Center for Medicare and Medicaid Services (CMS) Releases Guidance on ABLE Accounts

September 7, 2017

Today the Center for Medicare and Medicaid Services (CMS) released guidance to State Medicaid Directors regarding the “Implications of the ABLE Act for State Medicaid Programs”.  The ABLE National Resource Center (the Center) is pleased to see that the vast majority of the guidance acts to reinforce the language, spirit and congressional intent of the ABLE Act to ensure that ABLE accounts should “supplement, but not supplant” public benefits being provided to the ABLE account owner, including supports and services provided by the Medicaid program.

The contents of the letter are divided into the following topics:

-          Treatment of Funds in an ABLE Account

-          Contributions to ABLE Accounts

-          Distributions from ABLE Accounts

-          Post-Eligibility Treatment of Income

-          Transfer of ABLE Funds to State Estate Recovery

Over the next few days, the Center, in collaboration with our partners in both the disability community and 529A community, will be working to analyze the guidance from CMS and develop a comprehensive summary. Additionally, the Center plans to host a dedicated national webinar aimed at helping all ABLE related stakeholders better understand how ABLE accounts may interact with Medicaid eligibility and supports and services given this new directive.     

Some highlights include:

Treatment of Funds in an ABLE Account

Medicaid state agencies are directed to disregard all funds in an ABLE account, including interest/earnings, in determining the resource eligibility of Medicaid applicants and beneficiaries who are subject to a resource test.  Additionally, the interest/earnings of the funds in an ABLE account will be excluded with respect to countable income when determining eligibility for the Medicaid program.

Contributions to ABLE Accounts

The guidance states that contributions by a third party into a beneficiary’s ABLE account (such as a parent or friend of the account owner) are disregarded when determining Medicaid eligibility.  Further, contributions by a third party are not counted either as income or included in total resources of the account beneficiary (the same guidelines apply to contributions from a special needs trust and/or pooled trust).

Additionally, the ABLE beneficiary is allowed to contribute to their own income or resource into their ABLE account (thus reducing their countable resources with respect to their eligibility for Medicaid). However, while the contribution may result in a reduction of countable resources, it would not result in a reduction of countable income (provided the contribution is a result of their income). 

Lastly, it is possible that a third party who has made a contribution to an ABLE account of someone else may apply for Medicaid and seek coverage of long-term services and supports (LTSS) themselves. The ABLE Act does not provide for any special treatment of contributions made to an ABLE account benefiting another person.  Therefore, that particular contribution may affect the third party’s future eligibility for Medicaid.

Distributions from ABLE Accounts

The guidance states that so long as distributions from an ABLE account are used for qualified disability expenses (QDEs), the funds distributed will not be counted as income for purposes of determining eligibility for Medicaid.  Funds used for non-qualified expenses or distributions that exceed the costs of the QDEs may be counted as income of the beneficiary when determining eligibility for Medicaid.

Post-Eligibility Treatment of Income

The guidance directs Medicaid state agencies to disregard distributions as income provided they are used for QDEs (this is with respect to the consideration of the extent of medical assistance provided through Medicaid for long-term supports and services (LTSS) in institutions or through home and community-based services (HCBS) waivers).  

Transfer of ABLE Account Funds to State and Estate Recovery

The guidance stipulates that states are required to seek recovery of funds in an ABLE account that have become part of an estate subject to recovery under the statute. If the estate of an ABLE account beneficiary is not subject to Medicaid estate recovery, states have discretion whether to file a section 529A claim against the ABLE account of a deceased individual who had been enrolled in a Medicaid Buy In program.