Stimulus Check

My office has received a number of calls about the federal stimulus check that many taxpayers received.  There are two basic questions that my office receives, and the questions are as follows:  My loved one died in 2019, how do I cash his stimulus check?  Or, My mom is receiving Medicaid benefits, will the federal stimulus check impact her Medicaid eligibility?

The Internal Revenue Service (the IRS) recently put out guidance on the stimulus check instructing people to return any stimulus check that was issued to an individual who is deceased.  So, if your relative died in 2019, for instance, you cannot retain his stimulus check.

The problem seems to have arisen because the IRS issued the checks based upon taxpayers that were on its rolls as of 2018 and 2019.  The IRS apparently crosschecks deaths with another agency, but there is a lag between the IRS’s records and the time this crosscheck occurs; accordingly, the IRS was not aware that your loved one was deceased.

The questions about the effect of the check on Medicaid is a bit more interesting, at least for me.  It’s a fairly academic question that involves many of the moving parts of the Medicaid program.

Medicaid is a health payment plan for needy individuals.  In order to qualify for Medicaid benefits, an individual must have limited assets and insufficient income with which to pay for her care.  The receipt of the stimulus check has the potential of being both an income item and an asset item.

Let’s assume that Mrs. Smith is ninety years old and resides in a nursing facility.  Mrs. Smith receives Medicaid benefits.  Mrs. Smith receives $1,000 a month in retirement Social Security benefits.  Because Mrs. Smith is a Medicaid recipient, she can retain $50 of her income as a personal needs allowance.  The Medicaid program permits her to retain this $50 in order to pay for haircuts and clothes.

Mrs. Smith has a private supplemental health insurance through AARP.  The cost of this insurance is $100 per month.  Because the Medicaid program is the payor of last resort—meaning it will only pay after Medicare and private health insurance refuse to pay for a health item—the Medicaid program wants Mrs. Smith to retain her private health insurance.  By Mrs. Smith retaining her private health insurance, she is placing less of a burden on the Medicaid program, the payor of last resort.

When Mrs. Smith qualifies for Medicaid, she will receive a document that tell her she can retain the $50 of her $1,000 in income as her personal needs allowance and that she can pay her $100 monthly health insurance premium.  These deductions leave $850 in “available income.”

Her available income will be payable to the nursing home each and every month for the remainder of her life (assuming she remaining in the nursing home for the remainder of her life). The payment to the nursing home reduces the amount the Medicaid program pays the nursing home.

Every nursing home in New Jersey that participates in the Medicaid program has a Medicaid reimbursement rate.  The rate differs from facility-to-facility.  Let’s assume that the nursing home in which Mrs. Smith resides has a Medicaid reimbursement rate of $6,850 per month.

Mrs. Smith must turn over her $850 in available income to the nursing home each and every month.  The Medicaid program will pay the nursing home the remainder of the Medicaid reimbursement rate or $6,000 per month.

An income item for purposes of Medicaid is anything the Medicaid beneficiary receives that can be used to pay for a food or shelter item.  The $1,200 stimulus payment would be money that could be used to pay for a food or shelter item, so ordinarily, the stimulus payment would be income, meaning that it would have to be turned over to the nursing home.

Ordinarily, the $1,200 would also be an asset if held over to the following month and would count against the $2,000 asset limit for Medicaid eligibility; however, I say “ordinarily” because there is an exception in the law that excludes the stimulus check from being income or an asset for twelve months after receipt, so if the Medicaid beneficiary spends the money in twelve months, all will be well with continuing Medicaid eligibility.

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