MR #14.05: Clarification and Explanation of LTC and Community AABD Changes made in response to the DRA of 2005 and the Illinois SMART Act

Illinois Department of Healthcare and Family Services

Illinois Department of Human Services



This manual release clarifies and further explains changes in community AABD and long term care policy resulting from the federal Deficit Reduction Act of 2005, the Illinois SMART Act (PA 097-0689), and other improvements to conform with federal and state regulations. [Also see MR #12.18.] Topics clarified and further explained include:

  • verifying resources and transfers during the lookback period;
  • transfers to the community spouse;
  • annuities;
  • medical expenses;
  • two-step eligibility;
  • penalty periods;
  • medical backdating;
  • homestead property;
  • non-homestead property;
  • income;
  • resources for self-support;
  • prepaid burial contracts;
  • requests for hardship waiver;
  • liens and estate claims;
  • billing;
  • redetermination.

The policies and workers' action guides listed and linked under Manual Revisions (below), but not otherwise referenced within this release, were revised in minor ways including terminology changes, updated form names, address changes, etc.

When all of the HFS forms revised and developed in response to the DRA and the SMART Act have been completed and made available for use, an Information Memorandum with a complete list will be published. It is important to check the forms library and use the current version of each form, including those referenced in this release.

Verifying resources and transfers

WAG 01-02-01-a and PM 07-02-21 were revised to provide better direction about when to have the customer or authorized representative complete HFS Form 3654, Additional Financial Information for Long Term Care, to identify all current and transferred resources.

PM 07-02-20-a is clarified to describe a reasonable process for verifying resource transfers. Even though all LTC applicants and customers in community cases that move into LTC must report transfers of resources during the entire 60-month lookback period, it is customary and permissible to require detailed bank records and other documentation for only the 12-month period immediately before application unless there is reason to require records and verifications for older transfers.

Other sections of the Policy Manual, including PM/WAG 07-02-20-b, were revised to clarify the process for referral to LTC-ADI.

Transfers to the community spouse

PM 15-04-04-a is revised to better explain the Community Spouse Maintenance Needs Allowance (CSMNA).

PM 07-02-22, PM 07-02-22-a and PM/WAG 19-02-03-b now include better direction regarding the Community Spouse Resource Allowance (CSRA) and review of resources at redetermination. The community spouse's resources are not reviewed at annual redetermination except to verify transfer up to the CSRA, if applicable, at the first redetermination.

PM 07-02-22 was also revised to clarify which resources received after initial determination of eligibility are available to the LTC spouse and which are not. If the community spouse acquires a resource (such as an inheritance) after initial eligibility is determined, it does not affect the CSRA which was previously established and the new resource is not available to the LTC spouse. If the LTC spouse receives a resource after eligibility is determined, it cannot be transferred to the community spouse even if the transfer would bring resources of the community spouse up to the maximum CSRA amount. If, after eligibility is determined, a resource is received by the couple (not legally owned by one or the other alone), half of the resource belongs to the community spouse and the other half is available to the LTC spouse.


Purchasing an annuity that does not meet the requirements detailed in policy is considered a transfer for less than fair market value (FMV). Changing the terms of an annuity subsequent to purchase may also cause it to be considered a transfer for less than FMV. The purchase of an annuity that pays out over a period less than the person's life expectancy may be considered an allowable transfer if it meets all of the other requirements listed in PM 07-02-20-b. Also see revisions to WAG 07-02-17.

Medical expenses

Policy regarding allowable medical expenses is clarified in PM 15-08-05. Allow premiums for dental coverage and eye care only if the plan covers services not covered by the medical card. Due to changes which became effective 07/01/12, emergency extraction is the only adult dental service covered by the medical card so dental insurance premiums for additional services are allowed.

If a community spouse is paying for health insurance of the LTC spouse, allow the portion of the premium paid for the LTC customer's coverage if it can be separately identified.

For NH or SLF cases, long term care charges at the private pay rate can only be applied to the person's credit or spenddown for the month the services are provided and only if the bill has been paid by the customer. LTC costs during a penalty period or for services provided by a terminated, barred or suspended facility cannot be used toward meeting spenddown. Contact the HFS Bureau of Comprehensive Health Services with questions about ineligible providers.

When considering medical expenses for services or items covered under Illinois' Medicaid Program, only allow receipts for services where the cost was the responsibility of the customer or someone included in the medical standard. Only bills that continue to be the responsibility of the customer or someone included in the standard are allowed. Expenses (bills or receipts) that will be covered by the medical card or by other health coverage are not allowed.

After eligibility is determined, the purchase of a funeral or burial contract may not be applied to reduce the group care credit or to meet spenddown. The purchase of the contract is considered an allowable transfer for LTC as long as the customer receives fair market value (FMV) but does not reduce the portion of the customer's resources that were originally determined available to pay for the customer's care.

Two-step eligibility

Use of income in determining two-step eligibility and spenddown is clarified in PM/WAG 15-04-04. Under Step 1, application of anticipated LTC charges used to meet spenddown no longer specifies "at the state payment rate." The private payment rate is used to determine spenddown. Spenddown calculation is also clarified in PM 15-02-03-b and WAG 15-08-01-c.

Penalty periods

PM/WAG 07-02-20-d was revised to clarify calculation and application of a penalty, including partial months. The changes include additional direction for determining the date the penalty begins, how to code certain cases, and improved examples.

Medical backdating

The manual now includes additional information about medical backdating. When backdating is requested for AABD medical cases, use the verified amount of nonexempt resources available on the first day of each individual month before any income is added or expenses paid out of the person's account(s). Examples are provided in WAG 07-02-00 and a new workers' action guide (WAG 15-04-01).

Homestead property

PM 07-02-04-a was revised to comply with Illinois law by adding that homestead property transferred to a trust is not exempt unless the person provides evidence that his or her spouse, minor child or child with a disability resides in the property.

PM 07-02-04-a was further revised to include additional detail regarding how to determine the value of homestead property in various regions of Illinois and the home equity limit was changed to $536,000 based on the increase in the CPI. For homestead property that includes farmland, send an inquiry to including the name of the county in which the property is located and the year for which value is needed. LTC-ADI will return a per-acre value via email that the caseworker will multiply by the number of acres to determine FMV of the farmland acreage. The FCRC adds that value to the FMV of the home and other buildings of the farm to determine the total FMV of the property. Equipment, tools, livestock, grain in storage and other farm resources are not part of the property value and must be valued and applied toward the resources for self-support (see PM 07-02-11).

Instructions for processing applications and cases of customers with excess home equity were added to WAG 07-02-04-a.

Non-homestead property

PM/WAG 07-02-04-b were revised to formalize the process for requesting an extension of the time limit for selling non-homestead property.  The criteria for exempting the equity value of non-homestead was also revised. Requests for guidance on cash cases are sent to the DHS Bureau of Program and Performance Management (formerly the Bureau of Research & Analysis). For medical only cases, send Form 2150 to the HFS Bureau of Medical Eligibiliy & Special Programs (BMESP).


Nonexempt income is only available to the extent and in the amount actually received by the customer. See revisions to PM 08-02-00.

Resources for self-support

PM 07-02-11 has been revised to clarify the circumstances in which an exemption may apply to resources used for self-support. Allow the exemption for rental property resources whether the income is earned or unearned and also when considering the resources of the spouse. At redetermination (see PM 19-02-03), review the current value of resources for self-support and exempt up to $6,000 only if the customer's circumstances meet policy requirements.

Prepaid burial contracts

To be exempt, an irrevocable prepaid burial contract funded by assignment of life insurance to a trust and established on or after 07/01/12 must name the State of Illinois as remainder beneficiary to the extent the state provides medical assistance. This specific time frame was added to PM 07-02-08-d along with instructions to submit a check for the remainder, when appropriate, to the HFS Bureau of Collections and payable to Treasurer, State of Illinois, HFS.

Requesting a hardship waiver

When medical benefits are denied due to excess home equity or a penalty is applied for a non-allowable transfer, the Notice of Decision on Application for Medical Assistance (HFS 458LTC) informs the customer of the denial or the penalty, the right to appeal and the opportunity to request a hardship waiver. 

WAG 01-08-00 was revised to clarify that the FCRC does not enclose an application for hardship waiver.  A customer or his/her representative who decides to request a hardship waiver contacts the Benefits Hotline and hotline staff send the Application for Hardship Waiver (HFS 2378WA). The customer or his/her representative completes the form and returns it to the mailing address or the fax provided at the bottom of the form. The OIG reviewer will contact the FCRC to request additional information, if necessary, by emailing the LOA and copying the ROA. The inquiry will specify the information needed and identify the case by name, number and caseload. A scanned copy of the waiver request will also be attached. The FCRC will send the requested information to OIG via fax or by scanning and emailing the documents and information.

If the penalty period resulted from a transfer for less than FMV made before 11/01/11, the OIG reviewer will send the customer or his/her representative a Statement of Hardship - Waiver of Penalty Period (HFS 2379WA). The form must be completed and returned to the mailing address or the fax at the bottom of the form before the penalty will be waived. 

Liens and estate claims

PM 23-02-00 was clarified regarding recalculation of NH/SLF credits and adjustment of spenddown amounts for active medical cases. These actions are not considered reports of overpayment. PM 23-09-00, PM 23-09-02, PM/WAG 23-09-02-c and PM 23-09-02-e were revised to clarify the circumstances under which the state is entitled to recover money spent on AABD customers and the processes used to complete the lien or claim.


Time frames for billing are revised in PM 20-04-01-c. Providers must submit most bills for service within 180 days. Medicare cross-over claims must be submitted within 24 months. LTC admissions must be submitted electronically within 5 working days and the supporting documentation must be submitted to the FCRC within 30 days.


In addition to the redetermination issues presented elsewhere in this release, PM 19-02-03 now includes a reminder to review current home equity and assess eligibility according to PM 01-08-02 for LTC cases. Also review annuities, loans and contracts for deed to assure requirements in PM 07-02-20-b are met and that such financial instruments have been referred to the Bureau of Collections using Form IL444-0008 ("DPA 8"). 

Manual Revisions

Forms referenced:

  • HFS 3654
  • IL 444-2498
  • HFS 458LTC
  • HFS 2378WA
  • HFS 2379WA
  • IL 444-0008

[signed copy on file]


Secretary, Illinois Department of Human Services


Director, Illinois Department of HealthCare and Family Services