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Medicaid
Facts
Medicaid (called "Medi-Cal" in California and "MassHealth"
in Massachusetts) is a federal program administered by the state that
provides health insurance coverage to lowincome children, seniors and
people with disabilities.
In addition,
it covers care in a nursing home for those who qualify. In the absence
of any other public program covering long-term care, Medicaid has become
the default nursing home insurance of the middle class. As for home care,
Medicaid offers very little except in New York State, which provides home
care to all Medicaid recipients who need it. (Although there are very
strict qualification standards - and the carq is often not available even
to those who qualify because of a shortage of qualified nurses.) Recognizing
that home care costs far less than nursing home care, a few other states-notably
Hawaii, Oregon and Wisconsin-are pioneering efforts to provide Medicaidcovered
services to those who remain in their homes.
While Congress and the federal Health tare Financing Administration (HCFA)
set out the rules under which Medicaid operates, each state is granted
the authority to enforce the rules as it interprets: Some states even
delegate the administration of the Medicaid program to their counties.
As a result, the rules are not enforced consistently in every state, or
even in every county - but in any case, the state programs cannot be more
restrictive than the federal rules. The following describes' those basic
rules, but check your state for the specific application where you live.
Resource (Asset) Rules
These are general federal guidelines. The specific rules in your state
may differ somewhat.
In order to be eligible for Medicaid benefits a nursing home resident
may have no more than $2,000 in "countable" assets. In addition,
the spouse of a nursing home resident - called the `community spouse'
- can retain up to one half of the couple's joint assets up to $90,660
(in 2002) but not less than $18,132 in "countable" assets. The
$90,660 figure changes each year to reflect inflation. The actual amount
that can be retained is set by each state but must be within these limits.
All assets are counted against these limits unless the assets fall within
the short list of "noncountable" assets. These include:
(1) personal possessions, such as clothing, furniture, and jewelry;
(2) one motor vehicle, at "reasonable value" for unmarried recipients
and of any value for the healthy (community) spouse;
(3) the applicant's principal residence, provided it is in the same state
in which the individual is applying for coverage (the states vary in whether
the Medicaid applicant must prove a reasonable likelihood of being able
to return home);
(4) prepaid funeral plans and a small amount of life insurance; and
(5) assets that are considered "inaccessible" for one reason
or another.
(6) "other assets" required to bring the community spouse up
to the minimum income levels permitted the community spouse (see Treatment
of Income).
Estate Recovery and Liens
Under Medicaid law, following the death of the Medicaid
recipient a state must attempt to recover from his or her estate whatever
benefits it paid for the recipient's care. However, no recovery can take
place until the death
of the recipient's spouse, or as long as there is a child of the deceased
who is under 21 or who is blind or disabled.
While states must attempt to recover funds from the Medicaid recipient's
probate estate, meaning property that is held solely in the beneficiary's
name, they have the option of seeking recovery against property in which
the recipient had an interest but which passes outside of probj ii
ate. This includes jointly held assets, assets in a living trust, or life
estates. Given the rules for Medicaid eligibility, the only probate property
of substantial value that a Medicaid recipient is Rely to own at death
is his or her home. However, states that have not opted to broaden their
estate recovery to include non-probate assets may not make a daim against
the Medicaid recipient's home if it is not in his or her probate estate.
In addition to the right to recover from the estate of the Medicaid recipient,
state Medicaid agencies must place a lien on real estate owned by a Medicaid
recipient during her life unless certain dependent relatives are living
in the properly. If the property is sold while the Medicaid recipient
is living, not only will she cease to be eligible for Medicaid due to
the cash she would net from the sale, but she would have to satisfy the
lien by paying back the state for its coverage of her care to date. The
exceptions to this rule are cases where a spouse, a disabled or blind
child, a child under age 21, or a sibling with an equity interest in the
house is living there, or if a child has resided in the home and provided
care to the Medicaid recipient for two years prior to the recipient's
application for Medicaid.
Whether or not a lien is placed on the house, the lien's purpose should
only be for recovery of Medicaid expenses if the house is sold during
the beneficiary's life. The lien shouid be removed upon the beneficiary's
death. , However, check with an elder law specialist in your state to
see how your local agency applies this federal rule.
Actually, there is no limit on the number of months a person can be penalized.
Many people believe the maximum penalty period is 36 months (or 60 months
for transfers to a trust) for Medicaid benefits
Example: The period of ineligibility for the transfer of property worth
$420,000 would be 84 months ($420,000 = $5,000 = 84 Months, or seven years).
With proper planning, however, you can ensure qualification in 36 months
or less.
When applying for Medicaid, the state Medicaid agency may only look at
transfers made during the 36 months preceding an application for benefits
(or 60 months if the transfer was made to a trust). This is called the
"look-back period." Effectively, then, with proper planning
you can ensure you will not have to wait more than 36 months to qualify
for benefits. Essentially, if you make large transfers you must be careful
not to apply for Medicaid before the 36-month look-back period passes.
Example: To use the above example of the $420,000 transfer, if the individual
made the transfer on January 1, 1999, and waited until February 1, 2001,
to apply for Medicaid - 37 months later - the transfer would not affect
his or her Medicaid eligibility. However, if the individual applied for
benefits in December 2001, only 35 months after transferring the property,
he or she would have to wait the full 84 months before becoming eligible
for benefits.
Exceptions to the Transfer Penalty
Transferring assets to certain recipients will not trigger a period of
Medicaid ineligibility. These exempt recipients include:
(1) A spouse (or a transfer to anyone else as long as it is for the spouse's
benefit);
(2) A blind or disabled child;
(3) A trust for the benefit of a blind or disabled child;
(4) A trust for the sole benefit of a disabled individual under age 65
(even if the trust is for the benefit of the Medicaid applicant, under
certain circumstances).
In addition, special exceptions apply to the transfer of a home. The Medicaid
applicant may freely transfer his or her home to the following individuals
without incurring a transfer penalty:
(1) The applicant's spouse;
(2) A child who is under age 21 or who is blind or disabled;
(3) Into a trust for the sole benefit of a disabled individual under age
65 (even if the trust is for the benefit of the Medicaid applicant, under
certain circumstances);
(4) A sibling who has lived in the home during the year preceding the
applicant's institutionalization and who already holds an equity interest
in the home; or
(5) A "caretaker child," who is defined as a child of the applicant
who lived in the house for at least two years prior to the applicant's
institutionalization and who during that period provided care that allowed
the applicant to avoid a nursing home stay.
Congress has created a very important escape hatch from the transfer penalty:
the penalty will be "cured" if the transferred asset is returned
in its entirety, or it will be reduced if the transferred asset is partially
returned.
Is Transferring Assets Against the Law?
You may have heard that transferring assets, or helping someone to transfer
assets, to achieve Medicaid eligibility is a crime. Is this true? The
short answer is that for a brief period it was, and it's possible, although
unlikely under current law, that it will be in the future.
As part of a 1996 Kennedy-Kassebaum health care bill, Congress made it
a crime to transfer assets for purposes of achieving Medicaid eligibility.
Congress repealed the law as part of the 1997 Balanced Budget bill, but
replaced it with a statute that made it a crime to advise or counsel someone
for a fee regarding transferring assets for purposes of obtaining Medicaid.
This meant that although transferring assets was again legal, explaining
the law to clients could have been a criminal act.
In 1998, Attorney General Janet Reno determined that the law was unconstitutional
because it violated the First Amendment protection of free speech, and
she told Congress that the Justice Department would not enforce the law.
Around the same time, a U.S. District Court judge in New York said that
the law could not be enforced for the same reason. Accordingly, the law
remains on the books, but it will not be enforced. Since it is possible
that these rulings may change, you should contact your elder law attorney
before filing a Medicaid application. This will enable the attorney to
advise you about the current status of the law and to avoid criminal liability
for the attorney or anyone else involved in your case.
Treatment of Income
The basic Medicaid rule for nursing home residents is that they must pay
all of their income to the nursing home. The resident may retain only
a minimal $50 monthly personal needs allowance (this amount may be somewhat
higher or lower in particular states), and funds to pay for any uncovered
medical costs (including medical insurance premiums). Some states also
permit a shelter allowance. In the case of a married applicant, the community
spouse who continues to live at home can retain the first $1,523 per month
of income including the income of the nursing home spouse to bring the
community spouse to the state minimum monthly income amount. A deduction
may also be allowed for a dependent child living at home.
In some states, known as "income cap" states, eligibility for
Medicaid benefits is barred if the nursing home resident's income exceeds
the monthly imcome allowance, unless the excess above this amount is paid
into a "(d)(4)(B)" or "Miller" trust. If you live
in an income cap state and require more information on such trusts, consult
an elder law specialist in your state.
For Medicaid applicants who are married, the income of the community spouse
is not counted in determining the Medicaid applicant's eligibility. Only
income in the applicant's name is counted in determining his or her eligibility.
Thus, even if the community spouse is still working and earning $5,000
a month, she will not have to contribute to the cost of caring for her
spouse in a nursing home if he is covered by Medicaid. (Note: this is
not true for all states. Federal law states that the community spouse
must contribute 20 percent of any "excess" income.)
Protections for the Healthy Spouse
The Medicaid law provides special protections for the spouse of a nursing
home resident to make sure she has the minimum support needed to continue
to live in the community.
The so-called "spousal protections" work this way: if the Medicaid
applicant is married, the countable assets of both the community spouse
and the institutionalized spouse are totaled as of the date of "institutionalization,"
the day on which the ill spouse enters either a hospital or a long-term
care facility in which he or she then stays for at least 30 days.
In general, the community spouse may keep one half of the couple's total
"countable" assets up to a,ma>nmum of $92,760 (in 2004).
Called the "community spouse resource allowance," this is the
most that a state may allow a community spouse to retain. A community
spouse can retain additional assets if he or she can show "hard 1p.
In most states the criteria for hardship are very difficult to meet. The
least that a state may allow a community spouse to retain is $18,552 (in
2004).
Example: If a couple has $100,000 in countable assets on the date the
applicant enters a nursing home, he or she will be eligible for Medicaid
once the couple's assets have been reduced to a combined figure of $52,000
- $2,000 for the applicant and $50,000 for the community spouse.
In nearly all circumstances, the income of the community spouse will continue
undisturbed;
he or she will not have to use his other income to support the nursing
home spouse receiving Medicaid benefits. But what if most of the couple's
income is in the name of the institutionalized spouse, and the community
spouse's income is not enough to live on? In such cases, the community
spouse is entitled to some or all of the monthly income of the institutionalized
spouse. How much the community spouse is entitled to depends on what the
Medicaid agency determines to be a minimum income level for the community,
spouse. This figure, known as the minimum monthly maintenance needs allowance
or MMMNA, is calculated for each community spouse according to a complicated
formula based on his or her housing costs. The MMMNA may ranye from a
low of $1,515 to a high of $2,267 a month (in 2004). If the community
spouse's own income falls below his or her MMMNA, the shortfall is made
up from the nursing home spouse's income. (In some states,
the community spouse is permitted to increase the MMMNA by retaining more
resources.)
Example:
Mr. and Mrs. Smith have a joint income of $2,000 a month, $1,500 of which
is in Mr. Smith's name and $500 is in Mrs. Smith's name. Mr. Smith enters
a nursing home and applies for Medicaid. The Medicaid agency determines
that Mrs. Smith's MMMNA is $1,515 (based on her housing costs). Since
Mrs. Smith's own income is only $500 a month, the Medicaid agency allocates
$1,015 of Mr. Smith's income to her support. Since Mr. Smith also may
keep a $60 a month personal needs allowance, his obligation to pay the
nursing home is only $425 a month ($1,500 - $1,015 - $60 = $425).
In exceptional circumstances, community spouses may seek an increase in
their MMMNAs either by appealing to the state Medicaid agency for "hardship"
or by obtaining a court order of spousal support.
The Home
In many states, nursing home residents do not have to sell their homes
in order to qualify for Medicaid. In some states, the home is not considered
a countable asset for Medicaid eligibility purposes as long as the nursing
home resident intends to return home; in other states, the nursing home
resident must prove a likelihood of returning home (usually accompanied
by a doctor's letter). In all states, the house may be kept if the Medicaid
applicant's spouse or a dependent relative lives there.
The Transfer Penalty
The second major rule of Medicaid eligibility is the penalty for transferring
assets. Congress does not want you to give all your money to your children
(or whomever) on Monday, qualify for Medicaid on Tuesday, and move into
a nursing home on Wednesday. So it has imposed a penalty on people who
transfer assets without receiving fair value in return.
This penalty is a period of time during which the person transferring
the assets will be ineligible for Medicaid. The penalty period is determined
by dividing the amount transferred by what Medicaid determines to be the
average private pay cost of a nursing home in your region. Each state
must recalculate this amount annually. In many states, including Michigan,
the period of ineligibility starts on the first day of the month of the
transfer. In other states, it begins on the first day of the month following
the transfer.
Example: If a Medicaid applicant made gifts totaling $90,000 in Michigan
where the average nursing home cost is $5,250 a month, he or she would
be ineligible for Medicaid for 17 months ($90,000 = $5,250 = 17), since
fractions are dropped.
Another way to look at the above example is that for every $5,250 (the
amount of one month's nursing home care in Michigan) transferred, an applicant
would be ineligible for Medicaid nursing home benefits for one month.
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