Veterans Aid & Attendance Benefit Not Counted as Income for Medicaid Eligibility

On February 6, 2015, a consent order was filed in the New Jersey federal district court concluding a hard-fought class action lawsuit. In the Order, the State of New Jersey agreed to amend its Medicaid program on a State-Wide basis to exclude VA pension benefits paid by the Department of Veterans Affairs (VA) when determining an applicant’s eligibility for Medicaid benefits.

In the Consent Order, the State of New Jersey agreed as follows:

  • A VA pension shall not be included as countable income during the Medicaid eligibility determination process when the applicant can demonstrate that the VA pension is received as a result of “unusual medical expenses” as defined in the statutes, i.e., when the VA pension results from unreimbursed expenditures for medical treatment exceeding 5% of the applicant’s annual income;
  • Within 3 months of the date the Consent Order is signed by the Court, New Jersey shall issue a Medicaid Communication and will distribute it to all County Welfare Agencies stating that a VA pension will not be included as countable income during the Medicaid eligibility determination process;

It is important to note that the plaintiffs requested a Medicaid eligibility date prior to December 1, 2014, the date qualified income trusts became effective in New Jersey.  The consent order also means that VA pension benefits do not need to be deposited into a qualified income trust since the benefit is excluded as income for Medicaid eligibility.

I wish to congratulate thank my elder law colleagues Alan H. Sklarsky, Esq., lead counsel in the case, Donald D. Vanarelli, Esq., Donald McHugh, Esq., Christopher Olszak, Esq., and Frederick P. Niemann, Esq., for an excellent result.


On January 23, 2015, the Department of Veteran Affairs proposed a rule that “would establish new requirements pertaining to the evaluation of net worth and asset transfers for pension purposes and would identify those medical expenses that may be deducted from countable income for VA’s needs-based benefit programs.”

The proposed changes in regulations would:

  • Establish a 3 year look back for gifts;
  • Impose penalties for up to 10 years;
  • Create a bright-line net worth standard of $119,220, which includes annual income;
  • Deny any expenses related to independent living facilities as care costs;
  • Require Veterans to sell their home place property if the lot coverage exceeds 2 acres.

Additionally, annuities and trusts used for the purpose of reducing assets for VA benefits would be considered countable assets.

The full proposed regulations can be downloaded at the link below:


All comments are due before March 24, 2015.  

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