Economic Stimulus Act's Impact on Long Term Care Residents and Providers

VHCA (3/28/2008)

VHCA has received a number of questions from member facilities regarding the impact of the recently enacted Economic Stimulus Act of 2008 on Medicaid beneficiaries. Click here to read a memorandum developed by Reed Smith for AHCA which attempts to provide clarification and guidance related to the legislation. 

Last month, President Bush signed into law the Economic Stimulus Act of 2008.  This legislation provides direct stimulus payments to select taxpayers, including those individuals who have no tax liability and receive Medicaid benefits.  Specifically, Medicaid beneficiaries are eligible to receive a payment or rebate of $300 ($600 on a joint return) if the beneficiary had at least $3,000 of qualifying income in 2007.  Social Security benefits, certain Railroad Retirement benefits, and certain veterans’ benefits are included in the determination of qualifying income. 

In order to receive the rebate checks, eligible individuals must file a 2007 federal income tax return.  Medicaid beneficiaries who would not otherwise file a tax return are encouraged, but not required, to file a return by April 15, 2008 in order to be among the first to receive a rebate payment.   In any case, taxpayers should file before October 15, 2008 in order to receive the rebate.

Key for those that provide Medicaid nursing facility services is that the rebate provided by the legislation will not count as income or resources for Medicaid purposes during the month of receipt or the following two months and will not have any effect on eligibility for Medicaid or other federal benefits.   The three-month window is significant in the treatment of the rebate in estate recovery proceedings, as well as financial penalties typically applied for transferring assets.  If the rebate is given away during the three-month period, it is not subject to a transfer penalty.  Similarly, if the rebate becomes part of a beneficiary’s estate during the three-month period, it is not subject to recovery.   Medicaid beneficiaries and their representatives should act promptly to file a 2007 federal income tax return in order to receive the stimulus payment.

Administrators and staff of long term care facilities, assisted living facilities, residential care facilities for the elderly and other facilities in which Medicare and Medicaid beneficiaries reside should consider ways to make information concerning the rebate available to their residents and provide assistance, as needed, to file a 2007 federal tax return.  Neither facilities nor individual staff should charge a fee for this assistance. 

Facilities should seek the assistance of family members or legal guardians to complete and sign the tax return of residents who are otherwise unable or incapable of understanding and signing a tax form.  Without a power of attorney that includes specific authority to sign a resident’s tax return, health care facilities may not sign the form on behalf of a resident.

Further, facilities and staff should not imply that residents are required to file a 2007 tax return if they are not otherwise required to do so.  Rather, they should indicate that if residents do not file the 2007 tax return, they will not be entitled to the stimulus payment.  Medicaid beneficiaries and their representatives can get free tax help through the Volunteer Income Tax Assistance (VITA) program by calling 1-800-906-9887.

The IRS Economic Stimulus Payments Information Center has posted a substantial amount of information, including links to the IRS Form 1040, on its website.  Reed Smith suggests that facilities could simply print out this information and make it available to residents and their families.

The IRS permits a representative of a taxpayer to sign the taxpayer’s personal income tax return if the taxpayer is unable to do so because of disease, injury or other good cause.   However, when a tax return is signed by a representative it must be accompanied by a power of attorney authorizing the representative to sign the return.  IRS Form 2848 provides a power of attorney and the instructions for its use.  Furthermore, if a taxpayer wants a representative to receive the rebate on his or her behalf, the taxpayer must specifically authorize the representative to endorse or cash the rebate check in the power of attorney.