Par. 1.  Material Transmitted and Purpose --Transmitted with this Manual Letter are changes to Service Chapter 510-05, Medicaid Eligibility Factors:

05-12-05.   Cooperation - Third Party Liability 

Language was added to the first paragraph of subsection 2 to clarify that an individual’s spouse must also cooperate.

2.	As a condition of eligibility, legally able applicants or recipients and their spouses must cooperate with the department and county agency in identifying and providing information to assist Medicaid in pursuing third parties who may be liable to pay for care or services, unless there is good cause not to cooperate. 

Language was added to subdivisions d and e of subsection 2 to clarify that cooperation includes paying medical payments, received by the recipient, to the department, and in identifying information.  These changes bring the policy language in line with federal regulations.

d. 	Pay to the agency any medical payments received that are covered by the assignment of benefits; and
e. 	Take any other reasonable steps to assist the state in securing third party payments and in identifying information to assist the state in pursuing any liable third party.

05-45-35.   Income Disregards and Deductions for the Family Coverage Group 

Language was changed in subsection 2 b from “33 and 1/3%” to “1/3” for clarification.

b. 	For each employed member of the unit, a disregard equal to 1/3 of the balance of earned income (after deducting the employment expense allowance) is disregarded.

05-70-10.   Asset Considerations 

A new paragraph was added to the end of subsection 1 to show that property an individual gives to another to be held for the individual’s use is still considered available to the individual.  This policy ties in with the new policy in 05-70-30 (Excluded Assets), 05-70-50 (Trusts), and 05-80-25 (5) (Exceptions to Disqualifying Transfer Provision).

The surrender or equity value of any money, insurance, or other property given to another person or entity to be held for the use of a member of the Medicaid unit is considered to be held in trust and is available to the extent provided in 510-05-70-50 (Trusts).

05-70-30.   Excluded Assets

Language was added to subsection 3, in three places, to address situations where funds, insurance, or other property is given to someone else in contemplation that it be used to meet the individual’s burial needs. If the individual does not own the burial plan, it is considered to be held in trust for the individual, and thus available to the individual and must be considered towards the burial exclusion.  This includes funds set aside in a separate account or used to purchase insurance or any other burial product.  Amounts in excess of the $3000 burial exclusion are a countable asset.  This is new policy that must be applied when processing applications and redeterminations beginning April 1, 2004.  This policy ties in with the new policy in 05-70-10 (Asset Considerations), 05-70-50 (Trusts), and 05-80-25 (5) (Exceptions to Disqualifying Transfer Provision).  Changes are planned for the application and redetermination forms to ask more specific questions about burial plans.  Until the changes are made it will be necessary to ask applicants and recipients (at redetermination) whether they have made any funeral arrangements or given someone else money, property, or insurance to pay for funeral expenses.
The first addition is in the first paragraph of subsection 3.  It states that the $3000 exclusion applies to prepayments or deposits designated for burial regardless of ownership.  The provision that the burial had to be maintained by the individual was also removed.
3.	Any prepayments or deposits, regardless of ownership, which total $3000 or less, which are designated by an applicant or recipient for their burial.  An applicant or recipient designates a prepayment or deposit for his or her burial by providing funds that are used for that purpose.
The second addition is added as subdivision b (the previous subdivision b, and subsequent subdivisions were re-lettered).  It states the new policy and provides an example.
b.	Any funds, insurance or other property given to another person or entity in contemplation that its value will be used to meet the burial needs of the applicant or recipient must be considered towards the burial exclusion.  This includes any funds set aside in a separate account or used to purchase insurance or any other burial product.  Any amount in excess of the $3000 burial exclusion is a countable asset if the fund, insurance, or other property has a cash value, fair market value, or surrender value.
Example:  An individual with no burial plan living in a nursing facility gives his daughter $3945 per month for five months, and asks that the money be used for his funeral.  His daughter purchases a $20,000 single premium life insurance policy that designates a funeral home as beneficiary, to the extent necessary to pay for the individual’s funeral and burial expenses, with the individual’s children named as contingent beneficiaries.  The individual applies for Medicaid in the fifth month.  The insurance policy has a surrender value of $17,500 in the month of application.  The policy is designated for the individual’s burial.  $3000 of the value of the policy is excluded.  The remaining $14,500 of the value of the policy is an asset held in trust, and is available to the extent provided in 05-70-50 (Trusts).  To the extent that the $19,725 paid to the daughter is neither excluded nor available under 05-70-50, a disqualifying transfer has occurred.
The third addition is in subdivision d.  It states that a burial account does not have to be in the applicant or recipient’s name.

d. 	A fund is considered to be designated for burial if identified as such on the account or by the applicant or recipient's statement. A designated account can have more than one owner as long as the account is designated for only one person’s burial and, a burial account does not have to be in the applicant or recipient’s name. Life insurance that is designated for burial, however, must cover the life of the person for whom it is designated. 

05-70-45.   Annuities

This entire section has been rewritten to provide information about annuities and how they will be looked at for Medicaid purposes.  It identifies those annuities that are not countable assets; annuities that are countable assets and how to establish their value; and how to determine if the purchase or annuitization of an annuity is a disqualifying transfer, and if so, how to determine the amount of the disqualifying transfer.  

Subsection 11 is key as it states that annuities must still be submitted to the Medicaid Eligibility Division for review and identifies what needs to be submitted along with the annuity.

11.	Annuities shall be submitted to the Medicaid Eligibility unit for assistance in determining whether the annuity is countable as an asset or whether a disqualifying transfer occurred.  A copy of the entire annuity policy, the date of birth of the annuitant, and verification of the annuity purchase price and, if applicable, date of annuitization, and, when appropriate, the annuitant's actual life expectancy as established by a reliable medical statement that estimates the remaining duration of life must be secured and submitted with the inquiry.

05-70-50.   Trusts 

Language was added to subsection 2 to address unwritten trusts.  This policy ties in with the new policy in 05-70-10 (Asset Considerations), 05-70-30 (Excluded Assets), and 05-80-25 (5) (Exceptions to Disqualifying Transfer Provision).

2.	A trust includes any legal instrument or device, whether or not written, which is similar to a trust.  An unwritten trust may arise anytime someone gives property to another with instructions to use the property in a particular way, or anytime someone keeps for his own use property that belongs to another.  When this happens, the individual who owned the property is both the grantor and the beneficiary of an unwritten express or implied trust.

Language was also added to subsection 3 b (the previous subdivision b, and subsequent subdivisions were re-lettered) to address information to be sent to the Legal Advisory Unit if a review is requested.

b.	If the trust is unwritten, describe the circumstances that you believe created the trust in a letter;  

05-80-05.  Definitions

Three definitions were added to this section because the terms are now used in the transfer provision (see changes to 05-80-25) and refer to the spouses in spousal impoverishment cases.  The previous subsection 7, the average cost of nursing care, was re-numbered as subsection 10.

7.	“Community spouse” has the same meaning as in 05-65-10, Definitions for Spousal Impoverishment.
8.	“Home and community based services spouse” has the same meaning as in 05-65-10, Definitions for Spousal Impoverishment.
9.	“Institutionalized spouse” has the same meaning as in 05-65-10, Definitions for Spousal Impoverishment.

05-80-25.   Exceptions to Disqualifying Transfer Provision

A new subsection 5 was added to show that the purchase of an annuity that meets the appropriate requirements is not a disqualifying transfer.

5.	A transfer is not disqualifying to the extent that the asset was used to acquire an annuity that is owned by a community spouse if:

	a.	The annuity is irrevocable and cannot be assigned to another person;

	b.	The annuity is purchased from an insurance company or other commercial company that sells annuities as part of the normal course of business;

	c.	The annuity provides for level monthly payments;

	d.	The annuity will return the full purchase price and interest within a reasonable estimate of the purchaser's life expectancy; and

	e.	The monthly payments from the annuity do not exceed $2267 unless specifically ordered otherwise by a court of competent jurisdiction acting to increase the amount of spousal support paid on behalf of a community spouse by an institutionalized spouse or a home and community based services spouse.

A new subsection 6 was added to show that a transfer to meet the burial needs of an individual is not a disqualifying transfer to the extent it meets the burial exclusion and is considered available.  An example was also added.  This policy ties in with the new policy in 05-70-10 (Asset Considerations), 05-70-30 (Excluded Assets), and 05-70-50 (Trusts).

6. 	A transfer to meet the burial needs of an individual is not disqualifying to the extent the asset transferred meets the burial exclusion and to the extent the asset is considered available to the individual.
 
Example:  A Medicaid recipient without any other burial plan purchases a burial insurance policy for $10,000 and transfers ownership to someone outside of the Medicaid unit.  The policy has a cash surrender value of $7500.  The insurance policy is considered to be transferred in trust to meet the burial needs of the individual, so the $7500 cash surrender value is considered available to the individual, of which $3000 is excluded for burial ($4500 is a countable asset).  The remaining $2500 of the amount that was transferred ($10,000 - $7500 = $2500) is a disqualifying transfer.

05-85-15.   Unearned Income

In the first paragraph of subsection 6 (a), “worker’s compensation” was changed to “Workforce Safety & Insurance” because of their recent name change.

6.	Types of unearned income include but are not limited to:
a.	Income from pension and benefit programs, such as Social Security, Railroad Retirement, veteran’s pension or compensation, unemployment compensation (including disaster assistance unemployment compensation), employee or individual pension plans and annuities, union compensation during strikes, Workforce Safety & Insurance, etc.

05-85-30.   Disregarded Income

In subsection 26, “worker’s compensation” was changed to “Workforce Safety & Insurance” because of their recent name change.

26.	Educational loans, scholarships, grants, awards, Workforce Safety & Insurance vocational rehabilitation payments, and work study received by a student; 

05-85-40.   Income Levels

The new Family Coverage income levels, family member income level ($521), and poverty levels, effective April 1, 2004, have been updated.

	Par. 2.  Effective Date  -- April 2004

Par. 3.  Manual Maintenance -- Please remove the following sections from Service Chapter 510-05 and replace with the new sections:

05-12-05.   Cooperation - Third Party Liability05-45-35.   Income Disregards and Deductions for the Family Coverage Group 
	05-70-10.   Asset Considerations
05-70-30.   Excluded Assets
05-70-45.   Annuities
05-70-50.   Trusts
05-80-05.   Definitions
05-80-25.   Exceptions to Disqualifying Transfer Provision
05-85-15.   Unearned Income
05-85-30.   Disregarded Income
05-85-40.   Income Levels