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AGED, BLIND AND DISABLED MEDICAID 805-2 Post Eligibility Treatment of Income (PETI)

Supersedes: ABD 805-2 (01/01/2026) Reference: 42 CFR 435.725 and .832; ARM 37.82.101, .1320; 42 U.S.C. 1396r-5 Overview: When Medicaid is contributing to the cost of institutional care, the institutionalized individual’s (whether married or unmarried) gross monthly income, less allowable deductions, must be applied to the cost of care. This is known as “Step 2” in the institutional budget process. The institutionalized individual’s (married or unmarried) spend down is calculated using a different method when Medicaid is not contributing to the cost of care. Total deductions cannot exceed the institutionalized individual’s (married or unmarried) gross income. NOTE: Blind/disabled work expenses are not used in PETI. When Medicaid is contributing to the cost of care, allowable deductions may include: 1. Up to $65 of gross earned income. 2. A $50 personal needs allowance (or the remaining income amount, if less than $50). NOTE: In addition to the $50 personal needs allowance, veterans receive an additional exclusion of up to $90 per month in VA pension income. The amount of VA pension income that exceeds $90 per month is countable. 3. A community spouse income maintenance allowance (allowed only when institutionalized individual is married). NOTE: Allow this deduction unless the institutionalized spouse specifically refuses it. The deduction is not allowed unless the funds are actually transferred to the community spouse. 4. Family maintenance allowance (allowed only when institutionalized individual is married). 5. The institutionalized individual’s (married or unmarried) incurred medical or remedial care expenses, including health insurance premiums. NOTE: Medicare Part B premiums must be entered as a medical expense for nursing home residents who receive Medicare, but not QMB or SLMB. 6. Court-ordered child support actually paid (CMA 601-1 Prospective Budgeting); 7. Court-ordered spousal support actually paid (CMA 601-1 Prospective Budgeting); and