Fact Sheet – IRS Updated Guidance on HCBS Difficulty of Care Payments

Executive Summary

Last year, the IRS announced that payments received by in-home, individual care providers under Medicaid Home and Community Based (HCBS) waiver programs can be treated as “difficulty of care” payments and excluded from the care provider’s gross income. In a recently updated Q&A, the IRS clarifies that payments from non-waiver HCBS can be also treated as difficulty of care payments.This NHeLP Fact Sheet describes how the exclusion of income from difficulty of care payments affects Modified Adjusted Gross Income (MAGI) based eligibility determinations for Medicaid, the Children’s Health Insurance Program (CHIP), and Marketplace subsidies. It also identifies advocacy strategies to ensure that states fully implement the difficulty of care payment income exclusion for both waiver and qualified non-waiver HCBS programs.