The Last Resort for Healthcare: What You Need to Know
Long-term care for a semi-price room in a nursing home averages $6,844 per month according to the U.S. Department of Health and Human Services.
Many Americans can’t afford such costs, so they often look to the option of last resort: Medicaid.
Medicaid is a program that provides health care to some middle-income families, even though it’s frequently thought to only be for the poor. Coverage includes custodial nursing home care in all states and home care services in a few.
It’s meant to pay for specific expenses after a patient’s resources are gone. The federal government pays a portion of the tab, while states operate and fund the balance.
Qualifying for it isn’t always easy, especially for elderly folks with a moderate income and who have accumulated a modest net worth over their working lifetimes.
Programs and qualifications among states can vary slightly depending on the needs and goals of that state.
That aside, there are basically two financial criteria that must be met.
First, Is the Income Eligibility Criteria…
The Federal guideline for 2019 is that an individual, age 65 or older, cannot have a monthly income greater than $2,313. If married and both spouses are applying for Medicaid, each can have a $2,313 income for a combined $4,626.
When only one spouse is applying, the non-applicant is allowed some of the applicant’s income to help cover the living-at-home expenses while their spouse is receiving care. In most states, that maximum is $3,160.50 per month.
If your elderly loved one’s income exceeds the threshold, she could spend some of her income on health care and medical-related costs to get her income below that threshold.
Examples of Medicaid income spend down include:
- Hearing aids
- Transportation to receive medical care
- Past medical and hospital bills
She should track every dollar spent on health care. Save every receipt. Missing one from the pharmacy, for example, could mean qualifying for Medicaid or not.
Second, Is the Asset Eligibility Criteria…
States will not grant Medicaid nursing home coverage if applicants have more than a certain amount of assets.
In most states, a single applicant, age 65 or older, is allowed to have $2,000. You can find your state’s requirements here.
If married and both spouses are applying for Medicaid, the typical limit is $3,000.
And if married with only one spouse applying, the non-applicant spouse can have as much as $126,420 in most states.
But not everything that people own is countable.
Countable assets are generally assets that can be converted to cash and used to pay for long-term care.
- savings accounts
- money market funds
- a second home
- IRAs, 401(k)s
Non-countable assets, that is those that are exempt from the state’s maximum, include:
- personal belongings
- a car
- irrevocable funeral and burial trusts
- the primary residence — assuming the non-applicant spouse will continue to live there and the equity is not more than $585,000
Medicare Spend Down
Suppose your elderly loved one is not in good health. And you know that that she may need long-term care in the near future. The problem is that her resources exceed the state’s Medicaid allowance.
That means she’ll have to spend down her assets.
She could begin by converting countable assets into non-countable assets. For instance:
- Making home improvements — a handicap bathroom, a chairlift, a wheelchair ramp
- Paying off mortgages, auto loans, credit cards
- Prepaying funeral and burial expenses
She could also set up a life care agreement…
This is a legal contract with a caregiver, can be a family member or friend, to provide a specified level of care for the duration of the elderly person’s life. Tasks could include housecleaning, preparing meals, and serving as an advocate if she goes to a nursing home.
The pay cannot be deemed as gifts, and a fair-market wage must be established.
You may be thinking… why bother with all that. Why not just give enough assets to friends and family members to get her countable assets down to the Medicaid limit, or sell them at a steep discount?
Clever idea. But states are onto that one with the…
This is a period of time when assets that could have been used to pay for long-term care were transferred. In most states it is 60 months. Here in California it’s 30.
The rules are complex and vary state to state. Basically though, authorities look closely for assets transferred within the look-back period.
And if they find that an applicant violated that rule, your loved one may not get the financial assistance she was seeking. Instead, she could with a penalty period — a period of Medicaid ineligibility when she would have to pay out of pocket for her own nursing home care.
Medicaid Estate Recovery Program (MERP)
To make all of this even more complicated, states are required to seek recovery from an individual’s estate for Medicaid payments made. They have been known to get pretty aggressive, for example immediately going after life insurance proceeds that were intended to benefit a surviving spouse.
They can even put a lien on a patient’s home if she is permanently institutionalized, unless her spouse is living there.
Before implementing any Medicaid planning strategies, I suggest meeting with an attorney. Not the one who handled your home closing or divorce.
You want an elder care attorney who knows the ins and outs of the Medicaid rules for your state and can re-structure your loved one’s finances to help them become eligible. The National Academy of Elder Law Attorneys is a good place to begin your search.
To a richer life,
— Nilus Mattive
Editor, The Rich Life Roadmap