The 300 percent of SSI income option (hereafter called the 300 percent option) was originally created so that states not wishing to cover the entire category of medically needy could at least cover higher income persons residing in a medical institution. States electing this option may establish a special income threshold, applicable to a persons gross income (all income, not just countable income), as high as 300 percent of the maximum SSI benefit--$2,022 per month and $24,264 per year in 2010. Persons who qualify based on income must also have resources within Medicaid eligibility limits. States typically use the same asset limits as SSI, but they may use more liberal Medicaid exemption rules.18
Overview of the 300 Percent of SSI Income Rule
When originally created, the 300 percent option was limited to persons in institutions, because home and community service alternatives to nursing homes were extremely limited. However, when the HCBS waiver authority was enacted in 1981, states were allowed to extend the 300 percent option to waiver applicants. The goal was laudable: to enable states to neutralize incentives for individuals to choose a nursing home over home and community services simply because of Medicaid financial eligibility rules.
However, the effectiveness of the 300 percent option in increasing access to home and community services is limited by two important factors. First, it can be used only for HCBS waiver participants, not for those receiving personal care or home and community-based services under the State Plan. Second, individuals eligible under this option, whether in an institutional setting or in an HCBS waiver program, are subject to a post-eligibility share-of-cost obligation (described below).
In states where the eligibility of higher income persons is limited to those qualifying under the 300 percent option, individuals with too much income to qualify for Medicaid even under this rule may still qualify by diverting their income into what is known as a Miller trust. Miller trusts are not limited to persons needing Medicaid for nursing home care or for services provided under an HCBS waiver. State Medicaid agencies may choose, but are not required, to play a role in helping establish these trusts.
To qualify as a Miller trust, contributions must consist solely of the individuals funds (income such as monthly Social Security or pension benefits, but not resources) and must be used solely for the benefit of the individual. There are no limits on how much income can be placed in the trust. However, if amounts paid out of the trust exceed the fair market value of goods and services on behalf of the individual, then the individual may be at risk of a penalty for an uncompensated asset transfer, resulting in loss of Medicaid coverage for needed services. Additionally, amounts paid out of the trust may count as income--whether paid directly to the beneficiary or paid to purchase something on their behalf (other than medical care).19 This income must be under the eligibility level in the state and is subject to post-eligibility share-of-cost rules. Finally, the trust must specify that the state will receive any amounts remaining after the persons death, up to the amount the state paid in Medicaid benefits for the Miller trust owner.20
Protected Amounts in Calculating Post-Eligibility Share-of-Cost Obligation
(an obligation that applies only to certain beneficiary groups)21
People who become eligible for Medicaid under the 300 percent option, whether in a nursing home or an HCBS waiver program, are typically expected to pay a share of their income toward the cost of their care, which they pay providers directly.22 This post-eligibility share-of-cost obligation can be quite high, depending on the individuals circumstances and the options the state has chosen. However, unlike nursing home care, which requires beneficiaries to contribute all but a personal needs allowance and other amounts described below, state waiver programs have greater flexibility to determine how much income HCBS waiver participants can retain; some states require little or no cost sharing. As with the medically needy spend-down provision, Federal rules do not require the individual to actually pay the share-of-cost amount but service providers can ensure payment through their usual bill collection policies.
The share-of-cost calculation is made by subtracting from total income certain amounts that are protected for the individuals personal use. The remaining income is the individuals share-of-cost obligation. The Medicaid program reduces the amount it pays for Medicaid services by the amount the individual is expected to pay. Protected amounts include
Amounts to cover basic needs. States must allow persons in nursing facilities and ICFs/ID to keep a minimum of $30 per month to cover personal needs. States also have the option to establish a higher amount across the board, or to establish higher amounts for reasonable groups. The personal needs allowance is set at a low level because the institution provides for most of the individuals basic living needs. The institution receives Medicaid payment for services it provides as part of its daily payment rate.
States establish higher allowance amounts for people eligible under the 300 percent option in HCBS waiver programs, because waiver participants must have sufficient funds to cover their community living expenses. A state can set the allowances for this group equal to the income eligibility thresholds that apply to other Medicaid eligibility groups in the state (e.g., at the SSI or medically needy income levels). The most generous HCBS waiver programs allow eligible individuals to retain all their income for personal use, thereby effectively eliminating any beneficiary liability for a share of cost and making Medicaid pay the entire cost of covered services. State decisions depend in part on budget concerns, because the less beneficiaries spend as their share of cost, the more the state must contribute.
Allowance for a spouse or other dependents. States must deduct income to provide for a spouse of an individual in an institution. The amounts protected for spouses of institutionalized persons are governed by the rules designed to protect against spousal impoverishment. States have the option to implement spousal impoverishment protections when one spouse is an HCBS waiver program (discussed in the next section).
Home maintenance allowance (at state option). Persons in an institution can, at state option, retain an additional amount for up to 6 months if needed for maintenance of a home. This allowance is limited to those who can reasonably be expected to return to their homes. This optional allowance is not available to individuals receiving waiver services since their basic needs allowance (discussed above) is intended to include maintenance of a home.
Amounts to cover other medical expenses.States must allow nursing home and ICF/ID residents, as well as HCBS waiver participants, to retain enough income to pay for additional medical costs they incur that are not paid for by Medicare, Medicaid, or any other payer. Long-term care expenses (e.g., home health aides, personal assistants, and adult day care) can be counted toward required medically needy spend-down amounts as long as the individual rather than some third party is responsible for paying the expense.