H.R. 670, Special Needs Trust Fairness Act

H.R. 670

Special Needs Trust Fairness Act

September 20, 2016 (114th Congress, 2nd Session)

Staff Contact

Floor Situation

On­­­­ ­­­­­­­­­Tuesday, September 20, 2016, the House will consider H.R. 670, Special Needs Trust Fairness Act, under suspension of the rules. H.R. 670 was introduced on February 3, 2015, by Rep. Glenn Thompson (R-PA) and was referred to the Committee on Energy and Commerce, which ordered the bill reported as amended by voice vote on July 13, 2016.

Bill Summary

H.R. 670 would amend title XIX of the Social Security Act to extend the Medicaid special needs trust exception to allow non-elderly individuals with disabilities to establish a special needs trust on their own behalf. Additionally, the bill would extend Medicaid coverage of tobacco cessation services to mothers of newborns for the first year of the child’s life.

To offset the cost of these policies, the bill would prohibit Federal financial participation under Medicaid for drugs used for cosmetic purposes or hair growth, except where medically necessary. The bill would also make available $10 million in 2021, and an additional $14 million in 2022, in the Medicaid Improvement Fund.


Under current Federal statue, most trusts are considered assets in determining Medicaid eligibility for aged and disabled individuals and are thus subject to asset transfer rules. Despite this classification, many types of trusts remain exempt and are not considered as countable assets for Medicaid eligibility determination. For example, asset transfer rules do not apply to certain special-needs trusts and pooled trusts because Medicaid does not count them as viable assets. This exemption is most widely known as the “special needs trust exception.”[1]

In order to qualify a trust under this specific exception, it must contain the assets of a non-elderly individual who is under the age of 65 who meets the legal definition of disability. Essentially, special needs trusts allow disabled individuals below the age of 65 to remain eligible for Medicaid benefits. Upon the beneficiary’s death, the remaining proceeds of the trust that are equal to any amount paid for medical assistance under the State Medicaid Program are given to the State. Only parents, grandparents, legal guardians, or a court can create a special needs trust on behalf of a non-elderly individual with disabilities, but this legislation would allow to these same non-elderly individuals to set up special needs trust for themselves without procuring an otherwise-mandated court order.[2]

Regarding the second purpose of this bill, CMS has recently stated that “cigarette smoking is one of the greatest drivers of adverse health outcomes and costs for state Medicaid programs,” and these adverse health outcomes often plague individuals under the age of 65. CMS also noted that states that have invested in comprehensive tobacco cessation programs have reduced smoking rates, improved health outcomes, and reduced health care costs accordingly. These results and further review has led the agency to conclude that “tobacco treatment is one of the most cost-effective preventive services with as much as $2-$3 return on every dollar invested.” Furthermore, State Medicaid programs are currently required by law to cover tobacco cessation services for pregnant women but not mothers. This legislation would extend these same tobacco cessation benefits to the mothers of newborns for one year, encouraging more mothers to help improve their health and the health of their child.[3]

According to the bill’s sponsor, this legislation represents “a fundamental issue of equal protection under the law. Currently, individuals facing life changing disease or disabilities are not treated fairly and this bill will begin to reserve those policies.”[4]

[1] See House Report 114-734, at 3.
[2] Id.
[3] Id, 3-4.
[4] See. Rep. Thompson’s Press Release, February 3, 2015.


The Congressional Budget Office (CBO) estimates that enacting H.R. 670 would reduce direct net spending by $5 million over the 2017-2026 period. Enacting the legislation would affect direct spending; therefore, pay-as-you-go procedures apply. H.R. 670 would not affect revenues.

Additional Information

For questions or further information please contact John Wilson with the House Republican Policy Committee by email or at 6-1811.