Author: Equip for Equality
Last updated: September 2012
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
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.
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.
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.
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.
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
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.
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:
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.
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.
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:
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:
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:
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.
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.
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:
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
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