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Medicaid Eligibility - Prepaid Burial Contracts

In Evans v. The Illinois Dept. of Human Services, the Court reviewed the standards for qualifying pre-paid burial contracts as exempt for purposes of the five-year look-back period for Medicaid eligibility.  The applicant purchased a $12,000 life insurance policy, and assigned it to an irrevocable trust to pay an estimated $12,000 in funeral and burial expenses.  She provided the Department with an estimate from a local funeral home for approximately that amount, but she never actually purchased a contract for such services.  The Department ruled that the life insurance purchase was a non-allowable transfer, and imposed a 3-month penalty period for the applicant's eligibility.

On review, the Court looked at the language of the Medicaid Act, the Illinois Public Aid Code, the Department's Policy Manual, and its Workers' Action Guide.  It concluded that because no actual services were contracted for, there was a transfer of $12,000 for less than fair market value.  Furthermore, the insurance policy provided that such expenses would only be paid if a bill for same was presented to the trustee within 45 days of the applicant's death, and if the bill was for less than the full amount of the policy, or if no bill was presented within the 45 days, the remaining value of the policy proceeds would then pass automatically to the applicant's children.  Since no services were ever contracted for, the Court determined that there was still a good chance that the insurance policy proceeds would not be used for funeral or burial expenses, and therefore, it was a disqualifying transfer.

The Court also reviewed how to calculate the rate to be used for the period of ineligibility, and decided that, based on the federal Medicaid Act, the rate to be used is that which is in effect at the facility on the date of application, not the date on which the Department makes it decision.  

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