Retroactive Spenddown of Excess Property on Medical Expenses (Principe Exemption)

The Principe v. Belshe court settlement allows retroactive spenddown of excess property on medical expenses in order to establish MC eligibility. Individuals who are determined to have excess property are now able to spend that excess property on qualified medical expenses in a later month to establish MC eligibility back to the month of application.

Excess property (and its conversion to cash for payment) actually spent on qualified medical expenses is treated as exempt property in prior months beginning with the month of application. The otherwise excess property must have existed for the entire month in which it is being exempted. MC may then be granted for the month(s) in which the exemption is applied if the individual is otherwise eligible. This exemption is known as the Principe Property Exemption.

Note: The procedure used when an individual reduces excess property in a month by paying, in that SAME month, current or future medical expenses in order to establish MC eligibility has not changed. The Principe procedure is similar although it applies when an individual reduces excess property in one month by paying qualified medical expenses in a LATER month.

Impact

The Principe Exemption does NOT impact individuals who:

Have excess property, but are able and do reduce that excess property during the same month (spenddown), or
Do not have the legal capacity to spenddown excess property.

Reminder: EWs must continue to consider availability before including property in the property reserve. An individual who is unconscious, comatose or incompetent at any time during the month is considered to not have the legal capacity to liquidate property and the property is considered unavailable. [Refer to new section]

Principe Property Exemption

The Principe Property Exemption is an exemption of otherwise excess property which is spent in a later month on qualified medical expenses. The otherwise excess property must have existed for the entire month or months beginning with the month of application.

In some instances, otherwise excess property may have to be converted to cash before it is spent on qualified medical expenses. The Principe property exemption also applies to the cash conversion.
The exemption cannot exceed the amount of otherwise excess property. If an individual pays medical expenses with property which is not excess property, he/she may be entitled to a reimbursement from a medical provider if MC eligibility is later established for the month in which the service was rendered.

Note: Once steps are taken to liquidate property, it is considered unavailable. The EW may be able to establish MC eligibility, if otherwise eligible.

Principe Month

Month(s), no earlier than the month of application, to which the Principe property exemption has been applied.

Note: The exemption may not be applied to any Retroactive MC months.

Qualified Medical Expense

Bills incurred in any month by:

The individual,
Any member of the individual’s MC Family Budget Unit (MFBU), or
The individual’s children who are not members of the MFBU but who are living with the individual.

The bill(s) must be unpaid in a month where excess property existed for the entire month beginning with the month of application.

Important: The same medical expense cannot be applied under Principe v. Belshe and also used to meet the share of cost or applied to share of cost under Hunt v. Kizer.

Verification of Payments

The actual payment of qualified medical expenses must be verified prior to applying the Principe property exemption.

The MC application must be approved/denied timely, however, if the applicant provides verification of the qualified medical expense payment at a later date (up to 3 years from the date of the denial notice of action), the EW must rescind the denial, apply the Principe property exemption and approve MC back to the date of original application, if otherwise eligible.

Note: It may be necessary to complete a “Letter of Authorization Request” (SCD 1594) in this situation.

MC 174

EWs must send an MC 174 to providers when payment of a medical expense (or portion of a medical expense) is used to reduce excess property to establish MC eligibility. The MC 174 informs the provider that MC is not liable for these medical expenses.

Any medical expenses paid by the individual from property that is not considered excess property is not to be included on the MC 174. The provider may bill MC for these services and then reimburse the individual. The EW must inform the client of the possible reimbursement.

Excess Property Paid on Medical Expenses in Month After Application

ExampleExample

Susan B., a single mother of two children, was hospitalized from 1/10 thru 2/3. During January she incurred $10,000 worth of medical bills. An outstationed hospital EW took a MC application on 1/11.

During the intake interview on 2/5, Susan verifies the total hospital bill and informs the EW that on 2/4 she closed her savings account ($5,000) and paid part of the bill. Her property reserve also included a $10,000 life insurance policy with a cash surrender value of $300 and a checking account with $500. Her total nonexempt property during January was $5,800. By February it had been reduced to $800.

The EW determines what portion of the $5,000 spent on qualified medical expenses represented otherwise excess property.

Property Spent on Qualified Medical Expenses (savings account)	$5,000
Cash Surrender Value & Checking Account	+ 800
Total Property in January	$5,800
Property Limit for MFBU of 3	-3,150
Amount of Otherwise Excess Property (List on MC 174)	$2,650
Amount Spent on Qualified Medical Bills	$5,000
Amount of Principe Exemption	- 2,650
Amount That May be Reimbursed or Used to Meet SOC (Do not list on MC 174)	$2,350

Only $2,650 of the $5,000 spent on qualified medical bills was otherwise excess property. Under Principe, the EW must:

Exempt $2,650 of the savings account during January.
Approve MC effective the date of application, if otherwise eligible.
Complete the MC 174 informing the hospital that MC is not liable for $2,650 of the $10,000 bill. The hospital may bill MC for the services in excess of $2,650 and reimburse $2,350 ($5,000 - $2,650) to Susan once MC pays the claim, if there is no share of cost.
Inform Susan of the possible reimbursement from the provider.

Informing Requirement

The EW must inform applicants of the Principe v. Belshe provision as a means to establish MC eligibility whether or not there appears to be excess property.

Continuing Beneficiary

Principe v. Belshe does NOT apply to MC recipients who are suddenly found to have excess property during an entire month. Instead, the current procedure for determining overpayments due to excess property is followed. The MC usage amount is compared to the excess property amount and the overpayment amount is whichever is less. If the excess property is the lesser amount, the recipient pays the excess property back to DHCS in order to reduce his/her property reserve.