Granted there is a lot of turmoil around health care at the moment, we thought it insightful to let our audience know a little bit more about Medicaid. Let’s start with the basics and break it down from there.
1. What is Medicaid?
Medicaid is a joint state and federal program that provides health coverage to certain groups of individuals, including but not limited to, low income families, seniors, individuals with disabilities, and individuals receiving Supplemental Security Income (“SSI”). An individual seeking to obtain Medicaid must meet state-specific financial requirements regarding income and assets.
2. What are the income requirements for Medicaid eligibility?
The income requirement for eligibility varies by state and each state will count some of your income, but not all of it. Most income counted by Medicaid will be applied toward nursing homes and other care costs. Medicaid makes up the difference between the total cost and an individual’s available income. Medicaid will also count income from:
- Regular benefit payments such as Social Security retirement or disability payments
- Veterans benefits
- Pensions
- Alimony
- Salaries
- Wages
- Interests from bank accounts and certificates of deposit
- Dividends from stocks and bonds
However, Medicaid usually does not count such things as income:
- Nutritional assistance such as food stamps
- Housing assistance provided by the federal government
- Home energy assistance
- Some earnings if you have earned income from work you do
Medicaid will count payments to which an individual is entitled even if the individual doesn’t receive all of the payment. For example, if you have earnings from which income taxes are withheld, Medicaid will count the entire amount of your earnings, including the amount that is withheld for taxes.
a. Coverage for the Medically Needed
Although only 33 states have chosen to cover the medically needed, it is an option for Medicaid eligibility. For an individual to qualify as medically needed, the individual must meet the general requirements, which must be one of the following:
- Be age 65 or older
- Have a permanent disability as that term is defined by the Social Security Administration
- Be blind
- Be a pregnant woman
- Be a child, or the parent or caretaker of a child
An individual must also meet certain other requirements, such as:
- Be a U.S. citizen or meet certain immigration rules
- Be a resident of the state where you apply
- Have a Social Security number
If an individual who is eligible as medically needy, has too much income to qualify for Medicaid, he/she can still qualify by “spending down” the income that is above their states income limit. An individual spends down his/her excess income to the state’s medically needy limit by incurring medical expenses, such as doctor visits, prescription drugs, or anything else the state considers to be medical or remedial care.
b. Income Cap States
The following is a list of income cap states that set an income threshold for Medicaid eligibility and denies application when the applicant’s income exceeds the threshold:
- Alabama
- Alaska
- Arizona
- Arkansas
- Colorado
- Delaware
- Florida
- Idaho
- Iowa
- Louisiana
- Mississippi
- Nevada
- New Mexico
- Oklahoma
- Oregon
- South Carolina
- South Dakota
- Texas
- Wyoming
c. Miller Trust
For states that do not have a Medically Needy Program, it’s common for Medicaid applicants to use income-only trusts, or often referred to as Miller trusts. A Miller trust is often used when an individual, who lives in an income cap sate, has too much income to qualify for Medicaid. This trust can be funded only with the individual’s income, such as Social Security benefits, pension, and etc., and cannot be funded with assets such as money from a bank account or sale of stocks or bonds.
A Miller trust must also contain a clause that says that upon the death of the person for whom the trust is established, any funds remaining in that trust must be paid to the state Medicaid program, up to the amount the program paid for services on behalf of that person.
d. Income Allowance for The Community Spouse
An institutionalized spouse is the spouse who requires care in a nursing home and is applying for Medicaid benefits. A community spouse is the healthy spouse who continues to live in the community, and is entitled to a minimum monthly maintenance needs allowance (“MMMNA”). For 2017, this allowance is between $2,030 and $2,536 per month.
3. What are the Asset requirements for Medicaid eligibility?
During the Medicaid application process, an individual will have to provide documentation for what assets he/she has. Medicaid does not count all assets when determining eligibility, Seniors may keep some noncountable assets, and may not keep other countable assets.
a. Noncountable Assets
Noncountable assets are those Seniors may keep. Assets that do not get counted for eligibility include, but not limited to:
- Primary residence
- Personal property and household belongs, such as furniture
- One motor vehicle
- Life insurance with a face value under $1,599
- Up to $1,500 in funds set aside for burial
- Certain burial arrangements
- Assets held in specific types of trusts
b. Countable Assets
Countable assets are those that are counted for eligibility. Generally, if an applicant has access to the principle of an asset, even if the principal has never been touched or if it is subject to takes or penalties, it is a countable asset. Under federal law, an unmarried applicant may retain noncountable assets plus no more than $2,000 to $4,000 in countable assets, and each state determines its own criteria within these federal limits. Countable assets include, but are not limited to:
- Checking and savings accounts
- Cash, stocks, and bonds
- Certificates of deposit
- Real property other than an individual’s primary residence
- Additional motor vehicles, if the individual owns more than one
c. Jointly Owned Assets and the Transfer of Jointly Owned Assets
Seniors applying cannot protect their assets by creating joint accounts, because Medicaid will count the joint accounts as belonging entirely to the applicant, unless the applicant can prove that the co-owner can control the account without the signature from another owner.
For example, if all of the money in an account came from a parent, merely adding a child’s name to that account will have no effect for Medicaid purposes because it is not a gift to the child. In this instance, the entire value of the account will still be counted for the purposes of determining the parent’s Medicaid eligibility.
Transferring jointly owned assets can potentially trigger a Medicaid penalty. An asset is considered to be transferred when the joint owner (not the Medicaid applicant) withdraws any money. If an asset is transferred during a look-back period, it will create a period of Medicaid ineligibility.
d. Look-Back Period
Transferring assets for less than the fair market value – by an applicant or spouse – within the look-back period will result in a period of ineligibility for Medicaid. Since February 2008, the look-back period during which Medicaid can review any financial transactions begins on the date of the Medicaid application and “looks back” 60 months for all transfers. Medicaid reviews any assets that have transferred for less than full value during the look-back period.
The larger the transfer of assets within he look-back period, the longer the period of ineligibility. The uncompensated value of any assets transferred during this period is then divided by the state-established monthly nursing home cost to determine a period of Medicaid ineligibility.
For example, transferring an asset valued at $ 100,000 in a state with a monthly nursing home cost of $ 5,000 for a semi-private room would result in a 20-month ineligibility/penalty period ($ 100,000 divided by $ 5,000), starting when the individual becomes eligible for Medicaid.
e. The Family Home
When determining eligibility for Medicaid your home, regardless of its value, is exempt from being counted as a resource as long as it is your principal place of residence. But, the value of your home can affect whether Medicaid will pay for your long-term care services, including nursing home care and home and community-based waiver services.
If your equity interest in the home exceeds a certain level, Medicaid cannot pay for your long-term care. The equity value of your home is the fair market value (that is, what you could sell it for on the open market) minus any debts secured by the home, such as a mortgage or a home equity loan.
This rule does not apply if the applicant’s spouse, minor child, or disabled child resides in the house. The spouse, minor, or disabled child is referred to as a member of a protected class. According to current guidelines, members of the protected class include:
- The applicant’s spouse;
- Any child under 21;
- Any child of any age who is blind or permanently and totally disabled;
- A brother or sister who owns equity interest in the home and resided in the home for at least one year preceding the Medicaid application;
- Any child who resided in the home for two years prior to admission to the nursing home and provided care that permitted the applicant to stay in the home.
We hope you found our quick guide insightful. If you or anyone you know resonates with any of the above mentioned, EPGD Law is here to help. We can be contacted directly via (786) 837-6787 or by email at info@epgdlaw.com.
*Disclaimer: This blog post is not intended to be legal advise. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*
