The federal Medicaid statute authorizes the use of individual self-settled special needs trusts for individuals under the age of 65. See 42 U.S.C. § 1396p(d)(4)(A). It also authorizes any applicant, regardless of age, to establish a self-settled pooled special needs trust sub-account. 42 U.S.C. § 1396p(d)(4)(C). An open question not addressed in (d)(4)(C) is whether States can penalize a transfer of resources or income to a sub-account results in a transfer penalty. Some States, like Georgia, take the position that those transfers are subject to a penalty because they do not fall under the exemption from the transfer penalty rules described at 42 U.S.C. § 1396p(c)(2)(B)(iv). That subsection states: “An individual shall not be ineligible for medical assistance by reason of paragraph (1) to the extent that—… the assets—… were transferred to a trust (including a trust described in subsection (d)(4)) established solely for the benefit of an individual under 65 years of age who is disabled (as defined in section 1382c(a)(3) of this title).” In other words, some States read an age limitation into the pooled trust statute where none exists.

Two Supplemental Security Income (SSI) decisions linked in the Other Resources section of this page indicate things may be changing. The reason this could impact Georgia Medicaid is because Georgia links its Medicaid program to the SSI program for purposes of determining disability. The result is that Georgia’s Medicaid program cannot be more restrictive to the SSI program when determining eligibility.

In each of the linked cases, the administrative law judge reviewing eligibility found that SSI could not assess a penalty when someone over 65 transferred money to a pooled trust sub-account. In each case, the ALJ examined the circumstances and found that the applicant did not make the transfer for less than fair market value. See 42 U.S.C. § 1396p(c)(1)(A) and 1396p(c)(2)(C)(i). Whether this represents a change in the wind allowing all Medicaid applicants over 65 to use pooled trust sub-accounts remains to be seen.

Following the Pfoser decision, Minnesota adopted a policy change which requires its Medicaid program to determine whether the trust beneficiary intended to receive fair market value in exchange for funding the pooled trust sub-account. If so, then the transfer could not be penalized because Section 1396p(c)(2)(C)(i) comes to the rescue. The Minnesota policy states:

The establishment or addition to pooled trust after the applicant or enrollee reaches age 65 is an uncompensated transfer unless a transfer penalty exception applies. A transfer penalty exception applies if the trust beneficiary intended to receive valuable consideration for the transferred asset or income. Valuable consideration is compensation that is approximately equal to the fair market value of the transferred asset or income.

To show that the valuable consideration exception applies, the applicant or enrollee must provide documentation that describes how the trust beneficiary intends that the trustee make disbursements from the trust sub-account. The documentation must show to the agency’s satisfaction that:

• • The trust beneficiary intends that the trustee disburse all funds transferred to the trust sub-account within the trust beneficiary’s expected lifetime as determined by the Social Security Administration’s Actuarial Life Table;

  • The trust beneficiary intends that the trustee make disbursements for goods, services or trust fees and expenses in amounts that are reasonable and customary; and

  • The trust beneficiary intends that the trustee make disbursements only for goods and services for the benefit of the beneficiary that are not otherwise covered by MA.

If, after reviewing the documentation, the agency determines that the trust beneficiary intended to receive valuable consideration in exchange for the amount transferred to the pooled trust sub-account, the applicant or enrollee has met the valuable consideration intent exception and no penalty may be imposed.

If the applicant or enrollee does not provide documentation or if, after reviewing the documentation provided, the applicant or enrollee does not show to the agency’s satisfaction that the trust beneficiary intended to receive valuable consideration in exchange for the transfer, then the agency must impose a penalty based on the uncompensated amount of the transfer. The uncompensated amount may include any of the following components:

• • Any amount for which the documentation provided lacks specificity sufficient to determine for what goods, services, or trust fees and expenses the trust beneficiary intends for the trustee to make disbursements, the amount of those intended disbursements, and when those disbursements are intended to occur;

  • Any amounts the trust beneficiary intends the trustee to disburse for goods, services or trust fees and expenses that are not reasonable and customary;

    Examples:

    • Where the trust beneficiary intends that the trustee disburse funds to pay $75 per day for a private room in a nursing facility, and the fair market value for a private room is $30 per day, the uncompensated amount is equivalent to $45 per day.

    • Where the trust beneficiary intends that the trustee disburse $3,000 for adaptive equipment not covered by MA, and the fair market value of the adaptive equipment is $2,000, the uncompensated amount is $1,000.

• • Any amount the trust beneficiary intends that the trustee disburse after the beneficiary’s expected lifetime as measured in accordance with the SSA’s Actuarial Life Table; or

  • Any amount that the trust beneficiary intends that the trustee disburse for goods or services that are covered by MA.

The “Pooled Trust Transfer Evaluation Worksheet” (DHS-8144) may be used to assist in evaluating any documentation that is provided by the applicant or enrollee.

The agency must follow ONEsource procedures, “Evaluating Transfers to a Pooled Trust for MA-LTC and AC” to evaluate transfers to a pooled trust sub-account by a person age 65 or older who is applying for or enrolled in MA-LTC.