I had a question from a client whose house was destroyed in the tornado in Tupelo; having found an answer, I thought I would place it here as a public service.
The client is on both Medicare and Medicaid. For Medicaid eligibility, if she has more than $2000 in (unexcluded) cash on hand, she can become ineligible until it is spent. She is going to receive payments, likely from FEMA and certainly from home casualty insurance and was worried it would effect eligibility for Medicare.
The answer is, to a great degree, it won’t. The rules come from those for excluding assets for SSI. First, FEMA payments are excluded where there has been a disaster area declaration. That is as provided in 20 CFR § 416.1124, quoted below the fold. So those are funds I would use last, because there are no strings: It is excluded for always. Second, insurance payments for property that is cash (and interest on the cash) for replacing an excluded resource, such as one’s house or contents, is excluded if used to repair or replace the resource within nine months of the date the cash is received. It becomes countable to the extent it is not spent by then or if any remains. This nine months can be extended for good cause shown:
The initial 9-month time period will be extended for a reasonable period up to an additional 9 months where we find the individual had good cause for not replacing or repairing the resource. An individual will be found to have good cause when circumstances beyond his or her control prevented the repair or replacement or the contracting for the repair or replacement of the resource. The 9-month extension can only be granted if the individual intends to use the cash or in-kind replacement items to repair or replace the lost, stolen, or damaged excluded resource in addition to having good cause for not having done so. If good cause is found for an individual, any unused cash (and interest) is counted as a resource beginning with the month after the good cause extension period expires.
20 C.F.R. § 416.1232 (quoted more fully below). This is why I said use the FEMA money last; it stays excluded.
An additional note: I told the client to open a new account for the funds and document the source of each check.
Update: Typed “Medicare” once where I meant “Medicaid” and have fixed that.