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So, you or an elderly loved one has been denied Medicaid, now what? Whether denied Medicaid for nursing home or in-home care, the need for care persists. While a Medicaid denial does not mean the family has any more financial resources that can be used to pay for care, the situation is not as hopeless as it may feel. There are several paths that a family can pursue and, in most cases, with time and planning, a denied Medicaid applicant can become Medicaid eligible.
When one receives a Medicaid denial letter (being told verbally by a caseworker is not a formal denial), one has three options: 1) request a reversal, 2) appeal the denial, or 3) re-apply for Medicaid. Which of these options to choose depends on two factors: 1) the reason for which one was denied Medicaid and 2) whether or not the applicant believes they have been incorrectly denied Medicaid.
Reasons for Medicaid / Medi-Cal Denial
Prior to exploring the 3 options one has after they have been denied Medicaid, it is important to understand the reasons for a Medicaid denial. Applicants receive a Medicaid denial letter and, in that letter, it will state clearly the reason for which an applicant has been denied. Most commonly an applicant is denied due to income or assets. In either case, they are being denied because they have income or assets in excess of the amount allowed by Medicaid. (To see state-by-state eligibility criteria, click here).
Another common denial factor is actually an approval, but with a penalty period due to violating Medicaid’s look back rule. A penalty is a defined period of time for which the applicant will be ineligible for Medicaid. For example, a case worker may find the applicant violated the look-back rule by giving away $20,000 in assets and is therefore penalized with a 4-month period of ineligibility.
Much less frequently an applicant is denied because their care needs are not severe enough to warrant the type of assistance they are requesting through Medicaid.
Types of Medicaid Denials
These “types of denials” are not formal designations but rather important in helping the applicant to determine which approach they should take to reversing the Medicaid denial decision.
1. Denied incorrectly because of an error made by the applicant – applicants make unintentional errors with frequency when applying for Medicaid. The paperwork is confusing, and the documentation requests are overwhelming at best.
2. Denied incorrectly because of an error made by the caseworker – nobody is perfect and that includes Medicaid office case workers charged with reviewing applications. By some estimates, as much as 25% of all Medicaid denials are made in error.
3. Denied and correct to be denied – Even those applicants who have been correctly denied Medicaid can take steps to gain eligibility.
Choosing Your Approach to Challenge the Denial
What to do when denied Medicaid? Most people think “appealing the Medicaid denial” is their only course of action, when in fact, making an appeal is just one of three options and probably the least attractive and most time-consuming of the options. Read the 3 approaches which follow and determine which is best for you or your loved one’s situation.
1) Request a Reversal
To request a Medicaid denial reversal means simply communicating with the case worker in a less formal manner than making an appeal, usually through email or by phone. When an applicant has made an error in the application paperwork, one can simply contact their case worker and mention the error that was made, why the error was made, and provide them with the corrected information or missing paperwork. Often, this simple process can result in a reversed decision.
If the applicant thinks the case worker has made an error in their calculations or in their interpretations of Medicaid’s complex rules, requesting a reversal can also be effective. However, it is best to proceed with caution and respect when doing so and it may require escalating the issue to a supervisor. Private Medicaid Planners can be of great assistance in this situation. If one suspects an error has been made, a Medicaid planner can review the decision, identify the error which was made, and provide the applicant with the supporting documentation to present to the case worker or his/her supervisor to illustrate the error. Alternatively, Medicaid planners will often communicate directly with the case workers on their clients’ behalf. Find a Medicaid planner to review a Medicaid denial.
Requesting a reversal is, by far, the fastest approach to changing a Medicaid denial to an approval. This approach can take days while a formal appeal or a re-application can take several months. Furthermore, a reversal preserves the applicant’s original date of application. This means, when approved, they are approved retroactively to their original application date, meaning their care costs will be covered retroactively.
2) Re-Applying for Medicaid
When an applicant was correctly denied Medicaid (most often for financial reasons), they can often become Medicaid eligible through re-applying for the program. For example, sometimes an applicant is denied Medicaid because assets are over Medicaid’s limit. The reason for “excess” assets could be something as simple as the applicant not understanding which assets are, and are not, counted towards the asset limit. Had the applicant been aware and had “spent down” the extra assets prior to application, eligibility would not have been denied.
Other re-application situations arise when the applicant has money over the income limit. Regardless of whether an applicant has income and / or assets over the limit(s), if they still cannot afford to pay for the care they require, professional Medicaid planning assistance should be considered. Working with a Planner and re-applying for Medicaid enables the applicant to restructure their finances so that they meet the eligibility requirements.
There exist many techniques allowed by Medicaid such as using Qualified Income Trusts, Irrevocable Funeral Trusts or purchasing Medicaid-compliant annuities. These techniques are complicated and often require the expertise of a professional Medicaid planner to implement correctly. Remember, a Medicaid office will have a record of past applications and will know the applicant’s financial situation at that time. Drastic differences in a financial situation may generate questions which the applicant must be prepared to explain and provide documented evidence of why their financial situation has changed. Again, this is where professional assistance can be very helpful. Read about the different types of Medicaid planners.
Re-applying for Medicaid resets the application date back to which benefits are covered. For example, if the applicant applied June 15 and went into a nursing home costing $5,000 month that same day, and two months later they were denied Medicaid and re-applied the next month successfully, the applicant might still be out the $15,000 spent on nursing home care for three months. If the decision had been reversed or appealed successfully, the benefits would apply retroactively to their original application date or the first day of the month in which the application was submitted. (There is also retroactive Medicaid, which allows an applicant to receive Medicaid coverage for up to 3 months prior to one’s Medicaid application date if eligibility criteria was met.) Therefore, re-application is best suited for persons who have been denied correctly and have made the effort to change their financial situation.
How long after being denied Medicaid can you re-apply? One can begin the re-application process immediately, but in practical terms, benefits are calculated to the month. Therefore, most immediate re-applications are for the following month.
3) Appealing the Medicaid Denial
Appealing a Medicaid denial is a tricky and time-consuming proposition for both the applicant and the Medicaid office. On the denial letter, the appeal process in the applicant’s specific state will be explained. Typically, an applicant has 45 days to request an appeal, but this could be as few as 30 days or as many as 90 days. Once requested, a hearing date is set by the Medicaid office, which further extends the appeal process. Applicants will often retain an attorney for the appeal process or at a minimum have a professional Medicaid planner review their original application.
The better news about appeals is that if an appeal is successful, benefits are made retroactively to the original application date. This is especially good news given that the time from an original application, to a denial, to an appeal, and finally to a hearing, may take many months. Retroactive benefits for many months’ worth of care, especially nursing home care, can amount to tens of thousands of dollars.
When appealing a Medicaid denial, it is important to be aware that the applicant is appealing based on the same financial information they submitted originally. Therefore, an applicant should be exceedingly confident that a mistake was made by the Medicaid office / caseworker when making an appeal. Furthermore, if a mistake was made by the caseworker, then the applicant should pursue Option #1 Request a Reversal prior to making the formal appeal.
Reasons for Denial and Possible Actions
Denied Due to Income
If you are denied Medicaid due to income (having income in excess of the Medicaid monthly income limit), there are several paths you might pursue to become eligible. First, if you feel you have been incorrectly denied, you should confirm the income limits for your state and type of Medicaid, understand how Medicaid counts income and then pursue the approach describe above 1. Request a Reversal.
If you feel you have been denied correctly, one path is to allocate excess income into Qualified Income Trust. This approach is only available in certain states. Another option, if married, is to allocate income to a spouse that is not applying for Medicaid. Other options may be available, it is recommended you discuss your case with a Medicaid planning professional.
Denied Due to Assets
If you are denied Medicaid due to excess assets, the first step is to confirm your assets exceed your state’s Medicaid requirements for the specific type of Medicaid you are applying and your marital status. There is considerable room for interpretation of countable and exempt assets. You might consider having a professional Medicaid planner review your case prior to requesting a reversal or filing a formal appeal.
If your assets do, in fact, exceed Medicaid’s limits, there are multiple strategies that can be employed to reduce your assets below the eligibility threshold. Read more.
Approved but with a Look-Back Penalty
If you have been approved for Medicaid but have been given a penalty period (a period of ineligibility due to a past asset transfer that violated Medicaid rules), you should have a Medicaid planning professional review your case prior to requesting a reversal or filing a formal appeal. Errors are easily made in the complicated application process both by the person preparing the application and the case manager reviewing the application, a Medicaid planner will be able to spot these errors and recommend a course of action either correcting the error or taking steps to modify the applicant’s finances and re-apply.