RFG Background Brief #11: "How does the CommonHealth deductible work?"
[May 19, 2005]
Donald N. Freedman
Catherine Millard

"I am disabled, under 65, and need health care services to manage at home. My income is too high for MassHealth-Standard, but the state says that I may qualify for services under MassHealth-CommonHealth if I first meet a deductible. How does this work? What expenses can be used to meet the deductible?"

Meeting the CommonHealth Deductible – The Individual

An individual with disabilities who is under age 65 but whose income is over $1,064 per month may nonetheless qualify for MassHealth under MassHealth CommonHealth in either of two ways: by showing that he or she is working at least 40 hours per month, or by showing that he or she has incurred a certain level of qualified medical or rehabilitation expenses within single six-month period. The amount of expenses that must be met is called the CommonHealth one-time deductible. The basic idea of the MassHealth deductible is the same as a deductible under private health insurance, although with differences in detail that often lead to confusion or uncertainty and thus delay MassHealth eligibility.

The purpose of this Background Brief is (in Section I) to explain basically how the deductible works, and (in Section II) to provide specific guidance on what expenses qualify for the deductible. This is particularly important since the sooner you meet the deductible, the sooner MassHealth will assume responsibility for covered medical, therapy and care expenses, including prescription medications. The applicable MassHealth Regulations treating the same subject are found at 130 CMR 506.010 which can be found on the internet by following links to the MassHealth regulations at www.mass.gov/dma.

Section I: The Basics of the CommonHealth One-Time Deductible

The MassHealth deductible works in a way that is similar to a deductible in private health insurance. With insurance, even if medical services you receive are of the kind covered by your policy, you still have to pay a certain amount every year for the services, before the policy kicks in and pays for services for the rest of the year; the next year, you must meet the deductible again. CommonHealth works on the same basic principle, except that the deductible must be met for just a single six month period; and the amount of the deductible is not a fixed number, which is the same for everyone, but a number, which varies with the amount of the individual's monthly income and is calculated by formula. You compute the deductible by subtracting $542 from total gross income and multiplying the result by six. Take a fictitious Mr. Jones that we will use as an example in this paper, whose gross income is $1400 from Social Security and a pension. His deductible would be $5148 (computed as follows: $1400 minus $542 equals $858 times 6 equals $5148).

With private health insurance, you must meet the deductible every calendar year. CommonHealth looks only at a single six-month period. If you apply for CommonHealth but have income of $1,064 or more, the notice from MassHealth telling you of its decision on your application will also give you the dates of the deductible period, which will be six months long. The notice will also say that as early in the deductible period as you accumulate certain expenses equaling the deductible, MassHealth will start paying for MassHealth-covered services.

If and when Mr. Jones accumulates and documents qualified expenses ($5148) during the deductible period, MassHealth will take over; if he doesn’t accumulate and document the qualified expenses, MassHealth won’t pay for anything.

What are “qualified expenses”? They include expenses for medical care, as you might expect, but also prescription and non-prescription medication costs, and health insurance premiums. They include services that are covered by MassHealth, such as home health services, but are not limited to that. For example, they include non-medical services made necessary by a medical condition, such as the installation of a wheelchair ramp, the purchase of a modified motor vehicle or payments for a “Lifeline” or similar personal emergency response unit or service.

There are limits. General living expenses, such as for food, clothing and shelter, are not qualified expenses. Also, medical expenses covered by Medicare or health insurance cannot be used to meet the deductible. (Even if medical expenses are covered, any deductibles or co-payments that you DO have to pay for the coverage ARE covered, however.)

Thus, the better you are at spotting and documenting qualified expenses, the sooner CommonHealth will assume responsibility for MassHealth services. The regulations are complex. For detailed guidance of expenses qualifying for the deductible, see Section II, below, but an example may be helpful in understanding how the process works.

Let’s return to Mr. Jones, whose deductible is $5148. As we figured above, Mr. Jones will be responsible for $5148 in qualified expenses during the one-time six month deductible period. Let's say that under the terms of his MassHealth eligibility notice his deductible period starts March 1. During March, if he has a typical month, Mr. Jones will buy medications at his pharmacy, and order some on the internet. He will also have three doctor visits, and some blood tests. He will also receive some bills for services he received in prior months. Some of the expenses will be of the kind that would ordinarily fit the requirements of the deductible, but cannot be included (except for deductibles and co-insurance requirements) because they qualify for payment under Mr. Jones’s Medicare and other health insurance plan. For purposes of our example, let's say that qualifying medical expenses in these categories total $1000.

Mr. Jones has Medex, a supplemental health insurance policy from Blue Cross/Blue Shield, in addition to basic Medicare. The premium for his Medicare Section II coverage ($78.20 in 2005) is automatically taken from his Social Security. His Medex premium is $1460 per quarter, or $487 per month. These expenses qualify for the deductible, although MassHealth uses a special (and helpful) rule in counting health insurance premiums for the deductible: you can credit six months of premiums toward the deductible right from the beginning of the deductible period, regardless of when the premiums are actually billed or paid. In our example, the deductible insurance expense would be computed as follows: $78.20 times 6 equals $469.20; $487 times 6 equals $2922; $469.20 plus $2922 equals $3391.20. This amount is treated as an expense on March 1, regardless of the timing of bills or payments.

If Mr. Jones has no other expenses qualifying for the deductible, he would have a total of $4391.20 by the end of March, the first month of his deductible period ($3391.20 for insurance plus $1000 for other expenses). At this rate, he would have enough expenses to cover his deductible of $5148 in late May. From that day forward, MassHealth would pay for covered services. Mr. Jones would have no future deductible to meet.

Section II - Specific Requirements for the Deductible

1. The amount of the deductible for an individual is computed by deducting $542 from the individual’s total gross monthly income (before taxes or any other deductions), and multiplying the result by six.

2. The one-time six-month period for the deductible starts ten calendar days before the Office of Medicaid receives the MassHealth application, and ends six months later.

3. Bills must be for services already received.

4. Bills used to meet the deductible may be for services received during or before the deductible period, but must either:

a. Be paid by you (or anyone else other than Medicare or health insurance) during the deductible period; or
b. Be unpaid, as long as they still represent a current obligation during the deductible period.

5. Bills used to meet the deductible may not be subject to payment or reimbursement by Medicare, the Veterans’ Administration, Workers’ Compensation or any other health insurance or coverage.

6. Also, bills for certain expenses are not allowable, as a matter of law, under 130 CMR 520.032(C):

a. Cosmetic surgery

b. Rest-home care

c. Weight-training equipment

d. Massage therapy

e. Special diets

f. Room-and-board charges for individuals in elder housing or congregate care arrangements (although sometimes a portion of the costs of assisted living or community residential programs for people with mental illness or mental retardation may qualify.)

7. Bills are applied to the deductible in the following order:

a. Medicare premiums (both Part A, if any, and Part B, which is $78.20 per month for 2005) and other health insurance premiums, which can be credited prospectively for the cost of six months of coverage;

b. “Expenses incurred by the individual . . . for necessary medical and remedial-care services of kinds that are recognized under state law but not covered by MassHealth.” This includes guardianship fees and expenses necessary for medical treatment, for example, over-the-counter remedies, supplies for incontinent adults, and alternative medical treatments such as acupuncture. “Remedial services” are defined as non-medical services made necessary by a medical condition, such as the installation of a wheelchair ramp or the purchase of a modified motor vehicle a modified, or payments for a “Lifeline” or similar personal emergency response unit or service.

c. Lastly, list expenses for necessary medical and remedial services of kinds that are covered by MassHealth. The following is a complete listing of such services as set out at 130 CMR 450.105(E):
(1) Abortion services
(2) Acute inpatient hospital services
(3) Adult day health services
(4) Adult foster care services
(5) Ambulance services
(6) Ambulatory surgery services
(7) Audiologist services
(8) Behavioral health (mental health and substance abuse) services
(9) Chapter 766 (special education): home assessments and participation in team meetings
(10) Chiropractor services
(11) Chronic disease and rehabilitation inpatient services
(12) Community health center services
(13) Day habilitation services
(14) Dental services
(15) Durable medical equipment and supplies
(16) Early intervention (age birth – 3 years) services
(17) Family planning services
(18) Hearing aid services
(19) Home health services
(20) Hospice services
(21) Laboratory services, including blood tests
(22) Nurse midwife services
(23) Nurse practitioner services
(24) Nursing facility services
(25) Orthotic services
(26) Outpatient hospital services
(27) Oxygen and respiratory services
(28) Personal care services
(29) Pharmacy services, including prescription medications
(30) Physician services
(31) Podiatrist services
(32) Private duty nurse services
(33) Prosthetic services
(34) Rehabilitation services, probably including job counseling and job coaching
(35) Renal dialysis services
(36) Speech and hearing services
(37) Therapy services, including physical, occupational, and speech/language therapy
(38) Transportation (and escort) services required for medical or rehabilitative care
(39) Vision care
(40) X-ray/radiology services

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