Pooled Income Trusts: Preserving Excess Income for Medicaid Home Care - Cona Elder Law

Pooled Income Trusts: Preserving Excess Income for Medicaid Home Care

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December 2010

by Melissa Negrin-Wiener, Esq.

Recent changes in the laws governing Medicaid have made it very clear that lawmakers are not looking to expand the benefits of the Medicaid program.  However, one change has proven to help recipients of Community Medicaid benefits preserve their excess monthly income to leave funds available for non-medical expenses.

In order to qualify for Medicaid Home Care Benefits, an individual may have no more than $13,800 of total assets in his or her name (the 2010 Medicaid resource allowance).  In addition, the same individual is only entitled to keep $767 of their income each month to pay for their day to day, non-medical expenses (the 2010 Medicaid income allowance). Until recently, recipients of Medicaid Home Care Benefits were required to contribute their excess income (any amount over the $767 received each month) toward the cost of their care.  For example, if an individual receives $2,000 per month from social security and/or a pension, s/he would have to spend $1,233 per month on the home health aide or other medical expenses before the Medicaid program would engage.  The Medicaid beneficiary would then be left with a mere $767 with which to pay their monthly personal and household expenses.

However, as a result of the New York State fair hearing decision, In the Matter of the Appeal of M. O., a determination was made that qualified elderly and disabled individuals in need of home care or community services can use all of their excess income to pay for their living expenses by participating in a pooled income trust (Fair Hearing No. 3945750N).  In the case of M.O., a sixty-seven (67) year old man was receiving Social Security disability benefits and applied for the Community Medicaid program.  At the time of his application, he was receiving $1,078.70 in income each month, which was in excess of the $642 allowable income limit for that year.  The applicant was approved for Community Medicaid benefits with a monthly spend-down of $358, namely his income less a Medicare premium, the $20 disregard and the allowable income limit.  The Agency’s original determination was that the excess income subject to the monthly spend-down liability was available for payment of medical care and services if the incurred cost of care was neither equal to nor greater than the excess income.  See 18 NYCRR 360-4.1, 360-4.8.  The Department of Health in this decision, citing the Federal revision made to the Administrative Directive 96 ADM-8 on September 23, 1997, determined that pooled income trusts may be funded with an individual’s income without affecting their Medicaid eligibility.  Further, the Department of Health found that such deposits of income are exempt from the applicant’s resource calculation whether they are diverted directly into a Pooled Income Trust or placed into said trust upon being received by the applicant.  Thus, Pooled Income Trust assets are available to pay a Medicaid recipient’s monthly personal and household expenses except for expenses that would otherwise be covered by Medicaid. 

Pooled Income trusts are established by various not-for-profit organizations and are codified pursuant to federal law (see 42 USC §1396p(d)(4)(c)) and state regulation (see 18 NYCRR §360-4.5(b)(5)).  All requests for disbursements are individually reviewed by the organization’s trustee.  Disbursements are not issued directly to the individual but rather to the applicable third parties such as landlords, mortgagors, retailers, vendors and so forth.  Upon the death of the individual, any balance remaining in the account will remain with the trust to further its charitable purposes. Although these trusts typically charge enrollment and monthly administrative fees, participating in a pooled income trust is a means by which a qualified individual can retain his or her excess income while remaining eligible for Medicaid.  For individuals seeking to shelter lesser amounts of excess income, a Pooled Income Trust  may not be appropriate.  

Returning to the example above, the individual enrolling in a pooled income trust who receives $2,000 per month may contribute the $1,233 overage to the trust to be used for other living expenses, including mortgage payments, rent, food, utilities, recreational activities, clothing, etc.  Prior to this trust option, Medicaid recipients could not use their excess income for anything other than their medical expenses thereby leaving many seniors seeking home/community care without sufficient funds to meet their daily living expenses. All individuals who qualify as disabled pursuant to Social Security Law are eligible to establish a pooled income trust.  Social Security Law 42 USC §1382c(a)(3), defines the term “disability” as an “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.”  See USC §1382c(a)(3).  In order to use a Pooled Income Trust to shelter excess income for Medicaid purposes, a Medical Report for Determination of Disability, Form DSS-486T, must be completed by the Medicaid applicant’s physician and submitted to the appropriate Social Services department for approval.     

Allowing the use of the Pooled Income Trust to shelter excess income has made staying at home a much more viable option for many elderly and disabled.  As the cost of living continues to increase, the use of a Pooled Income Trust will allow individuals to remain at home and avoid a nursing home before it is truly necessary.

Melissa Negrin-Wiener, Esq. is a partner with the Elder Law firm of Cona Elder Law, LLP, located in Melville.  Ms. Negrin-Wiener practices exclusively in the field of Elder Law, including asset protection planning, Medicaid planning, representation in Fair Hearings and Article 78 proceedings, estate planning, trust and estate administration, guardianships and estate litigation.


About the Author Cona Elder Law

Cona Elder Law is a full service law firm based in Melville, LI. Our firm concentrates in the areas of elder law, estate planning, estate administration and litigation, special needs planning and health care facility representation. We are proud to have been recognized for our innovative strategies, creative techniques and unparalleled negotiating skills unendingly driven toward our paramount objective - satisfying the needs of our clients.

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