An Overview and FAQ:

DD PETI

Full Name: Align Member Cost of Care Contribution in the DD waiver with Other Residential Waiver Services

As part of a broader LTSS Medicaid sustainability strategy to address ongoing budget constraints across the state, OCL is implementing a series of targeted changes. One of these efforts is DD PETI.

This change is planned to be implemented in July 2026.

Background & Purpose

What is PETI and why is it being applied to the DD waiver?

Post-Eligibility Treatment of Income (PETI) is the process used to determine how much of a Member’s income may be contributed toward the cost of their residential services after required protections and deductions are applied. It is a federally recognized methodology used after Medicaid eligibility is established.

PETI is already used across other HCBS waivers that provide residential services in Colorado, including the Elderly, Blind, and Disabled (EBD), Brain Injury (BI), and Community Mental Health Supports (CMHS) waivers. Applying PETI to the Developmental Disability (DD) waiver aligns cost-sharing requirements across programs, promotes equity, and supports long-term sustainability of Medicaid. PETI applies to residential per diem services, where Medicaid pays a daily rate and Members may be responsible for contributing toward the cost of care after required protections are applied.

Does PETI change Medicaid eligibility?

No. PETI does not affect Medicaid eligibility. It only determines how a Member’s income is used after they are already approved for services. PETI is based only on the Member’s own income and does not include income from parents, family members, or others in the household.

Why do Members have to contribute toward the cost of care now?

Currently, DD waiver Members only pay room and board, while Medicaid covers the full cost of residential services. Other residential HCBS populations already contribute a portion of their income toward service costs.

This change ensures Members receiving similar services are treated equitably and that contributions are based on ability to pay.

How PETI Works

How is a Member’s contribution calculated?

A Member’s contribution is determined through a standardized PETI formula that:

• Starts with total gross monthly income
• Applies required protections and deductions or possible exemptions from PETI altogether 
• Calculates remaining income available for cost of care

Members do not contribute all of their income—only what remains after protections. Members with limited income will have little or no contribution.

Will different people pay different amounts for the same service?

Yes. Each Member’s contribution is individualized based on their income, deductions, and circumstances, but the same formula is applied consistently to all Members.

What expenses are protected and not counted toward PETI?

Before any contribution is calculated, Members retain protected amounts, including:

• Personal Needs Allowance (PNA)
• Taxes
• Housing costs (when the Member is legally and financially liable for rent or mortgage)
• Non-covered medical expenses
• Certain trust-related deductions

These protections ensure Members can meet basic living needs before contributing to care.

Can you explain more about each of the protected areas?

Personal Needs Allowance (PNA)

What it is:

The Personal Needs Allowance (PNA) is a protected monthly amount that the Member keeps for everyday personal expenses. This amount is never included in the PETI calculation.

What it covers:

The PNA is intended to support independence and quality of life by covering personal expenses not included in the Room and Board payment, such as: 

• Clothing and shoes
• Cell phone and internet
• Hygiene and personal care items
• Transportation (gas, rides, bus passes)
• Social activities and entertainment

2026 Monthly PNA Amounts:

• Minimum: $184
• Maximum: $435.46
• A member’s PNA is determined by their monthly income level.

Even if a Member has higher income, they always retain at least the full PNA amount. As income increases, the amount they retain also increases.

Taxes

What it is:

Any required tax obligations are deducted before calculating a Member’s contribution.

A standard tax allowance of up to $300 per month may be applied, based on verified tax obligations.

What it covers:

• Federal income taxes
• State income taxes
• Payroll taxes (if employed)

Example:

• A Member receives $994/month in SSI
• The Member does not have earned income
• Total Gross Monthly Income = $994
• $150 is applied as a tax allowance
• Countable Income for PETI = $844
• Room and Board = $810
• Remaining Income: $34
• Personal Needs Allowance (PNA) = $34
• The PETI calculation is based on $844, not $994

This ensures Members are not expected to contribute money they never actually receive. 

Housing Costs (when the Member is financially responsible)

What it is:

If a Member is responsible for paying their own housing costs, such as paying rent or a mortgage directly, those expenses are protected and deducted before determining any contribution.

When this applies:

• The Member pays rent or a mortgage
• The Member holds a lease or has financial responsibility for housing
• The Member is legally and financially liable for the housing costs

What it may include:

• Rent or mortgage payments
• Utilities (electricity, water, gas)
• Home repairs
• Basic household expenses when applicable
• Only costs for the Member’s own residence - not shared household repairs, family expenses, or costs for a home that the Member is not financially responsible for

Housing costs may be based on typical monthly expenses (such as average utility costs). If a Member has a one-time or temporary housing expense (e.g., a repair), the PETI calculation may be updated for a limited period to account for that cost.

Example (independent living):

• Monthly income: $1,400
• Rent: $800
• Utilities: $150
• Housing Costs = $950
• Remaining Income = $450
• Personal Needs Allowance (PNA) = $435.46
• Member Payment to Provider = $14.54

Example (provider setting):

• A Member in a provider-owned home does not pay rent directly
• Instead, they pay a standard room and board amount
• Housing costs are already accounted for in that structure

This approach ensures Members are not put at risk of losing their housing.

Non-Covered Medical Expenses

What it is:

Medical, dental, or vision expenses that are not covered by Medicaid or other insurance may be deducted.

What it covers:

• Dental work not covered by Medicaid
• Vision care (e.g., glasses, contacts)
• Therapy or services not covered
• Medical equipment or supplies paid out-of-pocket

Requirements:

• Expenses must be documented
• Must not already be covered by another payer

Example:

• A Member pays $75/month for dental services not covered by Medicaid
• That $75 is deducted from their income before calculating PETI

This ensures Members are not penalized for necessary health-related expenses.

Certain Trust-Related Deductions

What it is:

Income placed into certain approved trusts may be treated differently in the PETI calculation.

How it works:

• Income deposited into an approved trust may be deducted
• Money distributed from a trust to the Member is counted as income

Types of trusts (generally):

• Special Needs Trusts
• Other Medicaid-compliant trusts

Example:

• A Member receives $1,000/month
• $300 is placed into an approved Special Needs Trust
• That $300 may be excluded from the PETI calculation

However:

• If the trust pays the Member $100 later
• That $100 is counted as income at that time

This ensures trust arrangements are handled consistently and in alignment with Medicaid rules.

Payments & Administration

Who collects PETI contributions and how does the Department get paid?

Members (or their legally authorized representative) pay their calculated contribution directly to the provider, similar to how room and board is paid today.

The provider then bills Medicaid for the remaining cost of services after the Member’s contribution is applied. This reduces the Medicaid-paid portion of the per diem rate.

How will this be operationalized?

The process remains consistent with existing PETI workflows:

• Members report income to their Case Manager
• A PETI worksheet is completed during service planning
• The final contribution is documented and approved
• The Member pays the provider directly

How are changing wages handled month to month?

The PETI calculation is updated during the plan year only when there is a significant change, defined as $150 or more per month.

Housing & Living Situations

How does PETI account for differences between living at home and living in a supported residential setting?

PETI is applied consistently across adult per diem residential services, with adjustments based on the Member’s living situation:

• Members living independently (own/rent home):
• Housing costs such as rent or mortgage are deducted before any contribution is calculated, helping maintain housing stability.
• Members in residential provider settings:
• Members retain their PNA and other deductions, and any remaining income contributes toward the cost of services, consistent with per diem residential service models

What housing costs remain the responsibility of the Member?

Members are still responsible for:

• Room and board payments (in provider settings)
• Rent or mortgage (if living independently)
• Other household expenses not covered by waiver services

These costs are either protected in the PETI calculation or remain part of the Member’s financial responsibility.

What about Members living with family or in host homes?

The PETI process still applies. Contributions are calculated based on the Member’s income and circumstances, and Members in family or host home settings pay a standard room and board amount to the provider agency for living expenses.

What does the room and board payment cover?

Room and board is a standard payment in residential HCBS settings and covers the basic living expenses associated with housing and daily needs. It is separate from the cost of services.

Room and board typically includes:

• Housing: rent or occupancy costs for the living space
• Utilities: electricity, water, gas, and basic heating/cooling
• Food: meals and basic groceries
• Furnishings: essential items such as a bed, dresser, and seating
• Household supplies: items like linens, toilet paper, soap, shampoo, and toothpaste

What about Members using housing vouchers or SNAP?

Housing assistance and food benefits are treated differently in the PETI calculation based on what they are used for and whether they are counted as income.

Housing vouchers (e.g., Section 8):

• Housing vouchers are not counted as income to the Member
• However, the Member’s portion of rent (what they are responsible for paying) can be deducted as a housing expense in the PETI calculation
• This ensures the Member can continue to meet their housing obligations

Example:

• Total rent: $1,200/month
• Voucher covers: $900
• Member pays: $300
• Monthly Income: $1,100
• Voucher Amount ($900) is not counted as income
• Housing Cost Used in PETI =$300
• Remaining Income After Housing = $800
• Personal Needs Allowance (PNA) = $435.46
• Member Payment to Provider = $364.54

SNAP (food assistance):

• SNAP benefits are not counted as income in the PETI calculation
• SNAP is intended to cover food costs and is not available to contribute toward cost of care

Example:

• A Member receives $200/month in SNAP benefits
• That $200 is not included in income
• It does not reduce deductions or increase contribution

Income & Work

Does PETI include all types of income?

Yes. PETI includes most income sources received by the Member, such as:

• Social Security (SSI/SSDI)
• Disabled Adult Child (DAC) benefits

However, deductions and protections are applied before determining any contribution.

How does PETI impact Members who work?

Members who are working are not subject to PETI on their earnings. This includes:

• Independent employment (unpaid activities, such as volunteer services do not qualify)
• Supported employment services (job coaching)
• Employment while enrolled through the Working Adults with Disabilities (WAwD) program

Earned income is excluded from the PETI calculation. PETI is based only on other countable income such as SSI/SSDI, and other earnings, after standard deductions are applied. 

Employment must be performed on an ongoing and regular basis, not as a one-time or isolated activity. Members may be asked to provide documentation such as a pay stub, tax records, W2’s, 1099’s, or other proof of work.

Members in WAwD are fully exempt from PETI as they may instead be paying a WAwD premium. 

If a Member is already using income for housing, what do they pay?

Housing costs are accounted for first. If a Member has limited income beyond those costs, their contribution toward services will likely be small or zero.

Member Impact & Protections

Will Members be required to give up all of their income?

No. Members always retain:

• Their Personal Needs Allowance
• Any applicable deductions (housing, medical, taxes, etc.)

Only remaining income is considered for contribution.

What if a Member has very low income?

Members with limited income—especially those receiving only SSI—will typically have little or no contribution.

How will Members pay for personal items like phones, clothing, or activities?

These items are covered using the Member’s Personal Needs Allowance (PNA), which is protected in the PETI calculation.

What if a Member has additional medical or personal expenses?

Certain expenses, such as non-covered medical, dental, or vision costs, may be deducted in the PETI calculation with proper documentation.