Long Term Care Medicaid is the federally mandated program that provides access to skilled nursing care for individuals who meet certain requirements. Although Medicaid is a federally created program, the actual administration of that program is left to the individual states. Because of this division between federally created rules and state administration, there are many specific differences between the states, although the overall rules are generally the same. Also, the rules change frequently, so from the time a reader starts this article, the rules may change before they even finish the article. As a result, the following information is for general knowledge and should not be relied upon without the advice of an expert in elder law.
There are a bevy of misconceptions related to Long Term Care Medicaid. In fact, it is common for families who could be eligible for Medicaid to incorrectly assume that they do not qualify, even before they know the rules. Even more often, individuals and families will attempt to “plan” for their future Medicaid needs by acting on rumor and the advice of family, neighbors and friends. Most often, these people find that not only have they acted incorrectly, but that their attempts at “planning” have actually caused more problems than they solved.
Because of the many rumors, misunderstandings and outright lies related to Medicaid, it is necessary to provide a general background to the program’s eligibility requirements before any discussion of planning can occur. The purpose of this article is to provide exactly that general overview with the intent that once the reader is armed with the basic knowledge, he or she will not make the same mistakes as so many of the people who came before them.
How does one qualify for Medicaid long-term nursing home benefits?
In very general terms, in order to qualify for Long Term Medicaid, the applicant must, (1) be a U.S. citizen or an alien lawfully living in the U.S. AND reside in the state where they are applying for benefits; (2) be over 65, disabled or blind; (3) have a “medical necessity” requiring skilled nursing care; (3) meet the income cap which means the applicant cannot make more than $2,163.00 (in 2015) per month in income; and (4) have only limited assets. In addition to these requirements, applying for LTC Medicaid does a person no good unless he or she is at a facility that accepts Medicaid and not all nursing homes accept Medicaid benefits. Of those nursing homes that do, the nursing home may only accept a limited number of Medicaid recipients. Additionally, the Medicaid “bed” generally is in a semi-private room.
What if the applicant receives only $1,000.00 per month in income but the other spouse receives $1,700.00 or even $3,000.00 per month in income?
The applicant will not have a problem with the income cap because he is receiving less than $2,163.00 per month in 2015. Medicaid only counts the applicant’s income and not the spouses income! If a couple are receiving rental payments from a lease of their land or are receiving note payments, the Medicaid Agency will consider that the income goes to the spouse whose name is on the check.
What if the applicant does have too much income?
Even if you, the applicant, has too much income, they can still qualify for Medicaid. If the applicant otherwise qualifies for Medicaid long term nursing home benefits, the applicant) or the applicant’s spouse or duly appointed agent) may create a Qualified Income Trust or “Miller Trust.” This trust allows the applicant to transfer his/her income into the trust and then qualify for Medicaid long term nursing home care benefits. This means that no one should every be disqualified for Medicaid because they have too much income! Either you have less than the income limit and qualify or you have more than the limit, set up a Miller Trust and then qualify.
This Miller Trust sounds great, can I transfer my other assets into a Miller Trust to protect them?
No. A Miller Trust is ONLY used to overcome the income cap issue. A Miller Trust is NOT a trust used to protect assets (resources).
What are the assets that I can keep and still qualify for Medicaid?
When applying for Medicaid, the state will look at what they call your “countable resources.” To qualify for Medicaid, an unmarried individual’s countable resources (assets) cannot exceed $2,000.00. If both spouses are applying for long term care nursing home benefits, then their combined countable resources generally cannot exceed $3,000.00.
If only one spouse is applying for Medicaid benefits, the community spouse will keep more than $2,000.00 in assets. When the Medicaid application is made, all available non-exempt resources of both spouses will be counted as resources, whether the property is classified as community or separate. One half of the couple’s resources will be set aside for the spouse not applying for Medicaid benefits, with a minimum set aside amount of $23,448.00 and a maximum of $117,240.00 in 2015. There may be ways in which to increase the maximum amount that can be set aside for the spouse staying at home but the strategies can be complex and should be discussed with an expert.
Are all of a person’s resources or assets counted when determining Medicaid eligibility?
No. The following assets are exempt from being included as a resource.
- The principal residence of the Applicant up to a value of $543,000.00;
- A burial plot held for the Applicant or the Applicant’s family;
- Term or burial insurance, if it has no cash value;
- Identifiable burial funds in the amount of $1,500.00 or a prepaid irrevocable burial contract regardless of the value;
- One automobile is exempt, regardless of value;
- Household goods and personal items;
- Life insurance policies owned by the Applicant with total face values of $1,500.00 per insured person or less;
- Livestock and poultry that are held for business purposes or for consumption;
- Business property essential for self-support; and
- Non-business property valued at up to $6,000.00, essential for self-support (generally mineral interests).
What if I am told that I have to “spend down” resources before I or my spouse qualifies for Medicaid. Should I “spend down” before I make application for Medicaid or after the application is made?
Spending down before or after the application is not the key. The Medicaid Agency gives you a credit for all monies spent after you enter a medical facility and ultimately stay for 30 days or more. For example, imagine that a Wife has a stroke and goes into the hospital in September. On October 4, she is moved into a nursing facility and continues to reside there. Her husband makes application for Medicaid benefits for her in December. The Medicaid Agency will determine what their assets were all the way back to September 1 and then again on December 1 to see if they have already spent funds to meet any spend down.
When only one spouse is applying for Medicaid, it is best to “spend down” AFTER the Medicaid application is filed. This is generally AFTER a person goes into a nursing home. However, before a person spends anything, they should get the advice of an expert. Many families do not have to spend a single penny before qualifying for Medicaid!
But I heard that if I go into a nursing home, I will lose my house. Isn’t this true?
No, you do not need to sell your homestead and spend the money in order to qualify for Medicaid. Nor will a nursing home make you sign your house over to them. These are all just rumors. The Medicaid Agency considers your homestead an “exempt” asset and therefore will not include it when determining your eligibility. You can get Medicaid and keep your house!!!
What about after my death? Will the State take the house if either I or my spouse receives Medicaid assistance?
Not if you protect it first! When the state pays for your care under the Medicaid program, the money they pay is more like a loan instead of a gift. The way they collect on their loan is a law called the Medicaid Estate Recovery Program. However, is no estate recovery, ever, when the deceased Medicaid recipient has a surviving spouse, minor children, disabled child of any age) or an unmarried adult child who lived in the homestead at least one year immediately prior to death. This is not a lien statute so the state will not “take” the homestead. The statute makes the State a creditor just like a doctor or ambulance company and just like any creditor, if there are no exemptions or waivers from collection, the creditor can require the executor to sell estate assets to pay the debt. But even if one of these exceptions doesn’t apply to you, all hope is not lost. There are many other ways you can protect your home and belongings if done very carefully.
Can I give away some of my resources (assets) in order to qualify for Medicaid?
Generally, no. If a nursing home applicant makes a transfer of resources for less than fair market value (a “gift”) in order to qualify for Medicaid benefits, the applicant will be penalized for the gift by being ineligible for Medicaid benefits for a calculated period of time (the “transfer penalty”). The Medicaid Agency has determined that the average private pay cost for nursing home care is $156.34 per day for Texas and $5,098.00 per month for Arkansas. To determine the number of months of ineligibility for any gift, the Medicaid Agency will divide the amount of the gift by $156.34 or $5,098.00 (depending on the state). The resulting quotient is the number of days/months of ineligibility for benefits.
If a gift is made, the presumption is that it was made in order to qualify for Medicaid benefits. The Applicant would have to prove that the gift was made for a totally different reason, which is a very difficult burden of proof. Also, do not confuse the Medicaid gifting penalty with the federal gift tax law. Under the gift tax rules, a person can give away up to $14,000 per person each year without having to file a gift tax return. But this rule is completely separate from Medicaid. Any gift can potentially cause a problem with Medicaid, no matter what amount it is.
Can I transfer all of my assets into a Trust and then apply for and qualify for Medicaid long term nursing home benefits?
Congress allows a disabled person under the age of 65 to transfer assets to a Supplemental Needs Trust drafted by an attorney or a Pooled Trust (e.g. the Arc of Texas, Master Pooled Trust) without transfer penalties. Both of these trusts require that upon the death of the applicant/beneficiary, all Medicaid expenditures are paid back to the State out of the remaining funds. These trusts are generally irrevocable. Also, if you have a disabled child or other disabled individuals in your family, you can transfer assets into trusts for their benefit if it is done very carefully.
If a person is planning ahead, there are additional types of trusts that can potentially be used to protect your assets from the costs of nursing home care. These are very specialized documents and should only be created by an attorney that is familiar with the Medicaid eligibility rules. These are not “living trusts” or “revocable trusts” which are the most common type of trust agreement. Generally, living trusts will not protect your assets from your own costs of care.
How can I learn the details about the Medicaid program?
When asking a legal question about the Medicaid program or any other legal issue, it is imperative that a person obtain advice from a competent elder law attorney. For example, Texas law prohibits non-attorneys from advising persons about Medicaid qualification and charging fee.
- A person who is not licensed to practice law in Texas commits an offense if the person charges a fee for representing or aiding an applicant or recipient in procuring assistance from the Commission [the Texas Health and Human Services Commission’s Medicaid program].
- A person commits an offense if the person advertises, holds himself or herself out for, or solicits the procurement of assistance from the Commission.
- An offense under this section is a Class A misdemeanor. Section 12.001 of the Texas Human Resources Code.
John K. Ross IV is an Elder Law attorney and senior partner of Ross & Shoalmire, LLP Elder Law Firm. John holds a degree in Accounting from Texas State University and a Juris Doctorate from Texas Tech School of Law. John devotes his entire practice to assisting individuals with their estate planning and Elder Law needs. He is licensed to practice in Texas, Arkansas, and before the Unites States Tax Court. John is a U.S. Marine Corp veteran and is also an accredited Veterans Affairs attorney, a member of the National Academy of Elder Law Attorneys, a member of the Judge Advocate for the American Legion and a member of the board of directors for the Alzheimer’s Alliance. John is a frequent speaker on both a local and national level, and has been quoted by such national publications as the Wall Street Journal on aging issues. John is the co-host of the Aging Insight radio program Saturdays from Noon to 1:00p.m on 98.5 FM Texarkana and the Aging Insight television program on KLFI-TV Channel 10 Texarkana.
John K. Ross IV, Lisa B. Shoalmire and/or Ross & Shoalmire, LLP, by way of this article, is not offering legal advice. This article is intended to be for informational purposes only. Before relying on any information contained herein, the reader should consult an elder law attorney.