How to Handle Households' Unanticipated Medical Expenses
You're probably familiar with HUD's requirement that you calculate elderly households' medical expense allowances at each recertification based on the households' medical expenses during the prior year. Generally, HUD says, the allowance covers households' “anticipated” medical expenses during the upcoming certification period. But sometimes your estimate may fall far short of actual expenses during the certification period, such as when a household member suffers a serious injury. If households ask for increased medical expense allowances, the HUD Occupancy Handbook has little to say on how you must respond.
To help you, we'll explain the steps you must take when households bring unanticipated medical expenses to your attention. You must verify the unanticipated medical expenses, and you may need to perform an interim recertification. We'll also give you a Model Form: Use Form to Verify Unanticipated Medical Expenses, that you can submit to physicians, pharmacists, and/or medical facilities under these circumstances.
Medical Expense Allowance Basics
The medical expense deduction is permitted only for families in which the head, spouse, or co-head is at least 62 years old or is a person with disabilities. These elderly or disabled households that have no disability assistance expenses may claim as a deduction medical expenses that are in excess of 3 percent of their “annual (gross) income.”
Medical expenses that may be considered include all medical expenses anticipated to be incurred during the coming year that are not covered by insurance. Medical expenses can include such items as:
Services of a physician or other health care professional;
Services of a hospital or other health care facility;
Medical insurance premiums;
Prescription and nonprescription medicines;
Eyeglasses and eye examinations;
Live-in or periodic medical care assistance (such as visiting nurses or care attendants);
Medical or health products or apparatus (such as hearing aids or batteries); and
Periodic payments on accumulated medical bills.
Although medical expenses are permitted only for elderly or disabled households, once a household qualifies as an elderly or disabled household, the medical expenses of all household members are considered.
For example, if a household includes the head (grandmother, age 65), her daughter (age 35), and her granddaughter (age 12), the medical expenses of all three family members would be considered [HUD Handbook 4350.3, par. 5-10(D)].
Under ordinary circumstances, HUD requires managers to calculate the allowance based on an estimate of the household's medical expenses during the upcoming certification period, says management expert Mark Alper. You must base your estimate on the household's medical expenses during the prior year, less expenses due to illnesses or injuries that aren't likely to recur and have been fully paid off [HUD Handbook 4350.3, par. 5-10(D)(6)]. Some anticipated medical expenses can be easily documented, such as Medicare and other medical insurance premiums, the cost of ongoing prescriptions, and payment agreements for accumulated medical bills. But inevitably you will come across a situation in which a household's past medical expenses don't accurately predict its future medical expenses.
Use Form to Verify Unanticipated Expenses
A household may approach you after certification, saying that their medical expenses have exceeded the allowance you gave them. For example, a household member may be injured in an accident or diagnosed with a previously unsuspected serious medical condition. In such a case, you'll need to verify the household's medical expenses connected with the unanticipated event.
To do this, ask the household for the names and addresses of everyone to whom they're likely to pay money in connection with the household member's treatment. Ask for information not only on health care providers, but also on health care facilities or institutions such as hospitals and pharmacies.
You'll need to send a verification form to each person or organization the household identifies, asking it to verify the household's unanticipated medical expenses. Before sending the form to each verification source, complete the introductory section. Then, in the first blank of the instructions section, you'll need to describe the injury or illness that caused the household to request a larger medical expense allowance.
It's not necessary that you be precise about the nature of the injuries or illness the household member suffered. You need only provide enough information for the verification source, who may treat this or other members of the household for other ailments, to understand which medical expenses you have in mind. In fact, do not press residents for details on possibly disabling medical conditions, says Alper. It's sufficient, for example, to write in this blank “suspected heart attack” or injuries suffered in car accident.”
You'll also need to fill in the relevant period of time. To do the interim recertification, you need to know the household's unreimbursed medical expenses stemming from the unanticipated event through the end of the certification period. It's very important that the verification source understand that you're asking for only the medical expenses incurred because of the unanticipated event, and only to the extent that the household incurs them during this specific period of time.
In the blanks provided, fill in the household member's best estimate of the date on which he or she first sought treatment for the accident or illness, and then the date on which the next certification period begins. If the member isn't certain when he or she first sought treatment, you may write, for example, “approximately 8/15/2011.” Because it's very important for the verification source to bear in mind the specific period for which you're asking him or her to estimate medical expenses, these same dates also appear in the “Information Requested” portion of the form.
If a source hasn't sent written verification of unanticipated medical expenses within a month or so, you may telephone the source for verification. But don't forget to document the conversation by making a note of whom you spoke to, the date, and what they said. If your efforts to verify in this way also fail, you may rely on documentary verification provided by the household, such as canceled checks, receipts, or copies of payment agreements with health care providers [HUD Handbook 4350.3, par. 5-13(C) and app. 3].
What to Do with Verified Information
You may rely on information verified by any of the sources to whom you send the form. If you get verified information from several third-party sources, however, their estimates may differ. If the differences are substantial, you'll need to contact the sources by phone to find out how they reached their estimates. You may discover that a source included the same expenses in more than one category, or made a mistake about the extent of the household member's medical coverage.
Recalculate the household's medical expense allowance based on the information you get. The additional medical expenses that you've verified may entitle the household to a larger medical expense allowance. Or, in some cases, a household that wasn't eligible for a medical expense allowance before, because its medical expenses didn't exceed 3 percent of household income, may now be entitled to one. If either of these is the case, you must do an interim recertification and adjust the household's rent accordingly [HUD Handbook 4350.3, par. 5-11(a)(3)].
Mark Alper: Vice President for Compliance, National Center for Housing Management, 333 N. First St., Jacksonville Beach, FL 32250; www.nchm.org.
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