Reporting VA Pension with Aid and Attendance Supplement for Medicaid Purposes

The Department of Veterans Affairs (VA) is causing Medicaid applicants to be incorrectly denied benefits due to the way the federal agency is reporting the VA pension benefit to state agencies for the purpose of determining Medicaid eligibility. In that regard, the VA is issuing letters to state Medicaid agencies which breakdown the VA benefit into two parts: the base pension portion of the benefit and the aid and attendance (A&A) supplement. Under the regulations governing the Medicaid program in New Jersey and many other states, the state Medicaid agency includes the base pension portion of the VA pension to the applicant’s income which is countable in determining Medicaid eligibility while excluding A&A supplement.  However, the VA’s breakdown of the pension benefit into two parts is often incorrect. Under Code of Federal Regulations §416.1103(a)(3), the federal regulation related to income for Medicaid purposes, income paid by a third party for medical care or services is excluded in determining Medicaid eligibility. In that regard, the regulation specifically excludes as income

assistance provided in cash or in kind … under a Federal, State or local government program, whose purpose is to provide medical care or services … .

In most cases, the Medicaid applicant would not have been eligible for any VA pension but for the fact that the applicant’s medical expenses exceed, and often far exceed, his or her income. Federal case law unequivocally supports the view that, under those circumstances, the entire VA pension benefit, not merely the base pension portion, is NOT to be considered countable income under Medicaid. This is precisely why the VA manual states:

M21-1MR, Part 3, Subpart iii, Chapter 4(2)(d): When to Notify State Agencies of Benefits Payable for Purposes of Medicaid Eligibility:

For purposes of Medicaid eligibility, advise the administering State agency of the amount of an award. Notes: *If the Aid & Attendance (A&A) allowance is payable, indicate what part of the monthly rate is considered to be for A&A. *In Improved Pension cases, – report the amount for A&A as the difference between the gross amount of pension and the maximum amount of pension payable, excluding consideration of the housebound or A&A rates, or – if pension would not be payable but for entitlement to the A&A allowance or Housebound rate, because income is in excess of the limit, report the entire amount of the payment as A&A. (Emphasis added).

Thus, reporting the VA pension benefit to state Medicaid agencies by breaking down the benefit between the base pension portion and the A&A supplement often results in the state Medicaid office improperly treating the entire pension portion as countable income when entire benefit, under federal law, should not be treated as countable income.

I discussed the VA’s problem in incorrectly reporting the VA pension to Medicaid agencies previously, here – Will The Pension Portion of VA Aid and Attendance Benefits Make The Recipient Ineligible For Medicaid Based On Excess Income?