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department of health and social services

Division of Medicaid and Medical Assistance

Statutory Authority: 31 Delaware Code, §512 (31 Del.C., §512)



20310 Long Term Care Medicaid

Nature of the Proceedings:

Delaware Health and Social Services (“Department”) / Division of Medicaid and Medical Assistance initiated proceedings to amend the Division of Social Services Manual (DSSM) regarding the Medicaid Long Term Care Program. The proposal amends a rule in the Division of used to determine eligibility for medical assistance to close a potential loophole in excluded resources. The Department’s proceedings to amend its regulations were initiated pursuant to 29 Delaware Code Section 10114 and its authority as prescribed by 31 Delaware Code Section 512.

The Department published its notice of proposed regulation changes pursuant to 29 Delaware Code Section 10115 in the May 2006 Delaware Register of Regulations, requiring written materials and suggestions from the public concerning the proposed regulations to be produced by May 31, 2006 at which time the Department would receive information, factual evidence and public comment to the said proposed changes to the regulations.

Summary of Proposed Change

Statutory Authority

Social Security Administration Program Operations Manual System (POMS) - POMS Section SI 01130.300, Life Insurance

Summary of Proposed Change

DSSM 20310.7.2: The Deficit Reduction Act of 2005 attempts to close loopholes in the Long Term Care Medicaid Program. Currently, Term Life Insurance, regardless of the amount of the face value, is excluded as a resource for applicants applying for Long Term Care Medicaid. It is a potential pathway by which resources could be placed in order to shelter assets. This allows individuals to become eligible for Long Term Care sooner. DMMA proposes that the State of Delaware become the beneficiary in the first position on all Term Life Insurance policies over $10,000.00 in face value. Should there be other burial resources, then there will be no $10,000.00 allowance.

Summary of Comments Received with Agency Response and Explanation of Changes

The State Council for Persons with Disabilities (SCPD) and Jerry A. Hyman, Attorney-at-Law offered the following observations and recommendations summarized below. DMMA has considered each comment and responds as follows.


Under, the current regulations, life insurance with no cash value are excluded as a countable resource. SCPD has the following observations.

First, the proposed regulation cites the attached SSA POM SI01130.300 as the statutory authority for the change. This POM (which is not a “statute”) provides no support for the change. Indeed, the PPOM recites that the face value of term life insurance with no cash surrender value is an excluded resource.

Agency Response: Term life insurance continues to be an excluded resource. POMS SI was cited to show where DMMA looks to for guidance and direction on this matter.

Second, the proposed regulation cites the Deficit Reduction Act of 2005 as support for the change. SCPD could locate no authorization for the change in the Act. See attached ARC/UCP summary of the Act and the entire Long-term Care section from the Act.

Agency Response: DMMA does not claim the Deficit Reduction Act (DRA) of 2005 gives authorization for the change. Rather, the intent of the DRA is to reduce costs to the Medicaid program and to encourage cost sharing with the Medicaid recipient.

Third, consistent with Federal law, the State cannot impose unauthorized restrictions on Medicaid. The Federal POM SI 01130.300 confirms long-established Federal policy of excluding term life insurance with no cash surrender value as a countable resource. Conceptually, the unauthorized demand that an applicant name the State as beneficiary of life insurance proceeds as a condition of qualifying for Federal benefits is a form of unwarranted extortion.

Agency Response: DMMA will continue to exclude Term Life Insurance policies for eligibility. DMMA is following the guidance of Section 6012 of the DRA where it allows for annuities or similar financial instruments to name the State as the beneficiary. DMMA maintains that the purpose of life insurance is to pay for one’s funeral costs. The agency believes that $10,000.00 is a reasonable amount to cover the cost of a funeral. Any amount over and above will be left to the Medicaid recipient’s heirs.

Fourth, the proposed regulatory change violates State statutory law:

A. The Department’s authority to recover Medicaid LTC disbursements upon a beneficiary’s death is limited to the deceased’s “estate”. See Title 25 Del.C. §5003. The definition of “estate” is as described in Chapter 19 of Title 12. See Title 25 Del.C. §5001(g). Title 12 Del.C. §1901 excluded life insurance from the “estate” of a deceased. Therefore, the Department is precluded from seizing life insurance proceeds upon the death of a LTC beneficiary.

B. The Department’s authority to recover Medicaid LTC disbursements upon a beneficiary’s death is likewise subject to a statutory “undue hardship” exception. See Title 25 Del.C. §5005. The proposed regulation contains no “hardship” exception.

Agency Response: A. The State of Delaware will not be “seizing” the life insurance proceeds. The policy would name the State as beneficiary after the funeral costs of no more than $10,000.00 were paid.B. The State of Delaware will consider undue hardship on a case-by-case basis. Clarifying language will be added to the final order regulation.

Fifth, forcing indigent applicants to sign over their meager ($10,000) term life insurance policies to the State as a condition of Medicaid eligibility is subjectively repugnant. It is inconsistent with State public policy. See, e.g., Title 31 Del.C. §501, which contemplates that the Medicaid program be administered humanely with due regard to the preservation of family life in such a way and manner as to encourage self-respect. Begrudging an elderly applicant the option of leaving a modest amount of life insurance to sustain a surviving spouse could be perceived as mean spirited.

Agency Response: There are spousal impoverishment rules in place to prevent the impoverishment of the recipient’s spouse. The State of Delaware does not regard $10,000.00 as a “meager” sum of money and there are no rules in place to protect the inheritances of the heirs of Medicaid recipients.

Mr. Hyman’s Letter

Death benefits from insurance policies which do not generate a cash value are not countable resources in determining the eligibility of a Medicaid applicant. The Division’s own Manual, at Section 20300.3 (on Resource Ownership) makes this clear. Any propose regulation which attempts to condition Medicaid eligibility on a requirement that the State be named as a life insurance beneficiary does not change the plain fact that life insurance which carries no cash value cannot be a countable resource.

What the proposed regulation purports to do is expand the State’s authority to recover from the estate of the individual (that is, recover from property only payable after the death of the individual). However, this is clearly beyond the scope of the Division’s rulemaking authority.

Estate Recovery is determined by Federal and State law. Federal law, at 42 U.S.C. Sec 1396p(b)(4), permits each state to, by law, determine the scope of the estate from which Medicaid recoveries may be made. Delaware has done so, at 25 Del.C. Section 5001(g), where ìestateî is defined for recovery purposes as the probate estate ìdescribed in Chapter 19 of Title 12 of the Delaware Code.î Nowhere in that chapter are the proceeds of life insurance (with or without cash value) includible in the probate estate. In fact, 12 Del.C. Sec 1901(c) specifically excludes such insurance from the estate.

Furthermore, only the proper and legally defined portions of the estates of Medicaid recipients can be subject to Medicaid recovery. The Division’s proposed language in this rulemaking makes no distinction between life insurance on the life of the Medicaid recipient and life insurance on the life of his or her spouse. Apparently, no-cash value life insurance on both spouses would be payable to the State under this proposal, an explanation of estate recovery far beyond what is permitted by any statute.

Therefore, the proposed language to be added by this rulemaking to Section 20310.7.2 of the Delaware Medicaid Manual is in clear violation of both State and Federal law, and would not be enforceable.

Agency Response: The State of Delaware agrees that death benefit insurance policies that do not generate a cash value (commonly known as term life insurance) are not countable resources in determining eligibility. No where in the revised rule DSSM 20310.7.2 does it suggest that they will be considered a countable resource.

The Department has the authority to make rules and regulations pursuant to 31 Del.C. §107 and §512; 16 Del.C. §122(3)(j); and 42 C.F.R.§901 et seq.

Findings of Fact:

The Department finds that the proposed changes as set forth in the May 2006 Register of Regulations should be adopted.

THEREFORE, IT IS ORDERED, that the proposed regulation to amend the Division of Social Services Manual regarding financial eligibility determination for the Medicaid Long Term Care Program is adopted and shall be final effective September 10, 2006.

Vincent P. Meconi, Secretary, DHSS, 8/14/06



20310 Resource Exclusions

20310.1 Place of Residence/Real Property

An applicant/recipient's principal place of residence and any land that adjoins is excluded if certain conditions are met.

20310.1.1 Intent to Return

The principal place of residence may be excluded if the individual intends to return home after any length of time.

Temporary Institutionalization - If the attending physician has certified that a recipient is likely to return to his own home within a definite period (not to exceed 2 months) up to $75.00 per month may be protected for maintenance of the home.

20310.1.2 Spouse and/or Dependent Relative

If the applicant/recipient's home is used by a spouse and/or dependent relative during the individual's absence it may be excluded.

20310.2 Jointly Owned Real Property

Jointly owned real property may be excluded if the sale would cause undue hardship, due to loss of housing, to a co-owner.

20310.3 Attempts to Sell

Real property may be excluded when an individual has made reasonable but unsuccessful efforts to sell throughout a 9-month period of conditional benefits, as long as the individual continues to make reasonable efforts to sell it. (See DSSM 20360)

20310.4 Indian Lands

Any lands that are restricted allotted Indian lands are excluded.

20310.5 Automobiles

One automobile, regardless of value, if, for the individual or a member of the individual's household (member of a household is one who receives food, clothing and shelter at the applicant's residence at time of institutionalization) if it fits the exclusions listed in Sections 20310.5.1 -20310.5.4.

20310.5.1 Employment

The automobile is excluded if necessary for employment.

20310.5.2 Medical Use

If the automobile is necessary for the medical treatment of a specific or regular medical problem, it may be excluded.

20310.5.3 Modifications

An exclusion may be used if the vehicle is modified for operation by or transportation of a disabled person.

20310.5.4 Essential Daily Activities

The automobile may be excluded if it is necessary because of climate, terrain, distance, or similar factors to provide necessary transportation to perform essential daily activities.

20310.6 Joint Ownership

If the automobile is jointly owned and if a co-owner refuses to sell it may be excluded.

20310.7 Life Insurance

20310.7.1 Face Value

Life insurance is excluded if the total face value of the policies is $1500 or less and the individual has no revocable designated burial funds.

(See Section 20340.1.3 Relation to Burial Allowance for the relationship between life insurance and the burial allowance)

20310.7.2 Death Benefits

The face value of term or death benefit only policies that do not generate a cash surrender value and burial insurance policies are excluded for eligibility. Term, death benefit policies or burial insurance with a face value equal to or greater than $10,000.00 must designate the State of Delaware as the beneficiary in the first position. The State will retain the amount no greater than the Medicaid expenditures. In situations where there are other burial funds available to cover the burial expenses, there will be no $10,000.00 allowance. Naming the State of Delaware as the Beneficiary is a condition of eligibility. [Applicants/recipients may request a hardship consideration.]

20310.8 Burial Exclusions

20310.8.1 Designated Burial Funds

20310.8.2 Burial Spaces for Relatives

20310.8.3 Burial Space Items

20310.8.4 Burial Site Services

20310.8.5 Prepaid Burial Contract

20310.8.1 Designated Burial Funds

Burial funds in the amount of $1500 that are separately identifiable and are clearly designated for burial expenses will be excluded.

20310.8.2 Burial Spaces for Relatives

A burial space or burial space item is excluded if held for the burial of the applicant/recipient, his/her spouse, or any other member of his/her immediate family. Immediate family includes parents, adoptive parents, minor or adult children (including adoptive and stepchildren) siblings (including adoptive and step) and the spouses of these relatives. If the relative's relationship to the recipient is by marriage only, the marriage must be in effect in order for the burial space exclusion to continue to apply. For example, a burial space held for a sister-in-law is no longer excludable if she and the recipient's brother divorce.

20310.8.3 Burial Space Items

A burial plot, gravesite, crypt, mausoleum, urn, niche, or other repository customarily and traditionally used for the deceased's bodily remains, vaults, headstones, markers, or plaques if pre-paid are excluded.

20310.8.4 Burial Site Services

The opening and closing of the gravesite and the care and maintenance of the gravesite if prepaid are excluded.

20310.8.5 Prepaid Burial Contract

A prepaid burial contract (sometimes funded by a life insurance policy) that cannot be revoked and cannot be sold without significant hardship is excluded.

20310.9 Retroactive Social Security Administration Lump Sum

The unspent portion of retroactive SSI and Title II Retirement, Survivors, and Disability insurance (RSDI) benefits is excluded from resources for the six calendar months following the month of receipt.

20310.10 Reparations

German Reparation payments must not be considered available in the eligibility or post eligibility treatment of income and resources. They can no longer be applied toward the personal needs allowance, community spouse income allowance, family member allowance nor cost of care. If German reparations payments are retained beyond the month of receipt, they must be considered exempt resources whether received while the person was in the community or after becoming institutionalized. These funds should be kept separate from other income and resources. Interest earned on these resources must be considered available income.

9 DE Reg. 239 (8/1/05)

20310.11 Disaster Assistance Funds

Any unspent Federal disaster assistance funds are excluded for 9 to 18 months.

20310.12 Agent Orange Payments

Any unspent Agent Orange settlement payments are excluded.

20310.13 Victims Compensation Payments

Victims compensation payments from a State established fund are excluded from resources for a period of 9 months after the month of receipt.

20310.14 Radiation Exposure Compensation

Any unspent Radiation Exposure Compensation Trust Fund Payments are excluded.

20310.15 Unspent Cash for Medical or Social Services

The unspent cash paid to an individual to help the individual pay for a medical or social service is not a resource for 1 full calendar month following the month of receipt.

20310.16 Netherlands' Act for Victims of Persecution

Any unspent payments from the Netherlands' Act on Benefits for Victims of Persecution 1940-1945 (WUV) are excluded.

20310.17 Earned Income Tax Credit

EITC (Earned Income Tax Credit) payments are excluded from resources in the month following the month of receipt.

10 DE Reg. 553 (09/01/06) (Final)