Will The Pension Portion of VA Aid and Attendance Benefits Make The Recipient Ineligible For Medicaid Based On Excess Income?

Family members in search of sources of funding of long-term care costs for loved ones who can no longer live independently are repeatedly given misinformation about the effect of Aid and Attendance (“A&A”) benefits from the Department of Veterans Affairs (“VA”) on future eligibility for Medicaid. For example, staff at assisted living facilities often warn family not to apply for VA A&A benefits for residents because of the concern that the increase in resident income due to the receipt of the VA A&A benefit would result in the resident being found ineligible for Medicaid benefits due to excess income at a later date when the resident applies for Medicaid. This is unfortunate since a surprisingly large number of older Americans are eligible for VA A&A benefits (I blogged about the eligibility rules for VA A&A benefits here), and the VA is one of few government benefit providers of cash benefits paid directly to recipients each month to help offset the high cost of care in assisted living facilities. Most importantly, VA A&A benefits are excludable and not considered to be countable income in determining eligibility for Medicaid. I previously blogged about Medicaid Communication No 87-22, dated August 24, 1987, which excludes VA A&A benefits from being considered as income in determining Medicaid eligibility, here.

Recently, I’ve heard a variation of the above which is equally wrong. The VA A&A benefit consist of two parts, the improved pension portion and the A&A supplement. The family of a loved one in an assisted living facility was told not to apply for VA A&A benefits because, even though the A&A supplement portion of the benefit is not countable by Medicaid, the improved portion of the benefit is countable, and would result in the resident being found ineligible for Medicaid benefits due to excess income. This is also incorrect information. Under the VA Claims Adjudication Manual M21-1MR, Part III, Subpart iii, Chapter 4.2 (d), the VA adjudicator is to inform the Medicaid agency that the entire payment consists of the A&A benefit IF the applicant’s income exceeds the improved pension portion of the benefit, and the applicant’s unreimbursed medical expenses exceed his or her income. That is the case with most clients who reside in assisted living facilities or have long-term care needs and reside at home or in other facilities. Most often, the unreimbursed medical expenses of such clients far exceed that amount of income they receive. Thus, in many states, Medicaid exempts both the improved pension portion of the benefit and the A&A supplement.

M21-1MR, Part III, Subpart iii, Chapter 4.2 (d) is annexed here – M21-1MR

UPDATED ON 1/1/11: In Florida, this issue was decided by a class action law suit in 1987 in a case entitled Mitson By and Through Jones v. Coler, 674 F. Supp. 851 (S.D. Fla. 1987).  The Court held that the portion of the VA Improved Pension (VAIP) which was awarded because of unreimbursed medical expenses (UMEs) should not be counted as income for purposes of determining the recipient’s Medicaid eligibility.  The Court reasoned that in order to qualify for matching federal funds for Medicaid, the State of Florida was obligated to comply with the regulations promulgated by the federal Department of Health and Human Services (HHS) regarding eligibility for Supplemental Security Income (SSI) when it was  determining a applicant’s eligibility for Medicaid benefits.  Under HHS regulation 20 C.F.R. Section 416.1103(a)(3),  “assistance provided in cash or in kind . . . under a Federal, State, or local government program, whose purpose is to provide medical care or services. . .” is excluded from income. To the extent that the VAIP represented a federal reimbursement of medical expenses, it could not be included as income.   This may not help if the veteran qualifies VAIP solely because of a lack of gross income.  But if the gross income is reduced by UMEs and this reduction qualifies the veteran for the VAIP, then the logic should work.