DEPARTMENT OF HEALTH & HUMAN SERVICES CMS/I
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop S2-14-26
Baltimore, Maryland 21244-1850
CENTERS for MEDICARE & MEDICAID SERVICES
Center for Medicaid and State Operations
Disabled and Elderly Health Programs Group (DEHPG)
MAR 13 2006
Mr. Jay J. Sangerman
Attorney at Law
60 East 42nd Street
New York. NY 1016
Dear Mr. Sangerman:
You have contacted the Centers for Medicare & Medicaid Services (CMS) seeking clarification of the Medicaid program's policy regarding payments from a structured settlement annuity into a trust established for the benefit of a disabled individual under Section 1917(d)(4)(A) of the Social Security Act (the Act), often referred to as a "special needs trust". You would like CMS's guidance on how structured settlements established by an irrevocable assignment of the annuity payments to the trust before the beneficiary reaches age 65 would affect the individual's eligibility for Medicaid, both before and after the disabled individual attains age 65. In part your request results from the determination by some States that a structured settlement annuity and special needs trust would be exempt assets for Medicaid purposes only if the guaranteed payment period under the annuity contract does not extend beyond the applicant's 64`h year of age. You have submitted one such letter, from the Texas Health and Human Services Commission, that contains what you believe is a misunderstanding of federal law on this point.
We have also received a copy of a letter to you regarding these issues from the Social Security Administration (SSA), which analyzed how policies of the Supplemental Security Income (SSI) program would apply to structured settlement annuities. SSA concluded that the payments from a structured settlement annuity that are irrevocably assigned to a special needs trust are not income to the trust beneficiary when paid into the trust, if the beneficiary has no right to anticipate, sell or transfer the annuity payments. SSA also concluded that the right of the trust to receive the payments is not a resource to the trust beneficiary.
Federal law requires that States use the rules of the most closely related cash assistance program as the baseline for determining eligibility for Medicaid. In the case of aged, blind, or disabled Medicaid applicants and recipients, those would be the rules of the Supplemental Security Income (SSI) program, which is administered by SSA. If income or assets are not countable for determining SSI eligibility, they cannot generally be counted in determining Medicaid eligibility. As SSA has determined that structured settlement annuities irrevocably assigned to a special needs trust are neither income nor resources to the beneficiary for SSI purposes, they would not be treated as income or resources in determining Medicaid eligibility in most States. The only exceptions would be States, known as "209(b)" States that had more restrictive trust policies in effect in 1972.
You further ask if payments from a structured settlement to a special needs trust after the trust beneficiary reaches age 65 are permitted under the Medicaid rules for special needs trusts. In Section 3259.7 of the State Medicaid Manual, CMS has provided policy guidance to States regarding special needs trusts. In pertinent part, the Manual states: "When a trust is established for a disabled individual under age 65, the exception for the trust discussed above continues even after the individual becomes age 65. However, such a trust cannot be added to or otherwise augmented after the individual reaches age 65."
In analyzing this issue, we agree with SSA's conclusion that it is the right to receive the payments from the annuity which is the asset, not the individual payments themselves. Where the individual has made an irrevocable assignment of a structured settlement annuity prior to age 65, annuity payments paid to a special needs trust after an individual reaches age 65 would be treated the same as payments made before the individual attained age 65. Payments from a structured settlement annuity into a special needs trust pursuant to an irrevocable assignment made by a disabled individual under 65 would not disqualify an otherwise qualified trust from treatment under the 1917(d)(4)(A) rules even when the payments are made after the beneficiary has reached his or her 65`" birthday. For Medicaid purposes, policies related to special needs trusts apply to trusts established on or after August 11, 1993.
We hope that this information responds to your questions.
Gale P. Arden Director