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Family Supplementation: The Danger of Giving Money to Persons on Medicaid

In states that allow Family Supplementation, a senior can accept monetary contributions from family members that enhances the senior’s existing Medicaid coverage, and Medicaid won’t count those contributions as part of the senior’s income. The contributions are primarily used to upgrade nursing home rooms or to pay for room and board at assisted living facilities. However, family members need to be careful they don’t violate Medicaid rules when they provide the financial help, otherwise they might jeopardize a senior’s eligibility status or interrupt their care.

Family Supplementation Basics

The rules for Medicaid Family Supplementation vary by state in terms of what the family can supplement, or even if it’s allowed at all. However, in general there are 2 critical points to remember when it comes to Medicaid Family Supplementation:

1) Done correctly, and in states that allow it, Family Supplementation will not count as income for the Medicaid recipient and therefore will not impact their eligibility.
2) Family members can only supplement existing Medicaid coverage/benefits.

In most cases, when a family member gives a senior money on a regular basis to pay for anything, including room and board or healthcare costs, it will be counted as income by Medicaid. So, a supportive family member could actually hurt the senior they are trying to help by making the senior ineligible for Medicaid with their contributions. But, if the family member is paying for something that is allowed under the state’s Family Supplementation rules, those payments will not be counted as income for the Medicaid recipient.

So, what does Family Supplementation allow payments for? Again, it can vary by state, but a good rule of thumb to remember is that it is meant to “supplement” coverage that already exists. This is fairly straightforward and clear when it comes to upgrades in nursing homes – Nursing Home Medicaid covers the cost to stay in a semi-private room, and the family covers the cost to upgrade to a private room. It’s less straightforward when it comes to supplementing Medicaid coverage in an assisted living facility, but it works like this: When a family wants to supplement the coverage by paying for room and board at an assisted living facility, the senior must be covered by a Home and Community Based Services (HCBS) Waiver or an Aged, Blind, or Disabled (ABD) Medicaid program that specifically provides services in an assisted living facility. In states that don’t provide long term care services in assisted living facilities, Family Supplementation for seniors in assisted living facilities is not an option.

Again, these rules vary by state. Before advising any client or senior on Medicaid Family Supplementation, we strongly recommend contacting your state Medicaid offices to see what is allowed in your state (despite the difficulty in actually reaching them). Unfortunately, there is no current central repository on Family Supplement rules across the 50 states.

Other Uses for Family Supplementation

While upgrading to a private room in a nursing home and paying room and board at an assisted living facility are the two most common uses for Family Supplementation, they aren’t the only ones. These other uses can include, depending on the state:

-Paying for any goods and services offered by assisted living facilities or nursing homes that are not covered by Medicaid (such as phone service or cable television)
-Paying for goods and services in assisted living facilities or nursing homes beyond those covered by the Medicaid recipient’s SSI payment.
-Paying up to the maximum allowable charges for room and board in assisted living facilities or nursing homes.

Payments and Pitfalls of Family Supplementation

Even in states that allow Family Supplementation, family members must be sure to follow state rules when it comes to making financial contributions. The rules vary by state, but in general simply giving money directly to the senior is not allowed. Any funds transferred this way, no matter what they may be used for in the end, will likely be considered as countable income or countable assets in terms of Medicaid’s financial eligibility limits.

That issue can be avoided in most states if the family member sends payments directly to the nursing home or assisted living facility. However, even though direct payments will not typically count against Medicaid eligibility limits, they may have an impact on the senior’s Supplemental Security Income (SSI), if they have any. Paying bills directly are considered in-kind payments, and in-kind payments can impact SSI benefits and wind up reducing them by as much as one-third.

By using a third-party Supplemental Needs Trust, family members can make monetary contributions to a senior’s care without impacting Medicaid eligibility or SSI benefits. The family member creates and funds the trust and is known as the trust’s “grantor,” and they can also be the “trustee” and manage the trust and the payments made to the senior, who is known as the trust’s “beneficiary.” The family member/“grantor” can also choose a third person to act as the trustee, either another family member or a professional trustee who will charge a service fee.

Consequences of Violating Family Supplementation Rules

If a senior accepts financial contributions from a family member that are not allowed under their state’s Family Supplementation rules, they could go over their state’s income or asset limit and become ineligible for Medicaid. Some states would allow the senior to rectify the situation – return the money and stop accepting future payments – without taking away their benefits and making them re-apply for Medicaid. Or, the state could take away the senior’s coverage for the month the violation occurred, but allow those expenses to be covered by Retroactive Medicaid, so the senior would not have to cover any expenses out of pocket.

But in states with stricter rules, or in cases where the senior keeps receiving money from family members despite being told it was violating Family Supplementation rules, the senior could lose their benefits and be forced to re-apply for Medicaid. However, since this type of violation does not break Look-Back Period rules, the senior would not have a period of ineligibility, which means they could immediately re-apply for Medicaid after losing their benefits.