Qualifying for Medicaid in Oklahoma
By Travis Smith

This article is an introduction to Medicaid Long-Term Care eligibility and is by no means comprehensive. The statements in this article do not constitute official statements of the Oklahoma Department of Human Services or the Oklahoma Health Care Authority and are not binding on those agencies. The only official statements regarding the Oklahoma Medicaid Program are found in Title 317 of the Oklahoma Administrative Code.

THE MEDICAID PROGRAM

It is useful to have some general information about the Medicaid program in order to give context to discussion of Long-Term Care.

Title XIX of the Social Security Act establishes the medical assistance program, more commonly known as “Medicaid.” Medicaid is a federal program administered by the states that provides medical insurance for certain categories of poor people. Medicaid is often confused with Medicare, which is an entirely separate program.

Medicaid statutes seem as complicated as federal income tax laws with a seemingly endless number of interconnecting definitions and exceptions, as well as constantly amended statutes, newly promulgated regulations and informal federal guidance. To complicate things, each state is given a number of options to choose from and therefore, no two states have Medicaid programs that are the same.

To further complicate things, the Secretary of Health and Human Services has the authority to waive provisions of the Medicaid statutes. The result is that a state may have a Medicaid program component with rules that are in conflict with federal statutes. The courts have often commented on the complexity of the Medicaid program, with comments such as:

There can be no doubt but that the statutes and provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous kind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of the matters addressed merely a passing phase.

Rehabilitation Association of Virginia, Inc. v. Kozlowski, 42 F.3d 1444, 1450 (C.A. 4 1994)

The Oklahoma Health Care Authority (OHCA) is Oklahoma’s Medicaid agency. OHCA promulgates rules and makes payments to providers. The Oklahoma Department of Human Services (OKDHS) determines who is eligible for Medicaid, using rules promulgated by OHCA.

OKDHS and OHCA regulations refer to the Medicaid program as “medical assistance.” All of OHCA’s regulations can be found on the OKDHS Web site, www.okdhs.org, by clicking on the “policy and forms” link. OKDHS appendix C-1, which contains Medicaid income and asset limits, can be accessed at the OKDHS Web site by clicking on “policy and forms.”

BASIC CONCEPTS

With understanding Medicaid eligibility for people in nursing homes as the goal, the best way to start is to address the basic factors of Medicaid eligibility for every applicant or recipient who is ABD (aged, blind or disabled).

Categorical Relationships

To be eligible for Medicaid in Oklahoma, a person must be in a category of people who can receive Medicaid (categorically related) and must meet the financial eligibility rules for that particular category. The three general categories of people who are eligible for Medicaid are children under 19 and some of their caretakers (categorically related to AFDC — aid to families with dependent children); pregnant women (categorically related to pregnancy services) and people who meet the Supplemental Security Income (SSI) definitions of aged, blind or disabled (categorically related to ABD).1

Since few of the people needing Long-Term Care are categorically related to AFDC or pregnancy services, discussion is limited to the eligibility of those who are categorically related to ABD.

“Aged,” “blind” and “disabled” are defined the same way that SSI defines the categories. Aged is an individual whose is 65 years or older. Blind is a person who has worse than 20/200 in the better eye with a corrective lens. Disabled means a person who cannot do any full-time job.2

Financial Eligibility

In addition to being categorically related to ABD, a person must meet income and asset requirements in order to be eligible for Medicaid.

Assets. There is a $2,000 limit on assets for a person who is categorically related to ABD the items specifically exempted. The more common exemptions are:4

• The home the person lives in, the land adjacent to it and the minerals under it;
• One car, as long as it is used four times a year for medical purposes;
• Clothing, furniture and household goods;
• Burial spaces, headstones and designated accounts for burial up to $1,500;
• The cash surrender value of life insurance policies up to $1,500;
• Irrevocable burial contracts with a face value up to $7,500;
• Property, both real and personal, used in a trade or business.

For trusts established after Aug. 10, 1993, OAC 317:34-5-41(d)(9) controls. A revocable trust is available. An irrevocable trust established by a person, or by another on behalf of the person, and funded with the person’s money is considered available.

Annuities are treated like trusts. If the annuity can be revoked or assigned, then it is considered to be available. If the annuity is irrevocable and unassignable, then it is considered unavailable. If the annuity will not pay out during the expected lifetime of the beneficiary, then the part of the purchase attributable to the period beyond the beneficiary’s life expectancy is considered to be a transfer — as explained below. Annuity payments are income.5

A provision found at OAC 317:35-5-41(d)(9)(F)(i) allows people receiving Social Security or SSI disability benefits to have a trust and retain Medicaid eligibility. The trust must:

• solely benefit a disabled person who is under 65 years of age when the trust is established and funded;
• be established by the beneficiary’s parent, grandparent, guardian or a court;
• contain only the beneficiary’s money;
• be irrevocable;
• not contain any provision to allow the beneficiary to invade the trust; and
• provide that upon the beneficiary’s death, the Medicaid program is paid back for funds expended after establishment of the trust.

If a trust meets these requirements, then income and undistributed corpus are not considered available to the beneficiary for purposes of determining Medicaid eligibility.

These trusts are commonly referred to as Special Needs Trusts, but actually are not. Special Needs Trusts were described in the federal statute prior to Aug. 11, 1993, but there is no requirement in OAC 317:35-5-41(d)(9)(F)(i) that the trustee consider the special needs of the beneficiary. These trusts should be referred to as Medicaid disability trusts or Medicaid payback trusts.

The income and corpus of a trust that is not funded by the ABD person’s money is not considered available to the beneficiary unless the beneficiary has the power to force payment for his benefit. An example of a trust that is not considered available is a trust established by a grandparent that contains none of the disabled person’s money and allows the trustee sole discretion to control income and corpus.

Income. Income is defined at OAC 317:35-5-42(a) as, “. . . that gross gain or gross recurrent benefit which is derived from labor, business, property, retirement and other benefits, and any other form which can be counted on as currently available for use on a regular basis.” Everything that meets this definition is income unless it is specifically excluded from income. Among the items that OAC 317:35-5-41(b) exempts from counting as income are:

• Food stamps;
• Loans;
• Indian payments (including judgment funds or funds held in trust) distributed per capita by the Secretary of the Interior (BIA) or distributed per capita by the tribe subject to approval by the Secretary of the Interior;
• Income up to $2,000 per year received by individual Indians, which are derived from leases or other uses of individually-owned trust or restricted lands;
• Benefits from state and community programs on aging;
• Low Income Heating and Energy Assistance Program (LIHEAP) payments for energy assistance.

When determining income that is counted toward Medicaid eligibility, the gross amount of unearned income is counted. Countable earned income is calculated by deducting $85 from gross earned income and then dividing the remainder in half.6

The income limit for an individual who is categorically related to ABD and who wants Medicaid to pay for nursing home care is $1,737. This is gross income, not net.

LONG-TERM CARE

Definitions

To be medically eligible for Medicaid to pay for nursing home services, the individual must:7

• require a treatment plan involving the planning and administration of services that require skills of licensed technical or professional personnel that are provided directly or under the supervision of such personnel and are prescribed by the physician;
• have a physical impairment or combination of physical and mental impairments;
• require professional nursing supervision (medication, hygiene and dietary assistance);
• lack the ability to care for self or communicate needs to others; and
• require medical care and treatment in a nursing home to minimize physical health regression and deterioration.

The ADvantage Waiver provides in-home services to adults who meet the medical requirements for nursing home services. The in-home services necessary for the person to live safely at home must cost no more than it would for the person to live in a nursing home.8 Financial eligibility for the ADvantage Waiver is the same as for a nursing home, with the exception that no income is paid for services received.

Financial Eligibility
Single Individual

1. Assets — With the exceptions set forth below, assets are counted the same as in ‘Basic Eligibility’, above.9 The asset limit is $2,000.10

Homes. A house that the Medicaid applicant/recipient is living in is not a countable asset. A home that the Medicaid applic-ant/recipient does not live in is not a countable asset as long as it is occupied by the person’s minor child, a TANF recipient, or a relative who is aged, blind or disabled.11 If none of these people live in the home, the home is still exempt for 12 months after entry into the nursing home, as long as the person says he plans to return home. At the end of 12 months the home counts as an asset unless good faith efforts are being made to sell. When the house is sold, the person is ineligible for benefits until assets are spent back below $2,000.

Except for the home, property that is otherwise exempt loses its exemption when placed in a revocable trust.12

Transfers. A person cannot give away assets to become eligible for Long-Term Care. OKDHS looks back three years to determine if assets have been disposed of at less than fair market value in order to be eligible for Medicaid.13 If so, the person is ineligible for Medicaid, from the date of transfer, for a period of months equal to:

(fair market value less encumbrances — sale price)/$2,000.14

The lookback period is five years in two situations. The first is if the transfer is to a trust, from which the transferor cannot benefit. The second is if a transfer is made to another person from a trust which the Medicaid
applicant/recipient funded and is also a beneficiary of.

A penalty for transfer without fair market value received in return is not applied if:15

• Ownership of the house was transferred to the person’s spouse; the person’s child under 21 or who SSA has found disabled; a sibling who has equity interest in the home and resided in the home for at least one year prior to the institutionalization of the individual; or the individual’s son or daughter who resided in the home and provided care for at least two years prior to the individual’s institutionalization.
• The person can show that his intent was to dispose of assets at fair market value;
• The person can show that the transfer was exclusively for a purpose other than Medicaid eligibility.
• The transfer is to a trust established solely for the benefit of a disabled individual under the age of 65.
• The penalty would result in undue hardship.

2. Income — A person can have income up to 300 percent of the current year maximum SSI payment to an individual. In 2005 this is $1,737.16 The institutionalized person keeps the first $50 as a personal needs allowance, pays medical insurance premiums and then pays the rest to the nursing home. Medicaid pays the remainder.

If an institutionalized person’s gross income is more than $1,737 but does not exceed $2,500, he can become income eligible by establishing a Medicaid Income Pension Trust. All of the person’s income goes into the trust. The trustee then takes out an amount equal to $1 below 300 percent of SSI, uses the first $50 for the personal needs allowance, pays medical insurance premiums and then pays the rest to the nursing home.

The trust accumulates the rest of the income. When the person dies, the money left in the trust is used to pay back the Medicaid program, to the extent that funds were expended on behalf of the trust beneficiary after the date the trust was established. OKDHS has promulgated a Medicaid Income Pension Trust form which, if used by an applicant, will automatically be approved. The IRS says that Medicaid Income Pension Trusts do not need a separate EIN.

An Institutionalized Individual with a Spouse Remaining at Home

The most complex Medicaid eligibility issues are presented when one spouse needs Long-Term Care while the other spouse does not. The spouse needing Long-Term Care is called the “institutionalized spouse” and the spouse who does not need Long-Term Care is called the “community spouse.”

The federal law in this area was contained in the Medicare Catastrophic Coverage Act (MCCA), passed in 1988. The MCCA contained “spousal impoverishment” provisions, which deal with the division of income and assets between the institutionalized and community spouses. The U.S. Supreme Court recently discussed the spousal impoverishment provisions of the MCCA in Wisconsin Department of Health and Family Services v. Blumer, 122 S.Ct. 962, 534 U.S. 473 (2002).

1. Assets — The institutionalized spouse does not meet the Medicaid asset limit until the couple’s total countable assets, less the amount allocated to the community spouse (described below) is $2,000 or less.17 The amount allocated to the community spouse is called the “spousal share” in Oklahoma Medicaid rules and the “community spouse resource allowance” (CSRA) in the federal statute.

Protecting Assets for the Community Spouse. The process to determine how much of a couple’s assets are allocated to the community spouse begins by adding the value of all countable assets, including separate property and assets covered by a prenuptial agreement, as of the date the institutionalized spouse entered Long-Term Care. The total is then divided in half.

The second step is to make sure that the community spouse has assets worth at least $25,000. If half of the total countable assets is less than $25,000, then enough of the institutionalized spouse’s half are reallocated to the community spouse to bring the community spouse’s assets up to $25,000.

The third step is to make sure that the community spouse’s assets do not exceed a certain amount, which is increased each year. For people entering a nursing home in 2005, regardless of when the application is made, the amount is $95,100. If half of the total countable assets is greater than $95,100, then the community spouse’s half of the assets in excess of $95,100 are reallocated to the institutionalized spouse.

Asset Spenddown. The last step in determining asset eligibility for the institutionalized spouse is to take the couple’s total countable assets on the date of application, subtract the assets allocated to the community spouse and then compare the remainder to the $2,000 asset limit. If it is more than $2,000, then the institutionalized spouse has to “spend down” assets to become eligible.

To meet the spenddown amount, the institutionalized spouse has to show that assets, not income, have been spent for the benefit of one of the spouses after entry of the institutionalized spouse into the nursing home. This can take place either before or after the application.

The couple can spend the money any way they want on themselves, but cannot meet the spenddown by giving it away. Ways to meet the spenddown include, but are not limited to, paying the nursing home, buying exempt assets, paying debts and doing household repairs or remodeling.

If the couple acquires assets after the date of entry into Long-Term Care, the new assets are allocated to the institutionalized spouse and must be spent down.

The Home. The home of the institutionalized spouse is not counted as an asset as long as the community spouse, minor child or a relative who is aged, blind or disabled or a TANF recipient lives there.18 If none of these people lives in the home, and 12 months pass since entry into the nursing home, then the house counts as an asset unless good faith efforts are being made to sell the house. When the house is sold, the person is ineligible for benefits until assets are back below $2,000.

The institutionalized spouse can transfer the home, without penalty, to the community spouse; the person’s child under 21 or who SSA has found disabled; a sibling who has equity interest in the home and resided in the home for at least one year prior to the institutionalization of the individual; or the individual’s son or daughter who resided in the home and provided care for at least two years prior to the individual's institutionalization.

Annuities. Prior to Feb. 1, 2005, a couple could, in effect, convert assets allocated to the institutionalized spouse into community spouse income by buying an annuity that pays the community spouse. The annuity must be irrevocable and unassignable and produce a return at the market rate when purchased. An annuity purchased after the institutionalized spouse enters the nursing home must pay out in a period no longer than his or her expected life at the date of purchase. An annuity purchased before entry into the nursing home may pay out within the life of either spouse. This has the effect of reducing, dollar-for-dollar, the amount of the institutionalized spouse’s income that is paid to the community spouse. The monthly payments to the community spouse constitute income to the community spouse.

On Feb. 1, 2005, OAC 317:35-5-41(d)(10) was amended to reflect the fact that there is a market for irrevocable annuities. The amendment creates a presumption that an irrevocable annuity can be sold and that the value is the total of all remaining payments, discounted by the IRS Applicable Federal Rate for the month of application or review. The presumption of marketability and value may be rebutted by compelling evidence.

OKDHS does not consider that an annuity purchased from a friend or relative to be financially sound, and therefore, fair market value is not received when such an annuity is purchased.

Transfers. For transfers made by either spouse prior to the institutionalized spouse becoming eligible for Medicaid, the penalty for giving away assets is the same as for a single person. This includes assets given away by either spouse before the day the institutionalized spouse is found to be eligible for Medicaid.

Transfers made by the institutionalized spouse after becoming eligible for Medicaid are penalized the same way. However, the institutionalized spouse must make one kind of transfer that is not penalized. The institutionalized spouse must transfer all interest in the assets allocated to the community spouse within 12 months of becoming eligible for Medicaid. If this is not done, the assets allocated to the community spouse will be considered available to the institutionalized spouse at the end of the 12 months. If the institutionalized spouse transfers assets to the community spouse in excess of the allocation described above, the excess assets are considered to still be available to the institutionalized spouse.19

Transfers made by the community spouse after the institutionalized spouse becomes eligible for Medicaid do not result in penalties for the institutionalized spouse. However, the transfers would result in penalties to the community spouse if she applies for Medicaid during the applicable lookback period.

2. Income — To determine income eligibility for an institutionalized spouse, the couple’s income is allocated by counting his income as his, hers as hers, and joint income split in half. The income limit for an institutionalized spouse is the same as for a single individual – $1,737 per month.20 The institutionalized spouse keeps the first $50 as a personal needs allowance, pays health insurance premiums, and then gives money to the community spouse, if necessary, to bring the community spouse’s income up to $2,378 per month.21 The remainder goes to the nursing home.

If an institutionalized person’s income is more than $1,737 but not more than $2,500, he can become income eligible by establishing a Medicaid Income Pension Trust. All of the person’s income goes into the trust. The trustee then takes out an amount equal to $1 below 300 percent of SSI, uses the first $50 for the personal needs allowance, and then pays health insurance premiums, and then gives money to the community spouse, if necessary, to bring the community spouse’s income up to $2,378 per month and pays the remainder to the nursing home. The remainder of the provisions relating to the Medicaid Income Pension Trust are the same as for a single person.22

Institutionalized Couple

If the institutionalized person has a spouse and the spouse is also institutionalized, income and assets are divided according to the formula that his income is his, hers is hers, and joint is split in half. Eligibility is then separately determined for each individual.23

Repayment 24

The Omnibus Budget Reconciliation Act of 1993 mandates the state to seek recovery against the estate of certain Medicaid recipients who received medical care on or after July 1, 1994, and who were 55 years of age or older when the care was received. The payment of Medicaid by OHCA on behalf of a recipient who is an inpatient of a nursing home creates a debt to OHCA subject to recovery by legal action either in the form of a lien filed against the real property of the recipient and/or a claim made against the estate of the recipient. Recovery for payments made under Medicaid for nursing care is limited by several factors, including the family composition at the time the lien is imposed and/or at the time of the recipient’s death and by the creation of undue hardship at the time the lien is imposed or the claim is made against the estate.

OHCA may file and enforce a lien, after notice and opportunity for a hearing (OKDHS will conduct hearings), against the real property of a recipient who is an inpatient in a nursing home, ICF/MR or other medical institution in certain instances.

A lien may not be filed on the homeproperty if the client’s family includes:

• a surviving spouse residing in the home;
• a child or children age 20 or less lawfully residing in the home;
• a disabled child or children of any age lawfully residing in the home; or
• a brother or sister of the recipient who has an equity interest in the home and has been residing in the home for at least one year immediately prior to the recipient’s admission to the nursing home and who has continued to live there on a continuous basis since that time.

A lien may be filed only after it has been determined, after notice and opportunity for a hearing, that the recipient cannot reasonably be expected to be discharged and return to the home. To return home means the recipient leaves the nursing home and resides in the home on which the lien has been placed for a period of at least 90 days without being re-admitted as an inpatient to a facility providing nursing care. Hospitalizations of short duration that do not include convalescent care are not counted in the 90-day period. Upon certification for Medicaid for nursing care, OKDHS provides written notice to the recipient that a one-year period of inpatient care shall constitute a determination by the department that there is no reasonable expectation that the recipient will be discharged and return home for a period of at least three months. The recipient or the recipient’s representative is asked to declare intent to return home by signing the Acknowledgment of Intent to Return Home/Medicaid Recovery Program form. Intent is defined here as a clear statement of plans in addition to other evidence and/or corroborative statements of others. Should the intent be to return home, the recipient must be informed that a one-year period of care at a nursing home or facilities constitutes a determination that the recipient cannot reasonably be expected to be discharged and return home. When this determination has been made, the recipient receives a notice and opportunity for hearing. This notification occurs prior to filing of a lien. At the end of the 12-month period, a lien may be filed against the recipient’s real property unless medical evidence is provided to support the feasibility of his/her returning to the home within a reasonable period of time (90 days). This 90-day period is allowed only if sufficient medical evidence is presented with an actual date for the return to the home.

Once a lien is filed, the property does not count against the $2,000 asset limit.25

Enforcement of a lien can be waived if enforcing a lien or a recovery from an estate would create an undue hardship. Undue hardship exists when enforcing the lien would deprive the individual of medical care such that his/her life would be endangered. Undue hardship exists when application of the rule would deprive the individual or family members who are financially dependent on him/her for food, clothing, shelter or other necessities of life. Undue hardship does not exist, however, when the individual or his/her family is merely inconvenienced or when their lifestyle is restricted because of the lien or estate recovery being enforced.

If the recipient was age 55 or older when the nursing care was received, recovery may be made only if:

• the individual’s spouse has left the home;
• there are no children of the individual who are under 21 living in the home;
• there no disabled children of the individual living in the home;
• there is no sibling of the individual who has lived in the home continuously since at least one year prior to the admission of the individual into the nursing home;
• there is no child of the recipient who has continuously lived there for at least two years prior to the admission into the nursing home and who provided care to the individual which allowed him to live at home rather than an institution.26

The estate consists of all real and personal property and other assets included in the recipient’s estate as defined by Title 58 of the Oklahoma Statutes.

Appeals

A Medicaid recipient can appeal any denial of eligibility or services.27 Appeals regarding financial and medical eligibility are heard through the OKDHS fair hearing process.28 The process begins with a hearing before an administrative hearing officer. The next steps are an on-the-record review by the Director of Human Services and then appeal to the district court in the county in which the individual lives. The district court is limited to review of the administrative record, except that new evidence can be introduced to show irregularities in the proceedings not appearing in the record.29

Appeals regarding medical services are heard through OHCA hearing process. The OHCA hearing process has a program review panel as the first step. The panel is made up of three OHCA employees who are appointed by the OHCA CEO. The panel members are in jobs related to the problem being complained about. The panel usually does not hold a hearing, but reviews the papers involved and issues a decision. The next step is a hearing de novo before a hearing officer, who is a lawyer. The next step is a review by the CEO of the hearing officer tape and exhibits.30 The next step is appeal to the state district court in the county where the recipient lives. The cases are handled there just like OKDHS appeals.31

1. OAC 317:35-5-2
2. OAC 317:35-5-2 through 35-5-5
3. OAC 317:35-7-38
4. OAC 317:35-5-41
5. OAC 317:35-5-41(d)(10)(A)
6. OAC 317:35-5-42(d)
7. OAC 317:35-19-3
8. OAC 317:35-17-3
9. OAC 317:35-9-65; OAC 317L35-15-6; OAC 317:35-17-10; OAC 317:35-19-19
10. OKDHS Appendix C-1, Schedule VIII.D.
11. OAC 317:35-5-41(c)(6)(F)
12. OAC 317:35-5-41(c), OAC 35-5-41(d)(9)(E)(iii)(I)
13. OAC 317:35-9-67(4); OAC 317:35-17-10(3); OAC 317:35-19-20(4)
14. Id.
15. OAC 317:35-19-20(4)(F)
16. OAC 317:35-9-65, 317-35-9-67, 317:35-9-68; OKDHS Appendix C-1, Schedule VIII(B)(1)
17. OAC 317:35-19-21(3)(B)(2)
18. OAC 317:35-5-41(c)(6)(F)
19. OAC 317L34-19-20(4)(F)(III)
20. OAC 317:35-9-65(3), 317-35-9-67, 317:35-9-68, 317:35-19-21(3), 317:35-17-11; OKDHS Appendix C-1, Schedule VIII(B)(1)
21. OAC 317:35-19-21(3)(C)
22. OAC 317:35-5-41(d)(9)(F)(ii)(IV); OAC 317:35-19-19(a)(3)
23. OAC 35-19-21
24. OAC 317:35-9-15, 317:35-19-4
25. OAC 317:35-5-41(c)(6)(H)
26. OAC 317:35-19-4(b)(5)
27. OAC 317:2-1-2(a)
28. OAC 340:2-5-6(4)
29. 56 O.S. § 168; OAC 340:2-5-50 through 2-5-80.
30. OAC 317:2-1-2 through 2-1-2.2
31. 63 O.S. § 5052

About the Author

Travis Smith is an Assistant General Counsel with the Oklahoma Department of Human Services. He represents the agency in matters involving benefit programs, with most of his time spent on Medicaid issues. Before going to work for OKDHS, he was employed by Legal Aid of Western Oklahoma. Mr. Smith is a 1979 graduate of the University of Oklahoma College of Law.