H-2100, Deduction of Incurred Medical Expenses (IMEs)

Revision 22-4; Effective Dec. 1, 2022

A Medicaid recipient may pay for health care costs Medicaid does not cover. Some of these expenses, referred to as incurred medical expenses (IMEs), may be deducted from a recipient’s personal income when calculating co-payment amounts. IMEs for necessary medical care are allowable deductions if the medical services were received not more than three months prior to the month of application, regardless of the recipient’s medical effective date (MED). Expenses for services received before the three-month prior period may not be deducted.

When calculating a recipient's co-payment amount, certain IMEs not covered or reimbursed by a third party are deducted. HHSC limits these expenses to Medicare and other general health insurance premiums, deductibles, and coinsurance, and to medical care and services that are recognized by state law but not covered under the Medicaid state plan. Only the amount of the IME that remains after payments from all third-party sources (such as Medicaid, Medicare and private health insurance) becomes the recipient’s responsibility and may be considered as an allowable deduction.

An open-ended IME is an ongoing expense that occurs every month. For example, Medicare Part B premiums and general health insurance premiums are open-ended IMEs.

An IME for a set amount that a recipient will pay off within a specific period is not open-ended. For example, dentures or wheelchairs are not open-ended IMEs.

IMEs may be reported at application, renewal or as a change. 

Process IME requests received after a person is certified for Medicaid as a change.

  • process the IME request within 10 work days of receipt; 
  • enter the IME information into the Texas Integrated Eligibility Redesign System (TIERS); and
  • notify the recipient, the nursing facility, and the IME provider of the co-payment adjustment.

For medical expenses incurred prior to the recipient’s MED, allow the IME deduction in the first month that the recipient has a co-payment responsibility. If the amount of the medical expenses, in addition to other allowable deductions, exceed the recipient’s total countable income for the month, the excess portion of the deduction for the medical expenses may be carried forward to ongoing month(s).

Related Policy

Redetermination Cycles, B-8200
IME Notices, H-2900

H-2110 When to Consider an IME Deduction

Revision 16-2; Effective June 1, 2016

An incurred medical expense (IME) deduction applies only to Medicaid recipients with a co-payment amount other than zero.

The recipient must provide verification of all medical expenses to be considered.

In spousal impoverishment budgets with a co-payment amount other than zero, an IME deduction is allowed when an IME is paid for by the recipient or the recipient’s community-based spouse.

H-2120 Medically Necessary

Revision 16-2; Effective June 1, 2016

Before allowing an incurred medical expense (IME) deduction, the expense must be certified as medically necessary.

Medically necessary is defined as the need for medical services in an amount and frequency sufficient, according to accepted standards of medical practice, to preserve health and life and to prevent future impairment.

Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME,  is used for certification of medical necessity. The form must be completed, signed, and dated by the recipient's physician or a nurse practitioner, clinical nurse specialist, or physician's assistant who is working in collaboration with the recipient's physician.

Form H1263-B, Certification of No Medical Contraindication – Dental, is used for dental IME recipients. By signing Form H1263-B, the attending physician (medical practitioner) certifies that the dental treatment is not medically contraindicated for the recipient. The physician is not able to certify medical necessity for dental services.

H-2130 Form H1263-A and Form H1263-B

Revision 22-4; Effective Dec. 1, 2022

Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME, is used to request an IME deduction for medically necessary durable medical equipment.

Form H1263-B, Certification of No Medical Contraindication – Dental, is used to request an IME deduction for necessary non-emergency dental services.

Form H1263-A and Form H1263-B must be signed with handwritten dates and signatures by the recipient or the recipient’s authorized representative (AR) and the recipient’s attending practitioner. A stamped signature is not acceptable.

If Form H1263-A or Form H1263-B is received with a stamped signature:

  • pend the case;
  • send Form H1052-IME, Notice of Delay in Decision for Incurred Medical Expense – Action Needed, to notify the provider and the recipient of the delay in processing due to the need for a handwritten signature; and
  • request a new Form H1263-A or Form H1263-B with handwritten signatures.

The signature dates of the recipient or the recipient's AR and the recipient’s attending physician on Form H1263-A or Form H1263-B must not be more than 90 days apart.

If the signature dates are more than 90 days apart:

  • pend the case;
  • send Form H1052-IME to notify the recipient or the recipient’s AR and the IME provider of the delay in processing; and
  • request a new Form H1263-A or Form H1263-B.

Request a new Form H1263-A or Form H1263-B and send Form H1052-IME if Form H1263-A or Form H1263-B is received without any of the following:

  • signature of the recipient or the recipient’s AR;
  • a description of authority to act for the recipient listed in Section II of Page 2; or
  • signature of the recipient’s attending practitioner.

A request for an IME deduction for services received prior to the MED must be initiated by the recipient or the recipient’s legal guardian, Power of Attorney (POA), or designated AR. The request may not be initiated by a medical services provider or supplier unless the provider or supplier is also the recipient's AR.

For IME requests received after a person is certified for Medicaid, there are no restrictions on who can complete Form H1263-A or Form H1263-B. However, the recipient or the recipient’s AR must sign Form H1263-A or Form H1263-B, Section II of page 2 to indicate a request for a deduction from the recipient's personal income to pay for an IME.

If the recipient is unable to sign and does not have a designated AR, legal guardian or POA, the following can sign the form on the recipient’s behalf:

  • nursing facility administrator;
  • social worker; or
  • director of nursing.

If the recipient has a designated AR but someone other than the AR signs Form H1263-A or Form H1263-B, verify the AR is aware of the IME request. If unable to contact by phone, pend the case and send Form H1052-IME to request the AR sign Form H1263-A or Form H1263-B. If Form H1263-A or Form H1263-B is not returned with the signature of the designated AR, deny the IME request.

This will ensure all parties are knowledgeable of the IME request. If the AR has changed, thoroughly document the explanation in the case record.

Submitting to HHSC

Send completed Form H1263-A and Form H1263-B to HHSC via mail or fax.

Fax to: 877-447-2839
Or
Mail to:
Texas Health and Human Services Commission
P.O. Box 149027
Austin, TX 78714-9027

H-2140 Deductions for Insurance Premiums

Revision 16-2; Effective June 1, 2016

Premiums for general health insurance policies, including premiums for limited scope polices for vision and dental, may be allowable incurred medical expenses (IMEs). Allow an IME deduction when a recipient provides verification that a policy is assignable, the coverage effective date, and the premium amount.

Assignable means the benefits may be paid to the health care provider.

If a health insurance policy is not assignable, payments are made directly to a recipient. The policy is considered an income maintenance policy and is not an allowable IME.

Use Form H1253, Verification of Health Insurance Policy, if a recipient requests help to obtain verification for a policy.

Verification of the first premium payment is not required prior to allowing an IME deduction.

Assignable general health insurance policies must be reported on the Third Party Resource screen in the system of record.

For IME requests for dental insurance premiums, use Form H1053-IME, Provider Notice of Incurred Medical Expense Decision, to notify a dental insurance provider that an IME deduction request is approved or denied. Form H1053-IME does not contain space for co-payment information. To safeguard confidentiality, do not add co-payment information to the form or provide the information to any provider (either verbally or in writing) without written authorization from the recipient.

H-2150 Non-Allowable Deductions – General IME

Revision 22-4; Effective Dec. 1, 2022

The following are not allowable IME deductions:

  • items covered by the nursing facility (NF) vendor payment including, but not limited to, diapers, sitters, certain durable medical equipment, dietary supplements or physical, speech or occupational therapy;
  • covered services that are beyond the amount, duration, and scope of the Medicaid state plan including, but not limited to, additional prescription drugs;
  • expenses incurred by Medicaid-eligible recipients for services covered by the Medicaid state plan but delivered by non-Medicaid providers;
  • expenses for medical services received more than three months prior to the month of application;
  • premiums for cancer or other disease-specific insurance policies, or general health, dental, or vision insurance policies with benefits that cannot be assigned;
  • premiums for insurance policies that pay a flat rate benefit to the insured or income maintenance policies;
  • health care services provided outside of the U.S.;
  • expenses incurred during a transfer of assets penalty including, but not limited to, nursing facility bills;
  • expenses incurred by Medicaid-eligible recipients for eyeglasses, contact lenses, hearing aids, services provided by a chiropractor or a podiatrist (these are covered through the Medicaid program);
  • expenses incurred by Medicaid-eligible recipients 21 years or older requiring mental health and counseling services provided by a licensed psychologist, licensed professional counselor, licensed clinical social worker or a licensed marriage and family therapist effective for dates of service on or after Dec. 1, 2005; and
  • expenses covered by STAR+PLUS managed care organizations (MCOs) either:
    • as an NF add-on service, including medically necessary durable medical equipment, such as customized power wheelchairs (CPWCs), augmentative communication devices (ACDs), emergency dental services, and physician ordered rehabilitation services (also called goal directed therapies); or
    • as value-added services (VAS). VAS are extra benefits offered by an MCO beyond Medicaid-covered services. VAS may include routine dental, vision, podiatry, and health and wellness services. Note: A recipient may choose to use the MCO VAS or the IME process.

Related Policy 

Limitations for Pre-Eligibility Incurred Medical Expenses (IMEs), H-2160

H-2160 Pre-Eligibility IMEs

Revision 22-4; Effective Dec. 1, 2022

Expenses for necessary medical care received within three months prior to the month of application, are allowable IME deductions regardless of the recipient’s MED. Expenses for services received before the three-month prior period may not be deducted. The recipient must provide verification of all medical care expenses.

To be considered as a deduction, the expense must:

  • be the responsibility of the recipient;
  • be reported at application or within three months of certification;
  • not be subject to payment by a third party; and
  • remain unpaid at certification.

The allowable deduction must not exceed the Medicaid reimbursement rate in effect when the medical expense was incurred. Do not use the private pay rate. 

Use Form H0005, Policy Clarification Request, and follow policy clarification request procedures to request the Medicaid reimbursement rate for all pre-eligibility IMEs.

Related Policy 

Deduction of Incurred Medical Expenses, H-2100
Form H1263-A and Form H1263-B, H-2130
Non-Allowable Deductions – General IME, H-2150