Planning for Long-term Care with Medicaid
What is Medicaid?
Medicaid, also known as “Title XIX”, is a needs-based program for individuals who are 65 years of age or older, or disabled, and who lack sufficient income and assets to pay for their long-term medical care and treatment. If an individual meets the eligibility criteria, Medicaid will pay health care providers directly for long-term health care services delivered to the individual in a nursing home or at home. Medicaid also pays for additional medical services, such as doctor visits, inpatient and outpatient hospital care, laboratory services, and transportation necessary to receive medical care.
What is the difference between Medicaid and Medicare?
Medicare is the federal health insurance program available to most people 65 years of age or older. Unlike Medicaid, Medicare does not have income or asset eligibility rules. Medicare helps to pay for most routine health care services for individuals, however, it does not pay for the cost of long-term health care in a nursing home.
What is Medicaid Planning?
The goals of Medicaid planning are to establish eligibility for the applicant in the appropriate Medicaid program, while, at the same time, preserving the maximum amount of income and assets for other family members as permitted by law. You can think of Medicaid planning as a variation of the same type of income tax planning and financial planning engaged in by many individuals and businesses on a routine basis.
How do I apply for Medicaid?
In Connecticut, the Medicaid program is administered by the Department of Social Services (“DSS”), where Medicaid applications are reviewed by an appointed DSS caseworker. Applications can be completed and submitted by an individual, an individual’s family member or representative, a representative of a health care facility or independent contractor, or by an elder law attorney.
Applications must include copies of personal and financial information ranging from copies of a birth certificate, social security cards, health insurance cards, and a driver’s license, to copies of financial account statements, insurance policy statements, and evidence of debts or other liabilities and medical expenses. When applying for Medicaid, a knowledgeable elder law attorney will provide the applicant with a complete list of documentation that must accompany a Medicaid application and will often assist in the gathering of these documents from the appropriate institutions.
How Do I Qualify for Medicaid?
An individual can qualify for Medicaid if he/she is functionally eligible and financially eligible, as determined by the DSS.
Functional Eligibility: To be considered functionally eligible for Medicaid an applicant must be at least 65 years of age and unable to perform, without substantial assistance of another person, certain Activities of Daily Living. Typically, an individual requiring the care of a skilled nursing facility satisfies this requirement.
Financial Eligibility: To be considered financially eligible for Medicaid, there are asset and income limits that must be met.
Asset Limit: an applicant can have no more than $1,600.00 in countable assets. Certain assets are excluded from being counted toward this $1,600.00 limit. A spouse of an applicant may also keep additional assets.
Income Limit: an applicant residing in a nursing home does not have an income limit and can have any amount of income and still qualify for Medicaid. A majority of this income will, however, need to be paid to the nursing home as Applied Income. An applicant residing at home can have no more than $2,382.00 (in 2021) in gross monthly income to qualify for the homecare Medicaid program. A home care applicant with income greater than the income limit can still qualify by diverting the income over the limit to a PLAN Pooled Trust with the assistance of an attorney licensed with PLAN of CT.
What Assets are Excluded?
Excluded assets are assets that are not counted against the “asset limit” and, therefore, are assets that the applicant and/or the applicant’s spouse may keep. All other assets should be considered counted toward the $1,600.00 asset limit and any assets a spouse may keep. Excluded assets may include:
Your home ($906,000.00 equity limit as of 2021) is excluded if you, your spouse, or a disabled or minor child under 21 years of age are living in it;
Personal effects, household items, and furnishings;
A car;
Irrevocable Funeral Contracts up to $10,000.00 in value;
Burial Plot or Revocable Burial Trust of a reasonable value;
Term life insurance policies (no interest or dividend payments and no cash surrender value);
Other life insurance policies (such as “whole life” or “universal life”) with a cash value of less than $1,500.00;
An amount equivalent to the amount your Connecticut Partnership Long-Term Care Insurance Policy has paid out for your care:
Other “inaccessible” assets (consult an elder law attorney);
It is advisable to consult with an elder law attorney to determine if these types of assets are excluded in a particular situation.
Does Medicaid Cover Care at Home?
Yes, the Connecticut Home Care Program for Elders (CHCPE) enables eligible individuals to stay at home instead of going into a nursing facility*. To be eligible for CHCPE, an applicant must meet the basic Medicaid eligibility requirements, as well as the CHCPE requirements.
CHCPE requires that an applicant be at risk of being placed in a nursing home, yet still be capable of safely remaining home and receiving health care at home. An applicant is considered to be at risk of being placed in a nursing home when the applicant needs assistance with daily living needs such as bathing, dressing, eating, taking medications, and toileting.
The services offered may include home health services, homemaker services, visiting nurse services, adult day care center services, care management services, home-delivered meals, companion services, personal care attendant services, emergency response services, and minor home modifications.
*It is important to note that due to changes in the state budget, the CHCPE program has substantially reduced the number of hours of care services they will approve, leaving many individuals who require 24/7 care, or close to it, with less care coverage than they may need. This causes some individuals to be forced to move into a skilled nursing facility to receive adequate care.
What is my Spouse Allowed to Keep?
When a Medicaid applicant is married, the spouse is called a “Community Spouse.” The Community Spouse is entitled to keep minimum amounts of income and assets, so as not to cause undue hardship to the spouse, however, there are also limits to what a Community Spouse is allowed to keep.
Income: A Community Spouse is entitled to keep his or her own income plus some of the applicant’s income, if his/her personal income is too low. This income threshold is called the Minimum Monthly Needs Allowance, or "MMNA”, and is established by federal law. The MMNA increases every year. In 2021, the MMNA is $2,115.00, and, depending on housing costs and other expenses, can be increased to a maximum of $3,259.50 (without a DSS hearing). Here is an example:
Frank, the institutionalized spouse, receives $1,600.00 per month from social security and $900.00 per month pension from his pension. Sally, the community spouse, receives $1,200.00 per month from social security. At least $915.00 of Frank’s income will be diverted to Sally to bring her total income up to the MMNA of $2,115.00.
Assets: A Community Spouse can keep all excluded assets noted above. All other counted assets, whether jointly or solely owned, are valued and totaled. That total is divided evenly between the applicant and the Community Spouse. The Community Spouse can keep his/her half of the total counted assets up to a maximum of $130,380.00 (in 2021) and down to a minimum of $26,076.00 (in 2021). Here is an example:
Frank and Sally own their home ($400,000.00 fair market value), a new car ($30,000.00 fair market value), a $100,000.00 term life insurance policy with no cash value, and bank and stock accounts worth $100,000.00. In addition, each spouse has an IRA worth $25,000.00 and an annuity worth $25,000.00 each.
This is how the assets will be evaluated for Medicaid eligibility purposes:
Sally can keep the home because it is an excluded asset
Sally can keep the car because it is an excluded asset
Frank/Sally can keep the term life insurance policy because it has no cash value
The bank and stock accounts, IRA accounts and annuities total $200,000.00. One half is deemed Frank’s ($100,000.00) and one half is deemed Sally’s ($100,000.00). Sally can keep $100,000.00 of these assets (allocated any way she chooses) and Frank will need to “spend down” his $100,000 until only $1,600.00 remains, before he will be financially eligible for Medicaid.
What does it mean to “spend down”?
When an applicant’s assets place them above the Medicaid eligibility limit, certain “spend-down” strategies can be implemented to help the individual reach the required asset limit to qualify for Medicaid. Spending down must be done properly so as to not transfer assets or make gifts in a way that will result in a penalty. Proof of valid spend-down expenses must be submitted to DSS for their review. It is advisable to check with an elder law attorney before making spend-down decisions, to verify that it will not have an impact on eligibility for Medicaid. Here are some examples of expenditures that may be used to “spend down”:
Paying down debt and creditors, including a mortgage, equity line, promissory note, credit cards, bills, medical expenses, etc;
Making repairs or updates to the primary residence;
Purchasing a pre-paid irrevocable burial contract for up to $10,000.00 for the applicant and for the spouse;
Purchase a pre-paid burial fund of a “reasonable amount” for the applicant and the spouse (used to purchase the casket, gravesite, urn, outer burial container, headstone or marker, etc.);
Purchase a newer fuel efficient vehicle;
Enter into “Care Contracts” with family members or friends to assist the applicant with his or her daily routine, errands, transportation, and care (caution, as this must be reasonable and documented properly);
Prepay for dental or vision care;
Purchase comfort necessities for an individual going into a nursing facility;
Seek assistance from an elder law attorney for additional spend down options that may or may not work in your particular situation.
Is Gifting Assets Allowed?
Sometimes yes, but most of the time gifting is not allowed and will create a penalty. When an applicant applies for Medicaid, DSS will review the prior five years of financial transactions made by the applicant and his/her spouse, if applicable, t to determine if any gifts were made that would create a penalty. If you are in good health or have enough other assets to privately pay for your own care for a period of five years after making the gift, you can feel more comfortable to make gifts of your assets to others without threat of penalty. There is no way to “hide” a gift being made and when applying for Medicaid an applicant or representative must attest to the fact that accurate and complete information is being provided to DSS.
However, we do not have a crystal ball, and the healthiest of people can still experience drastic medical changes without warning. If gifts are made, they should be properly documented to provide this proof to DSS. Gifts made in order to become eligible for Medicaid benefits are not allowed, will be penalized, and could cause the State to take legal action against the recipient of the gift if the gift is not returned.
There are some examples of last-minute gifts that can be made that typically do not incur a penalty, if the transfer is done correctly. Here are some examples:
Spouse – An applicant can gift his/her assets to a spouse, including real property, without any penalties;
“Caregiver Child Exception” – An applicant can gift his/her home to a child who has lived in the home with the applicant for at least two (2) years before the applicant was “institutionalized” and if the child has provided care to the applicant during that two (2) year period, to prevent the need to move to institutionalize the applicant;
Young or Disabled Child – An applicant can gift his/her home to a child who is younger than 21 years of age, or is blind or disabled, and is living in the home;
Sibling- An applicant can gift his/her home to a sibling who has an ownership interest in the home for at least one (1) year and has lived there for at least one (1) year; or
You can gift a reasonable amount of cash assets to children, grandchildren, or other family members if, after making the gift, you have retained a sufficient amount of cash assets and income to meet your reasonably foreseeable future medical needs. (Consult with an elder law attorney, as this could still cause issues!)
What is the Penalty for Making a Gift?
Gifts of assets include any transfer of an asset for less than fair market value. These types of transfers or gifts can be “penalized” by DSS, meaning that they can postpone an individual’s eligibility to receive Medicaid. The penalty is calculated by taking the value of the gift made and dividing it by the current average monthly cost of nursing home care, published by DSS. The average cost of care in 2021 is $13,512.00. The end result is the number of months that the applicant is deemed ineligible for Medicaid benefits.
Here are two examples:
John gave $100,000.00 to his son, Frank on March 1, 2018, to help Frank buy a home. Four years later, John had a stroke and requires long-term nursing home care. John is otherwise eligible for Medicaid when he files his application with DSS on February 1, 2021. Because the applicant was submitted less than five (5) years since the date of the gift, the gift must be reported on the Medicaid application. The gift creates a penalty period of approximately 7.6 months from the date Frank would otherwise be eligible to receive Medicaid assistance. (100,000 / 13,143 = 7.6).
Same facts as above except Frank does not file the Medicaid Application for John until March 2, 2023. Since this is more than five (5) years since the gift, it need not be reported on the Medicaid application and there will be no penalty period.
DISCLAIMER: The printed information provided by Wiley Etter Doyon, LLC is provided as a public service and is not provided as legal advice. The laws pertaining to Estate Planning and Medicaid are complex, frequently change, and may vary from State to State. You should consult with an estate planning and/or elder law attorney before relying on any information contained in this material or attempting to apply it to your very unique facts and circumstances.