Title of Regulation: 12VAC30-40. Eligibility Conditions and Requirements (amending 12VAC30-40-280).

Statutory Authority: § 32.1-325 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: December 5, 2013.

Effective Date: December 19, 2013.

Agency Contact: Jack Quigley, Policy Division, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 786-1300, FAX (804) 786-1680, or email jack.quigley@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Sections 32.1-324 and 32.1-325 of the Code of Virginia authorize the Director of the Department of Medical Assistance Services to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority, as established by § 1902(a) of the Social Security Act (42 USC 1396a), provides governing authority for payments for services.

Purpose: This regulatory action is necessary to implement Chapter 506 of the 2011 Acts of Assembly, which allows participants in the MEDICAID WORKS program to earn up to $75,000 while still retaining eligibility for Medicaid benefits. In addition, the amendments fix several unintended inequities that the department discovered after the implementation of the program.

Rationale for Using the Fast-Track Process: These changes to the MEDICAID WORKS program are mandated by Chapter 506 of the 2011 Acts of Assembly or are fixes to unforeseen issues that arose after the program began. The amendments reinforce the purpose of the program to permit Medicaid enrollees who desire to better their lives by going back to work to do so at some level without endangering their Medicaid eligibility. These changes are noncontroversial, and therefore the department has chosen the fast-track rulemaking option for this regulatory action.

Substance: This regulatory action allows participants in the MEDICAID WORKS program to earn up to $75,000 while still retaining eligibility for Medicaid benefits. The amendments also correct an unintended consequence, which came to light after the initial regulations were promulgated, whereby individuals with disabilities, who receive a modest cash benefit (unearned income) from Social Security Disability Insurance (SSDI) and who elect to enroll in MEDICAID WORKS, actually can become ineligible for the MEDICAID WORKS program if their earned income causes their SSDI benefit to increase. While MEDICAID WORKS program participants may currently have gross annual earnings of as much as $44,300, their unearned income may not exceed 80% of the federal poverty level, equaling $745 per month. The entry income level for eligibility into the MEDICAID WORKS program is $745 per month.

This is clearly problematic because the intent of the MEDICAID WORKS program is to encourage Medicaid enrolled individuals to go back to work and earn higher income while retaining Medicaid eligibility. However, achieving higher income can result in a higher SSDI benefit payment that may, in turn, have a significant negative impact by making the individual ineligible for Medicaid. Disregarding any amount of SSDI payment, which increases as a result of work while participating in MEDICAID WORKS, corrects this unforeseen and unfair consequence of the individual succeeding in employment efforts. The amendments also allow for a disregard of any cost of living adjustment (COLA) increases so as not to discontinue Medicaid eligibility.

The amendments correct an additional unintended consequence of the initial regulations whereby an individual with disabilities who experiences a loss of employment through no fault of his own (for example, being laid off) becomes eligible for unemployment insurance benefits and acceptance of this unearned income payment causes the individual to become ineligible for continued Medicaid coverage. Medicaid policy requires that individuals who are eligible for unemployment insurance payments must apply for these cash benefits, which in turn may make the individual ineligible for Medicaid. Again, the intent of the MEDICAID WORKS program is to encourage individuals to go back to work and earn higher income while retaining eligibility for Medicaid. The program has an existing policy in place to allow an individual to remain eligible for MEDICAID WORKS for up to six months if he experiences a loss of employment through no fault of his own. Penalizing the individual for going to work, but then losing his job, is a direct contradiction of the intention for which the program was created.

Issues: These changes may assist employers because this action has the potential to expand the labor pool by adding new employees with disabilities who are proven to be valuable, dependable resources. Individuals with disabilities can have higher income and still retain Medicaid coverage. There are no advantages or disadvantages to the agency or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapter 506 of the 2011 Acts of Assembly, one of the proposed changes increases the maximum allowable gross earnings for participation in the Medicaid Works program. The other proposed changes expand the income disregards allowed in the program.

Result of Analysis. There is insufficient data to accurately compare the magnitude of the benefits versus the costs. Detailed analysis of the benefits and costs can be found in the next section.

Estimated Economic Impact. Virginias Medicaid Works program is a work incentive program offered to individuals with disabilities. The program allows Medicaid enrollees with disabilities to earn higher incomes up to a certain limit without losing their eligibility for Medicaid. The current gross income limit for Medicaid Works participants is $45,468 per year. Chapter 506 of the 2011 Acts of Assembly increased the maximum allowable gross earnings for participation in the Medicaid Works program to the maximum gross income amount allowed by the federal Ticket to Work and Work Incentives Improvement Act, which is $75,000 per year. One of the proposed changes implements the increased income limit passed by the 2011 General Assembly.

The proposed changes also introduce additional income disregards. One of these changes allows a Medicaid Works participant to disregard the increase in their Social Security Disability Insurance (SSDI) as a result of work while participating in the program. According to the Department of Medical Assistance Services (DMAS), working while in the program can actually cause the SSDI benefit to increase which in turn can cause the gross income to increase and render the individual ineligible for Medicaid. The possibility that working may lead to the loss of Medicaid eligibility may currently be discouraging some individuals from participation and undermining the very intent of the program, which is to encourage disabled individuals enrolled in Medicaid to go back to work and earn higher incomes. The proposed changes would also disregard any increase in the SSDI benefit due to cost of living adjustments.

Similarly, if a program participant becomes unemployed due to no fault of his own he is required to apply for unemployment insurance, which may in turn render the individual ineligible for Medicaid. Currently, the program allows participants to remain eligible for up to six months, if loss of employment was due to no fault of their own. The possibility of unintended unemployment causing loss of Medicaid eligibility also has the potential to discourage participation in the program and undermine the intent of the program. The proposed changes would disregard unemployment insurance benefits while the enrollee is in the six month grace period.

The proposed changes either increase the eligibility income limit or allow more income disregards in the Medicaid Works program, which would allow participants to earn higher incomes without putting their eligibility for the program or for Medicaid at risk. Thus, the proposed changes are expected to help maintain enrollment of current participants by allowing them to earn higher incomes. Thus, the proposed changes are expected to promote the Medicaid Works program, which in turn promotes work among disabled Medicaid enrollees. Once they are allowed to work and earn incomes, they may be able to support themselves and no longer need Medicaid and possibly other public assistance programs. Any reduction in the Medicaid enrollment and/or other public assistance programs would represent an economic benefit as it would reduce state and federal expenditures needed for public assistance. However, the possibility that some of the participants may never be successfully weaned out of Medicaid or other public assistance programs cannot be ruled out. The proposed changes would allow such people to maintain their Medicaid benefits while allowing them to earn higher incomes.

Currently, Medicaid pays $10,017 per person per year for individuals in the Medicaid Works program. According to DMAS, approximately five out of 45 Medicaid Works program participants may be affected by the proposed changes.

Businesses and Entities Affected. The proposed changes are expected to affect five out of 45 Medicaid Works participants.

Localities Particularly Affected. The proposed regulations apply throughout the Commonwealth.

Projected Impact on Employment. The proposed changes promote the Medicaid Works program which allows Medicaid enrollees with disabilities to work without losing their eligibility for Medicaid. Thus, an increase in the labor supply may be expected. According to DMAS, there could be five people affected by the proposed changes.

Effects on the Use and Value of Private Property. The proposed changes do not have any direct impact on the use and value of private property.

Small Businesses: Costs and Other Effects. The proposed changes do not have any direct effects on small businesses. However, increased labor supply may indirectly benefit small businesses that are hiring.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed changes do not pose an adverse impact on small businesses.

Real Estate Development Costs. No effect on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The department has reviewed the economic impact analysis prepared by the Department of Planning and Budget regarding 12VAC30-40, Eligibility Conditions and Requirements, concerning Update to Medicaid Works Income Limit. The agency concurs with this analysis.

Summary:

The amendments implement a change in the Medicaid Buy-In (MBI) program, MEDICAID WORKS, as authorized by Chapter 506 of the 2011 Acts of Assembly. Chapter 506 directs the Department of Medical Assistance Services to increase the maximum allowable gross earnings for participants in MEDICAID WORKS to the maximum gross income amount allowed under the Ticket to Work and Work Incentives Improvement Act that does not trigger the collection of mandatory premiums. This amount is calculated to be $75,000 in gross annual earnings.

The amendments also (i) adjust MEDICAID WORKS policy to mitigate the negative impact (loss of Medicaid eligibility) of higher earned income or higher unearned income as a result of participating in this work incentive program and (ii) enable a disregard for any increase in the amount of unearned income in the Social Security Disability Insurance (SSDI) payment resulting from employment as a worker with disabilities eligible for assistance under the Ticket to Work and Work Incentives Improvement Act, as a result of a cost of living adjustment to the SSDI payment, or for any unemployment insurance payments received by an enrollee as a result of loss of employment through no fault of his own.

12VAC30-40-280. More liberal income disregards.

A. For children covered under §§ 1902(a)(10)(A)(i)(III) and 1905(n) of the Social Security Act, the Commonwealth of Virginia will disregard one dollar plus an amount equal to the difference between 100% of the AFDC payment standard for the same family size and 100% of the federal poverty level for the same family size as updated annually in the Federal Register.

B. For ADC-related cases, both categorically and medically needy, any individual or family applying for or receiving assistance shall be granted an income exemption consistent with the Act (§§ 1902(a)(10)(A)(i)(III), (IV), (VI), (VII); §§ 1902(a)(10)(A)(ii)(VIII), (IX); § 1902(a)(10)(C)(i)(III)). Any interest earned on one interest-bearing savings or investment account per assistance unit not to exceed $5,000, if the applicant, applicants, recipient or recipients designate that the account is reserved for purposes related to self-sufficiency, shall be exempt when determining eligibility for medical assistance for so long as the funds and interest remain on deposit in the account. For purposes of this section, "purposes related to self-sufficiency" shall include, but are not limited to, (i) paying for tuition, books, and incidental expenses at any elementary, secondary, or vocational school, or any college or university; (ii) for making down payment on a primary residence; or (iii) for establishment of a commercial operation that is owned by a member of the Medicaid assistance unit.

C. For the group described in §§ 1902(a)(10)(A)(i)(VII) and 1902(l)(1)(D), income in the amount of the difference between 100% and 133% of the federal poverty level (as revised annually in the Federal Register) is disregarded.

D. For aged, blind, and disabled individuals, both categorically and medically needy, with the exception of the special income level group of institutionalized individuals, the Commonwealth of Virginia shall disregard the value of in-kind support and maintenance when determining eligibility. In-kind support and maintenance means food, clothing, or shelter or any combination of these provided to an individual.

E. For all categorically needy and medically needy children covered under the family and children covered groups, (§§ 1902(a)(10)(A)(i)(I), 1902(a)(10)(A)(i)(III), 1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 1902(a)(10)(A)(ii)(VIII), 1902(a)(10)(C)(ii)(I) and 1905(n) of the Act), the Commonwealth will disregard all earned income of a child under the age of 19 who is a student.

F. For all categorically needy and medically needy individuals covered under the family and children covered groups (§§ 1902(a)(10)(A)(i)(I), 1902(a)(10)(A)(i)(III), 1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(i)(V), 1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 1902(a)(10)(A)(ii)(VIII), 1902(a)(10)(C)(ii)(I) and 1905(n) of the Act), the Commonwealth will disregard the fair market value of all in-kind support and maintenance as income in determining financial eligibility. In-kind support and maintenance means food, clothing or shelter or any combination of these provided to an individual.

G. Working individuals with disabilities eligible for assistance under § 1902(a)(10)(A)(ii)(XV) of the Act who wish to increase their earnings while maintaining eligibility for Medicaid must establish Work Incentive (WIN) accounts (see 12VAC30-40-290).

1. The Commonwealth shall disregard any increase in the amount of unearned income in Social Security Disability Insurance (SSDI) payment resulting from employment as a worker with disabilities eligible for assistance under § 1902(a)(10)(A)ii(XVI) of the Act, or as a result of a COLA adjustment to the SSDI payment.

2. The Commonwealth shall disregard any amount of unearned income of an enrollee as a result of the receipt of unemployment insurance benefits due to loss of employment through no fault of his own. This disregard shall only apply while an enrollee is in the six-month safety net, or "grace" period.

3. The Commonwealth shall disregard earned income up to 200% of the federal poverty level $75,000 for workers with disabilities eligible for assistance under § 1902(a)(10)(A)(ii)(XV) of the Act. To be eligible for this earned income disregard, the income is subject to the following provisions:

1. a. Only earnings that are deposited into a Work Incentive (WIN) account can be disregarded for eligibility purposes.

2. b. All funds deposited and their source will be identified and registered with the department, for which prior approval has been obtained from the department, and for which the owner authorizes regular monitoring and/or reporting of these earnings and other information deemed necessary by the department for the proper administration of this provision.

3. c. A spouse's income will not be deemed to the applicant when determining whether or not the individual meets the financial eligibility requirements for eligibility under this section.

H. For aged, blind and disabled individuals, both categorically and medically needy, with the exception of the special income level group of institutionalized individuals, the Commonwealth of Virginia shall disregard the value of income derived from temporary employment with the United States Census Bureau for a decennial census.

I. For all categorically needy and medically needy individuals covered under the family and children covered groups (§§ 1902(a)(10)(A)(i)(I), 1902(a)(10)(A)(i)(III), 1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(i)(V), 1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 1902(a)(10)(A)(ii)(VIII), 1902(a)(10)(C)(ii)(I) and 1905(n) of the Act), the Commonwealth will disregard income derived from the temporary employment with the United States Census Bureau for a decennial census.