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Questions and Answers About Parental Fees Enacted in 2003
(Updated 6/30/04; New information added in June, 2004 is underlined.)

Parental fees were substantially increased in legislation that was enacted after the completion of the 2003 Legislative Session. Parents whose children receive Medical Assistance (MA) services through waivered services, TEFRA, Consumer Support Grants, ICF/MRs, or residential treatment programs for children with severe emotional disturbance were subject to these fee increases. These fee increases ranged up to 1200%. It is critical that parents understand all the implications of this legislation and are knowledgeable about their options related to influencing the calculation of their monthly fee.

Should I give up my Medical Assistance services because of the fee increase? Although the fee increases are very tough to swallow, The Arc of Minnesota urges parents to exercise extreme caution before deciding to drop Medical Assistance services. Many children received a waiver slot during the “Open Enrollment” period during 2001 who would have otherwise waited for years to get a slot. It is highly unlikely that this type of opportunity will be offered ever again. The legislature has also frozen any growth in the waiver program during 2004/2005, so waiting lists are going to grow again. The waiver continues for the lifetime of the person and will be very important for children as they become adults. Therefore, leaving the waiver program should be the last thing you consider after exhausting all other options, because of the long-term implications for your child. You need to continue to use a habilitation service (community supports) to remain eligible for the waiver. If you do decide to withdraw from Medical Assistance services, contact your county worker for the procedures for ending the service. Different counties have different policies and time frames for closing out Medical Assistance services. Remember, the Parental Fee ends after the month when your child turns 18!

What if I'm on the TEFRA program? If you do drop the waiver, TEFRA is still an option if your child qualifies. If a family is using TEFRA for a a younger child to access Medical Assistance, the fee is too high and the family chooses to drop TEFRA, they can get back on, if necessary, at anytime (assuming the child still qualifies). If they have a catastrophic medical problem, Medical Assistance goes back three months and pays medical bills when you reapply. Many families have questioned whether to drop services or not, and each family will have to make a decision on what is best.

Have there been changes to the way parental fees are calculated for parents who pay child support? Yes. Parents who do not live with each other have each been required to pay a parental fee. Previously, court-ordered child support payments actually paid on behalf of the child receiving services were deducted from the contribution. The 2003 legislature changed this. Now, an amount equal to the annual court-ordered child support payment actually paid on behalf of the child receiving services shall be deducted from the adjusted gross income (AGI) of the parent making payment prior to calculating the parental contribution.

What happens if I get off Medical Assistance? Are there other services available? It will vary from county to county, and some counties will charge for some services. Some counties may be able to provide you with a Family Support Grant (based on income guidelines), county-funded respite, or parent case management (Hennepin County). However, county-funded services are in jeopardy right now because of cuts to Local Government Aid (LGA) and other state funds that are being reduced. You will always have the option of privately paying for services.

What types of adjustments to my Parental Fee are possible? Adjustments can be made for increases in the family size; family income changes by more than 10% from one month to another; the past cost of services is at least 60% less than your annual fee; a change in living arrangements for the child (like a child returning from out-of-home placement); or changes to your adjusted gross income (AGI) that create a unique financial situation. These changes should be discussed (preferably in writing) with DHS as soon as possible after they occur. They must be reported within 30 days.

What if the parental fee is more than the cost of services that your child receives? The total amount that you owe for a fiscal year (July through June) will never be higher than the cost of services paid by Medical Assistance and your county for that same fiscal year. DHS refers to it as a Disparity Fee Agreement. Shortly after the fiscal year ends, you will receive a statement comparing the cost of services paid on behalf of your child, against the parental fee that you were charged for the year. Your fee can be changed if your past cost of services is at least 60% less than your annual fee. Necessary adjustments to your account will be made at that time. If you are only using Medical Assistance for school/health-related IEP services, call your local Arc chapter with questions about your fee.

Are there other reasons why my Parental Fee could be reduced? Yes. You may qualify for a Variance for Undue Hardship. A Variance for Undue Hardship can be granted for out-of-pocket expenses which are deductible from federal income taxes. Examples include medical expenses not paid by MA, insurance, or a pre-tax medical account for any member of the household; vehicle and home modifications; equipment; and casualty losses. These expenses will be deducted from your income for purposes of calculating the Parental Fee. Instructions for applying for a variance are included in the Department of Human Services (DHS) Parental Fee Worksheet. Economic hardship is not a basis for granting a variance; the request must meet the criteria listed above.

What happens if I don’t pay my fee or only part of my fee? If the parents fail to make appropriate reimbursement as required, the attorney general, at the request of the commissioner, may institute or direct the appropriate county attorney to institute civil action to recover the required amount (MN Statute 252.27, subd. 3). Services can’t be stopped solely due to non-payment of fees. Collections for parental fees are initially handled internally by the DHS collection staff. If the debt becomes past due, parents may be referred to the Minnesota Collection Enterprise, which is part of the Department of Revenue. Accounts may end up at outside collection agencies, but this is generally for accounts where the noncustodial parent lives out of state. Arc has heard of parents who have had their state income tax refund garnished. Not paying the fee could also result in a bad credit rating.

What appeal rights do I have? If you think that your Parental Fee has been miscalculated, you have the right to ask for a review or an appeal of your fee. You should request that immediately. You must submit a request for a review in writing to the Financial Management Division, Department of Human Services, 444 Lafayette Rd., St. Paul, MN, 55155-3824. If you have questions about the review process, you can call 651-296-6530 or 1-800-657-3751. The request for a review must be made within 15 days of receiving the order that announces the new fees.

You can file an appeal in writing within 30 calendar days of the date of the order that announces the new fees, or within 90 calendar days if you have good cause for failing to request a hearing within 30 calendar days. You can appeal this order to the Appeals and Regulations Division, Department of Human Services, 444 Lafayette Rd., St. Paul, MN, 55155-3813. The Department of Human Services document entitled "Important Fee Notice and Parental Fee Worksheet" (DHS-2977) states, "Your parental fee cannot be changed simply because you feel you cannot pay it."

Can I use a health Flexible Spending Account (FSA) to pay my parental fees? Health FSAs allow employees to be reimbursed for eligible health care expenses that are not covered or reimbursed by any other source. The employee elects at the beginning of the plan year how much they wish to have withheld on a pre-tax basis each pay period. Typically, expenses include such things as insurance deductibles, co-payments, dental work, eyeglasses, or contact lenses. For more information, check with your plan administrator or benefits manager. If you have not been using a FSA yet, ask about payment for parental fees that have been paid during your plan year. There also may be differences between FSA plans on the total amount of dollars that can be contributed to an FSA during a year. FSA money can’t be rolled over into the next plan year, so remember that you “Use It or Lose It”.

Some individuals have had difficulty getting their parental fee to be an approved expense within their FSAs. There are a couple of ways to address this issue, depending on the reason that the plan benefits manager is not allowing parental fee as an eligible expense:

1. If the parental fees are seen as an insurance premium: The federal government has set up two different types of flexible health accounts, one for premiums and one for medical expenses. Some companies only have a medical expense account and not a premium account. The benefits manager thinks that the parental fee is a premium and, therefore, not allowing the parental fee to go through the FSA. In that situation, explain to the benefits manager that the parental fee is not a premium. Tell him/her that at the end of every fiscal year, there is a settle-up. At the end of every fiscal year, all parental fees are reconciled. If you have paid more in fees than what MA has paid for, you get a credit on your account that makes it more like a co-insurance or co-payment. Premiums do not have a settle-up.
   
2. If the parental fees are not seen as a health related expense:. Sometimes the FSA benefits manager does not think the parental fee is used for health related expenses. Any and all medical services your child is receiving will be documented on the Explanation Of Medical Benefits form you receive from the Department of Human Services. Showing the EOMB to your benefits manager should help in that situation.

1. Show the benefits manager a copy of the new statutory language. The new language can be found in HF 2277 which was passed in the 2004 Legislative Session. (Click here to access that language.) You can find revised language on parental fees in that bill between lines 103.11 and 103.19, and between lines 104.22 and 104.34.
   
2. Get a written explanation of why it is not being allowed.
   
3. Call an Arc advocate for assistance.

Are there are other strategies for reducing out-of-pocket expenses for health care costs that could provide me with additional money that I could use to pay part of my parental fee?

A. Health Insurance Premium Payment. The county agency must pay private health insurance premiums for the child if the Department of Human Services determines the premiums are cost effective according to the provisions in "MDHS Health Care Programs Manual," Chapter 0910.05.03 AND the premium was not used to meet a spenddown. DHS will look at whether there are savings to Medical Assistance (MA) by having the private insurance pick up costs that would otherwise be billed to MA. If so, the family would be eligible to have the portion of premiums for the private health insurance that are paid for the child with a disability reimbursed. Request "Referral for Cost Effective Health Insurance Review" - DHS Form 2841.

B. Reimbursement for the cost of medical transportation trips. Medical Assistance can reimburse you for transportation expenses to and from medical appointments. Your local county agency will reimburse you for these expenses. Contact your local county agency to learn how to collect the reimbursement. Each county has its own form.

How can I reduce my Adjusted Gross Income that is subject to the Parental Fee? Increasing your contribution to tax deferred retirement plans such as 401(K) plans or 403(B) will decrease your AGI and the amount of income that is subject to the fee.

Can I deduct the cost of my parental fees on my federal income tax income return as a medical expense? You can only deduct the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income (line 36, Form 1040). Certain types of “disabled dependent care” expenses are permitted. You may also be able to deduct the costs of medical equipment or home and vehicle modifications that were not reimbursed through any other source. (See IRS Publication 502 – Medical and Dental Expenses.)

Are capital gains from the sale of a home treated as income? No. The 2004 Minnesota Legislature included a provision in HF 2277 that exempts capital gains in this instance. This provision is retroactive to July 1, 2003.

For more information on any financial strategies, consult with your tax advisor or accountant. For other questions, contact The Arc of Minnesota at 651-523-0823 or 800-582-5256.

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