396p(d)(4)(C) that meets all of the following conditions.

(a) The trust contains the assets of disabled individuals.

(b) The trust must be established and managed by an entity that has been granted non-profit status by the Internal Revenue Service. The non-profit entity must submit to the State a letter documenting the non-profit status with the trust documents.

(c) The trustees must maintain a separate account for each disabled beneficiary whose assets are placed in the pooled trust; however, for the purposes of investment and management of the funds, the trust may pool the funds from the individual accounts. If someone other than the beneficiary transfers assets to the pooled trust administrator to be used on behalf of that beneficiary of the pooled trust, the Deparment treats such assets as a gift to that beneficiary, which the administrator must add to and manage as part of the balance of the beneficiary's account and which are subject to all provisions of Medicaid restrictions that govern pooled trusts.

(d) Accounts in the trust must be established solely for the benefit of individuals who are disabled as defined in 42 U.S.C. 1382c(a)(3).

(e) The trust must be irrevocable; accounts set up in the trust must be irrevocable.

(f) Individual accounts may be established only by the parent, grandparent or legal guardian of the individual, by the individual, or by a court.

(g) An initial transfer of funds or any additions or augmentations to a pooled trust account by an individual 65 years of age or older is a transfer of assets for less than fair market value and may create a period of ineligibility for certain Medicaid services.

(h) The disabled individual cannot control any spending by the trust.

(i) Individual trust accounts may not be liquidated prior to the death of the beneficiary without first making payment to the State for medical assistance paid on behalf of the individual.

(j) The trust must include language that specifically provides that upon the death of the trust account beneficiary, the trustees will notify the Medicaid agency and will pay all amounts remaining in the beneficiary's account to the State up to the total medical assistance paid on behalf of the beneficiary. The trust may retain a maximum of 50 percent of the amount remaining in the beneficiary's account at death to be used for other disabled individuals if the trust has established provisions by which it will assure that such retained funds are used only for individuals meeting the disability criteria found in 42 U.S.C. 1382c(a)(3).

(k) A pooled trust that retains some portion of a deceased beneficiary's trust funds must describe how retained funds are used for other disabled persons. Any funds that are placed in an individual beneficiary's account or that are used to set up an account for an individual beneficiary who does not otherwise have funds to place in the pooled trust are subject to all of the provisions of Medicaid restrictions that govern pooled trusts. The pooled trust may include a plan for using retained funds only for incidental, one-time services to qualified disabled individuals who do not have accounts in the pooled trust.

(4) The following provisions apply to both individual trusts and pooled trusts described in Subsection R414-305-4(2) and (3).

(a) No expenditures may be made after the death of the beneficiary prior to repayment to the State, except for federal and state taxes and necessary and reasonable administrative costs of the trust incurred in closing the trust.

(b) The trust must provide that if the beneficiary has received Medicaid benefits in more than one state, each state that provided Medicaid benefits shall be repaid. If the remaining balance is insufficient to repay all benefits paid, then each state will be paid its proportionate share.

(c) The trust or an attached schedule must identify the amount and source of the initial trust property. The disabled individual must report subsequent additions to the trust corpus to the Medicaid eligibility agency.

(d) If the trust is funded, in whole or in part, with an annuity or other periodic payment arrangement, the State must be named in controlling documents as the preferred remainder beneficiary in the first position up to the total amount of medical assistance paid on behalf of the individual.

(i) Any funds remaining after full repayment of the medical assistance can be paid to a secondary remainder beneficiary.

(ii) The Department treats any provision or action that does or will divert payments or principal from such annuity or payment arrangement to someone other than the excluded trust or the Medicaid agency as a transfer of assets for less than fair market value with the exception that any remainder after the Medicaid agency has been fully repaid may be paid to a secondary beneficiary.

(e) The Department counts cash distributions from the trust as income in the month received.

(f) The Department counts retained distributed amounts as resources beginning the month following the month such amounts are distributed. The Department applies the applicable resource rules to assets purchased with trust funds and given to the beneficiary as his or her personal possessions. The disabled individual must report the receipt of payments or assets from the trust within 10 days of receipt. The Department excludes assets purchased with trust funds if the trust retains ownership.

(g) The Department counts distributions from the trust covering the individual's expenses for food or shelter as in-kind income to determine Medicaid eligibility in the month paid.

(h) If expenditures made from the trust also incidentally provide an ongoing and continuing benefit to other persons, those other persons who also benefit must contribute a pro-rata share to the trust for the expenses associated with their use of the acquisition.

(i) Contracts to provide personal services to the disabled individual must be in writing, describe the services to be provided, pay fair market rate consistent with rates charged in the community for the type and quality of services to be provided, and be executed in advance of any services being provided and paid. The Medicaid eligibility agency may require a statement of medical need for such services from the individual's medical practitioner. If the person who is to provide the services is a family member or friend, the Medicaid eligibility agency may require verification of the person's ability to carry out the needed services.

(j) Distributions from the trust made to or for the benefit of a third party that are not for the benefit of the disabled individual are treated as a transfer of assets for less than fair market value and may create a period of ineligibility for certain Medicaid services. This includes such things as payments of the expenses or travel costs of persons other than a medically-necessary attendant.

(k) The beneficiary must submit an annual accounting of trust income and expenditures and a statement of trust assets to the Medicaid eligibility agency upon request or upon any change of trustee.

(5) Assets held in a pooled trust complying with the provisions in Subsection R414-305-4(3) and (4) are not counted as available resources.

(6) 42 U.S.C. 1396p(d)(4)(B), provides for an exemption from the trust provisions for qualified income trusts (also known as Miller Trusts). Special provisions for this form of trust apply, under federal law, only in those states that do not provide medically needy coverage for nursing facility services. Because Utah covers services in nursing facilities under the medically needy coverage group of the Medicaid program, the establishment of a qualified income trust shall be treated as an asset transfer for the purposes of qualifying for Medicaid. This presumption shall apply whether the individual is seeking nursing facility services or home and community based services under one of the waiver programs.

 

R414-305-6. Transfer of Resources for Institutional Medicaid.

(1) This section establishes the standards for the treatment of transfers of assets for less than fair market value to determine eligibility for nursing home or other long-term care services under a home and community based services waiver.

(2) [The Department adopts Subsection 1917(c) of the Compilation of the Social Security Laws, in effect January 1, 1999, which is incorporated by reference. The Department adopts sections 6011, 6012, and 6016 of Pub. L. 109-171 which are incorporated by reference.]The Department applies the provisions of 42 U.S.C. 1396p(c) and (e) to determine if a sanction period applies for a transfer of assets for less than fair market value. In so far as any provision of this rule is inconsistent with applicable federal law, the applicable federal law governs over the inconsistent rule provision.

(3) If an individual or the individual's spouse transfers the home or life estate or any other asset on or after the look-back date based on an application for long-term care Medicaid services, the transfer requirements of [Section 1917(c) of the Compilation of the Social Security Act ]42 U.S.C. 1396p(c) and (e) apply.

(4) If an individual or the individual's spouse transfers assets in more than one month on or after February 8, 2006, the uncompensated value of all transfers including fractional transfers are combined to determine the sanction period. The Department applies partial month sanctions for transferred amounts that are less than the monthly average private pay rate for nursing home services.

(5) In accordance with 42 U.S.C. 1396p(c), the sanction period for a transfer of assets that occurs on or after February 8, 2006, begins the first day of the month during or after which assets were transferred or the date on which the individual is eligible for Medicaid coverage and would otherwise be receiving institutional level care based on an approved application for Medicaid but for the application of the sanction period, whichever is later.

(a) If a previous sanction period is already in effect on the date the new sanction period would begin, the new sanction period begins immediately after the previous one ends.

(b) Sanction periods are applied consecutively so that they do not overlap.

(6) If an individual or spouse transfers assets in more than one month before February 8, 2006, the uncompensated value of all transfers that occurred in each month are combined to determine the sanction period. The Department repeats this calculation for each month during which transfers occurred.

(a) For assets transferred before February 8, 2006, the sanction begins on the first day of the month in which the resource was transferred unless a previous sanction is in effect, in which case the sanction begins on the first day of the month immediately following the month the previous sanction period ends.

(b) If the total value of assets transferred in one month does not exceed the average private pay rate and the transfer occurred before February 8, 2006, the Department does not apply partial month sanctions.

([5]7) If assets are transferred during any sanction period, the sanction period for those transfers will not begin until the previous sanction has expired.

([6]8) If a transfer occurs, or the Medicaid eligibility agency discovers an unreported transfer, after an individual has been approved for Medicaid for nursing home or home and community based services, the sanction begins on the first day of the month after the month the asset is transferred.

([7]9) The statewide average private-pay rate for nursing home care in Utah used to calculate the sanction period for transfers is $4,526 per month.

([8]10) To determine if a resource is transferred for the sole benefit of a spouse, disabled or blind child, or disabled individual, a binding written agreement must be in place which establishes that the resource transferred can only be used to benefit the spouse, disabled child, or disabled individual, and is actuarially sound. The written agreement must specify the payment amounts and schedule. Any provisions in such agreement that would benefit another person at any time nullifies the sole benefit provision. [except for exempt]An excluded trust[s] established under [section 1917(d) of the Compilation of the Social Security Laws, January 1, 1999 ed.]42 U.S.C. 1396p(d)(4), that [provide for repayment of the state Medicaid agency or provide for a pooled trust to retain a portion of the remainder]meets the criteria in Section R414-305-4 does not have to meet the actuarially sound test.

([9]11) The Department shall not impose a[No] sanction [is imposed when ]if the total value of a whole life insurance policy is:

(a) irrevocably assigned to the state; and

(b) the recipient is the owner of and the insured in the policy; and

(c) no further premium payments are necessary for the policy to remain in effect.

(d) At the time of the client's death, the state shall distribute the benefits of the policy as follows:

([a]i) Up to $7,000 can be distributed to cover burial and funeral expenses. The total value of this distribution plus the value of any irrevocable burial trusts and[/or] the burial and funeral funds for the client can[]not exceed $7,000.

([b]ii) An amount to the state that is not more than the total amount of previously unreimbursed medical assistance correctly paid on behalf of the client.

([c]iii) Any amount remaining after payments are made as defined in [a.]Subsection R414-305-6(11)(d)(i) and [b.]Subsection R414-305-6(11)(d)(ii) will be made to a remainder beneficiary named by the client.

([10]12) If the [agency]Medicaid eligibility agency determines that a sanction period applies for an otherwise eligible institutionalized person, the [agency]Medicaid eligibility agency shall notify the individual that [the individual is ineligible]the Department will not pay the costs for nursing home or other long-term care services because of the sanction. The notice shall include when the sanction period begins and ends. The individual may request a waiver of the sanction period based on undue hardship. The individual must send a written request for a waiver of the sanction period due to undue hardship to the [agency]Medicaid eligibility agency within 30 days [after]of the [mailing ]date printed on[of] the sanction notice. The request must include an explanation of why the individual believes undue hardship exists. The State will make a decision on the undue hardship request within 30 days of receipt of the request.

([11]13) [Clients that]An individual who claims an undue hardship as a result of a sanction period for a transfer of resources must meet both of the following conditions:

(a) The [client]individual or the person who transferred the resources [has exhausted all]cannot access the asset immediately; however, the Department requires the individual to exhaust all reasonable means including legal remedies to regain possession of the transferred resource.

(i) [It is considered]The State may determine it is unreasonable to require the client to take action if a knowledgeable source confirms based on facts showing that it is doubtful those efforts will succeed.

(ii) [It]The State may determine that it is unreasonable to require the client to take action based on evidence that it would be more costly than the value of the resource, and

(b) Application of the sanction for a transfer of resources would deprive the [client]individual of medical care such that the [client]individual's life or health would be endangered, or would deprive the [client]individual of food, clothing, shelter or other necessities of life.

(14) If the State waives the sanction period based on undue hardship, the Medicaid eligibility agency will notify the individual. The Department shall provide Medicaid coverage on the condition that the individual take all reasonable steps to regain the transferred assets. The Medicaid eligibility agency will notify the individual of the date the individual must provide verifications of the steps taken. The individual must, within the time frames set by the Medicaid eligibility agency, verify to the Medicaid eligibility agency that individual has taken all reasonable actions. The State shall review the undue hardship waiver and the actions the individual has taken to try to regain the transferred assets. The time period for the review shall not exceed six months. Upon such review, the State will decide if:

(a) The individual must take additional steps and whether undue hardship still exists, in which case the Medicaid eligibility agency will notify the individual of the continuation of undue hardship and the need to take additional steps to recover the assets;

(b) The individual has taken all reasonable steps, they have proven unsuccessful and additional steps will likely be unsuccessful, in which case the Medicaid eligibility agency will notify the individual that no further actions are required and if the individual continues to meet eligibility criteria, the Department will not apply the sanction period; or

(c) The individual has not taken all reasonable steps, in which case the Department will discontinue the undue hardship waiver, the sanction period will then be applied and the individual will be responsible to repay Medicaid for services and benefits received during the months the undue hardship waiver was in place.

(15) Based on a review of the facts about what happened to the assets, whether the individual has taken reasonable steps to recover or regain the assets, the results of those steps, and the likelihood that additional steps will prove unsuccessful or too costly, the State may determine that the individual cannot recover or regain the transferred resource. If the State decides that the assets cannot be recovered and that applying the sanction will result in undue hardship, the Department will not apply a sanction period or will end a sanction period that has already begun.

([12]16) The [Department]State bases its decision that undue hardship exists upon the [client's ]medical condition and the financial situation of the [client]individual. The [Department will consider]State compares the income and resources of the [client]individual, [client]individual's spouse, and parents of an unemancipated [client]individual to the cost of providing medical care and daily living expenses to decide if the financial situation creates an undue hardship. The [agency]Medicaid eligibility agency shall send a written notice of its decision on the undue hardship request. The [client]individual has 90 days from the date [of mailing of]printed on the notice of decision [concerning the request for an undue hardship waiver ]that is mailed to the individual to file a request for a fair hearing.

([13]17) The portion of an irrevocable burial trust that exceeds $7,000 is considered a transfer of resources. The Department deducts the value of any fully paid burial plot, as defined in R414-305-1(3)(a),[ shall be deducted] from such burial trust first before determining the amount transferred.[

(14) If more than one transfer has occurred and the sanction periods would overlap, the sanctions will be applied consecutively so that they do not overlap. If a resource was transferred before February 8, 2006, the sanction begins on the first day of the month in which the resource was transferred unless a previous sanction is in effect, in which case the sanction begins on the first day of the month immediately following the month the previous sanction ends.]

 

R414-305-9. Treatment of Annuities.

This section defines how annuities are treated in the determination of eligibility for Medicaid.

(1) An individual must report any annuities in which either the individual or the individual's spouse has any interest at application for Medicaid, at each review, and as part of the change reporting requirements. Parents of a minor individual must report any annuities in which the child or either of the parents has an interest.

(2) For annuities purchased on or after February 8, 2006, in which the individual or spouse has an interest, the provisions in 42 U.S.C. 1396p(c) applies. The Department treats annuities purchased on or after February 8, 2006 that do not meet the requirements of 42 U.S.C. 1396p(c) as a transfer of assets for less than fair market value.

(3) With the exception of annuities that meet the criteria in Subsection R414-305-9(4), annuities in which the individual, the individual's spouse or a minor individual's parent has an interest are counted as an available resource to determine Medicaid eligibility, whether they are irrevocable or non-assignable. The Department presumes that a market exists that will purchase annuities or the stream of income from annuities, and therefore, they are available resources. The individual can rebut the presumption that the annuity can be sold by providing evidence that the individual has been rejected by several entities in the business of purchasing annunites or the revenue stream from annuities, in which case, the Department will not consider the annuity as an available resource.

(4) For individuals eligible under the aged, blind, or disabled category Medicaid, the Department excludes an annuity from countable resources in the form of the periodic payment if it meets the requirements of this subsection (4). For Family-Related Medicaid programs, all annuities are countable resources if the individual can access the funds, even if the annuities qualify as retirement funds or plans.

(a) The annuity is either an individual retirement annuity according to Section 408(b) of the Internal Revenue Code (IRC) of 1986 or a deemed Individual Retirement Account under a qualified employer plan according to Section 408(q) of the IRC; or

(b) The annuity is purchased with the proceeds from one of the following:

(i) As described in Sections 408(a), (c), or (p) of the IRC, a traditional IRA, accounts or trusts which are treated as a traditional IRA, or a simplified retirement account;

(ii) A simplified employee pension (Section 408(p) of the IRC); or

(iii) A Roth IRA (Section 408A of the IRC); and

(c) The annuity is irrevocable and non-assignable, the individual who was the owner of the retirement account or plan is receiving equal periodic payments at least quarterly with no deferral or balloon payments, and the scheduled payout period is actuarially sound based on the individual's life expectancy.

(d) If the individual purchases or annuitizes such annuities on or after February 8, 2006, then the annuities must name the State as the preferred remainder beneficiary in the first position upon the individual's death, or as secondary remainder beneficiary after a surviving spouse or minor or disabled child.

(5) Annuities purchased after February 8, 2006, in which the individual or the spouse has an interest are a transfer of assets for less than fair market value unless the annuity names the State as the preferred remainder beneficiary in the first position, or in the second position after a surviving spouse, or a surviving minor or disabled child, up to the amount of medical assistance paid on behalf of the institutionalized individual.

(a) The State shall give individuals who have purchased annuities before applying for long-term care Medicaid, 30 days to request the issuing company to name the State as the preferred remainder beneficiary and to verify that fact to Medicaid.

(b) The individual must verify to the Medicaid eligibility agency that the change in beneficiary has been made by the date requested by the Medicaid eligibility agency.

(c) If the change of beneficiary is not completed and verified, the annuities are a transfer of resources and the Department applies the applicable sanction period. If the Medicaid eligibility agency has approved institutional Medicaid coverage pending verification, Medicaid coverage for long-term care ends and the sanction period will begin effective the day after the closure date.

(6) The Department treats an annuity purchased before February 8, 2006, as an annuity purchased on or after February 8, 2006, if the individual or spouse take any actions that change the course of payments to be made or the treatment of the income or principal of the annuity. Such actions include additions of principal, elective withdrawals, requests to change the distribution of the annuity, elections to annuitize the contract, or other similar actions. Routine changes and automatic events that do not involve an action or decision from the individual or spouse do not cause an annuity purchased before February 8, 2006, to be treated as one purchased on or after February 8, 2006.

(7) If a sanction for a transfer of assets begins because the individual or the individual's spouse has not changed an annuity to name the State as the preferred remainder beneficiary of the annuity, the sanction for a transfer will not end until the date such change of beneficiary has been completed and verified to the Medicaid eligibility agency. The sanction period will not be rescinded.

(8) If all information about annuities the individual or spouse has an interest in is not provided by the requested due date, the Medicaid eligibility agency will deny the application. The individual may reapply, but the original application date will not be protected.

(9) The issuer of the annuity must inform the Medicaid eligibility agency of any change in the amount of income or principal being withdrawn from the annuities, any change of beneficiaries, or any sale or transfer of the annuity. The issuer of the annuity must inform the State if a surviving spouse or a surviving minor or disabled child attempts to transfer the annuity or any portion of the annuity to someone other than the Medicaid agency.

 

KEY: Medicaid

Date of Enactment or Last Substantive Amendment: [July 25, 2006]2008

Notice of Continuation: January 31, 2008

Authorizing, and Implemented or Interpreted Law: 26-18