The Texas Department of Health and Human Services Commission (HHSC), which governs the rules regarding long-term care Medicaid eligibility (Medicaid helps pay for some or all nursing home and medication costs, etc. – the present average monthly cost in Texas  for skilled nursing care is around $6,400 a month), has ruled that the annual required minimum distribution (RMD) from an IRA or other retirement accounts) is to be divided by 12 (instead of being income in the month of receipt) to determine the monthly income of the Medicaid applicant. This will make a difference in determining if the applicant is over the monthly income cap (presently $2,313 in year 2019), how much countable resources a spouse living in the community can keep without spenddown and how much income can be diverted from the institutionalized spouse to the community spouse (i.e., one living at home). HHSC has been trying to develop final rules on treatment of IRAs and distributions for over a year. Previously it was announced that retirement accounts (in which RMDs had been made for applicants over 70½) would not count as a resource and that ROTH IRAs (which does not have RMDs) and IRAs for those under 70½ would only be excluded if the IRA was invested in the form of an annuity.

Although the new rules have not been published, there was a case reported in the middle of October which indicated how income is to now be treated.

Texas has an income cap (presently $2,313 per month and projected to be $2,349 in year 2020 of non-countable resource income such as Social Security, pension or from IRAs that are excluded from being a countable resource). The recent case ruling will now result in having to determine the RMD for the year and dividing that amount by 12 to determine if the applicant’s income exceeds the monthly cap. Previously, income was only determined in the month of receipt (i.e., the month the RMD was made). If income exceeds the income cap, then a Qualified Income Trust would be needed for that Medicaid eligibility criteria requirement.

Furthermore, when combined non-countable resource income (such as an IRA RMDs as described above) is below the minimum monthly maintenance needs allowance (presently $3,160.50 in year 2019 and projected to be $3,214.50 in year 2020), the amount of countable resources the community spouse can keep is often expanded. The lower the non-countable resource income of a married couple, the greater the amount of countable resources that the community spouse can keep without “spenddown” as a result of federal rules to prevent spousal impoverishment. Thus, if the recent case becomes the rule, this will make a huge difference in many cases since the amount of monthly income will be increased (by the RMD divided by 12).

At the present time, although the present “maximum” protected resource amount is $126,420 in year 2019 (likely to rise to $128,580 in year 2020 based on the 1.6% rise in Social Security Income announced in October). The “maximum” protected resource amount can often be expanded whereby the community spouse can keep hundreds of thousands of dollars. This treatment of the annual RMD to be divided by 12 will change the amount the community spouse can keep especially if the applicant and/or spouse of the applicant have larger IRAs (in married couple cases where only one applies for Medicaid).

Finally, at the present time, if the income of the community spouse is less than $3,160.50 per month, there is a diversion of the institutionalized spouse’s income to the community spouse. Obviously, if IRA distributions (RMDs) are now counted in determining income, the less diversion (if any) there will be.

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