Ohio Medicaid changes “Aged Blind Disabled” Eligibility – Tax Refunds may be counted Twice

This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017.  The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.)  The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system.  The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care.  The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month.  The June 23, 2016 installment discussed the difficulty in understanding the need for a Miller Trust.  The July 1, 2016 installment discussed the need to empty the Miller Trust account every month.  The July 7, 2016 installment discussed  the need to balance the Miller Trust with the desire to have health insurance.  The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts.  The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document.  The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust.  The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic.  The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust.  The August 18, 2016 installment discussed  the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums.  The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust.  The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust.  Today’s installment will discuss how Ohio’s Medicaid rules appear to count income tax refunds twice.

In determining eligibility for any of Ohio’s Medicaid programs, a Medicaid caseworker must see if the applicant’s income fits within the Medicaid program’s income requirements as set forth in the Ohio Administrative Code (OAC.).  In the general rules of Medicaid eligibility, “‘Income’ means any benefit in cash or in-kind, received by an individual during a calendar month.”  (OAC 5160:1-1-01(B)(31) entitled “Medicaid: definitions”)  So, income is anything that the person receives that month.  That’s the general understanding of “income,” the arrival of money that wasn’t here before.

Then, the rules for processing of applications shows that Medicaid looks at GROSS income.  The rules explain that “the amount of gross monthly non-exempt income must be established first. (OAC 5160:1-2-01.9(C) entitled “Medicaid: income, exemptions, and disregards”)  This provision means that Medicaid looks at all income, even if that income doesn’t arrive, such as Medicare Part B premiums and money withheld for taxes.  (This is the same sort of income described as “invisible” in the August 11, 2016 installment.)

The rules go on to state that income tax refunds are exempted from income (OAC 5160:1-2-01.9(D)(3) in the same “Medicaid: income, exemptions, and disregards” section discussed in the previous paragraph.)  The rules for Ohio’s Medicaid for people who are Aged, Blind, or Disabled agrees, stating that “any amount refunded on income taxes already paid” is not income (OAC 5160:1-3-03.1(J)(8) entitled Medicaid: income)  An exemption for income tax refunds make sense.  Tax withholding was included in “income” because “gross income” is where Medicaid starts its analysis.  An income tax refund is simply a return of money previously withheld that is above the amount of the tax liability.

BUT, what counts as “income” changes in the calculation of patient liability for someone in the Aged, Blind, or Disabled program who needs long term care.  “Patient liability” is the amount of money that the person receiving long term care must pay each month as his/her share of costs.  (Medicaid makes up the difference between the patient liability and the monthly payment for care to which the care provider is entitled.)

To receive Medicaid coverage for long term care services, the person must first be eligible for Medicaid.  The examination of income for that eligibility determination does not, though, carry through to the calculation of patient liability.

To calculate patient liability for long term care services, the administrative agency must “total all income, earned and unearned, of the individual, without applying any exemptions or disregards” (OAC 5160:1-3-04.3(C)(2) entitled Medicaid: determining patient liability)  Remember:  Income tax refunds were “exempt” from income in the eligibility determination.

Because the patient liability calculation must total ALL income, it is looking at gross income, and gross income includes tax withholding.  However, because the calculation does not apply any exemptions, the patient liability calculation also includes tax refunds.  That’s a problem.

Money withheld for taxes and money returned as a tax refund are the same money.  A tax refund is the money that didn’t arrive last year actually arriving this year.  The tax withholding amount was counted in “gross income” even when it didn’t actually arrive in the first place.  That same money should not be counted when it it actually arrives as a tax refund.  It’s the same money.

The inclusion of tax refunds in patient liability calculations (assuming it doesn’t get corrected in the near future) means that the person won’t have all of the money that the Medicaid caseworker calculates as the amount that the person is supposed to pay as patient liability.  Someone (perhaps the Medicaid recipient, perhaps the spouse, or perhaps the care provider) is going to receive less money than the amount to which he/she is entitled.

This double-counting of the tax refund may have been a mistake in drafting the Medicaid rule, or it may have been intentional as a way to shave a few bucks off of the state’s Medicaid costs.  Either way, this needs to be fixed.

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