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Medicaid Planning and Long Term Care Issues

Frequently Asked Medicaid Questions

 

1. What is Medicaid?

Medicaid, also known as “Title XIX”, is a needs based program for individuals who are 65 years of age or older 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 services delivered to the individual.  Medicaid covers the cost of long term health care in a nursing home and also can provide assistance to elders who still can be cared for at home, with assistance.  Medicaid also pays for many medical services, such as doctor visits, inpatient and outpatient hospital care, laboratory services, transportation necessary to receive medical care, and other types of health care.

2. 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, eligibility for Medicare is not predicated upon the income or assets of the applicant.  Medicare helps to pay for most routine health care services for individuals, called “Medicare beneficiaries.”  However, Medicare does not pay for the cost of long term health care in a nursing home.

3. What is Medicaid Planning?

The twin 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 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.

4. How do I apply for Medicaid?

In Connecticut, the Medicaid Program is administered by the Department of Social Services (“DSS”).  All Medicaid applications are submitted to the applicant’s local DSS office to be reviewed by an appointed DSS caseworker.  Applications can be completed and submitted by an individual or an individual’s family member or representative, by 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.

5. What are “excluded assets”?

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. In many situations, excluded assets may include:

  • Your home ($750,000.00 equity limit) is excluded if your spouse or a disabled or minor child under 21 years of age is living in it
  • Personal effects
  • Household items and furnishings
  • A car:
    • If one spouse is in a nursing home or receiving care under the Waiver Program, the community spouse may keep one car of any value.
    • A car will also be an excluded asset if it is needed to take someone to medical appointments
  • Any handicapped accessible vehicle is excluded
  • Irrevocable Funeral Contracts up to $5,400.00
  • Burial Blot 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 face 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

It is advisable to consult with an elder law attorney to determine if these types of assets are excluded in a particular situation.

6. Can I receive Medicaid assistance and continue living in my home?

The Connecticut Home Care Program for Elders (CHCPE) enables eligible individuals to stay at home instead of going into a nursing home 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.

Depending on your income, you may be required to contribute financially toward the cost of the CHCPE services. The amount you must contribute is dependent upon your individual circumstances; a Care Manager who assesses your eligibility for the CHCPE program will be able to tell you the amount of your expected contribution, if any.

There are two separate home care programs known as the waiver program, and the state funded program. Here are the basic income and asset limitations for qualification in each program:

  • Waiver program, single applicant:
    • The income limit for the Medicaid Waiver is $2,022.00
    • Asset limit is $ 1,600.00
  • Waiver program, married couple both receiving services:
    • The income limit for the Medicaid Waiver is $2,022.00
    • Asset limit is $ 3,200.00
  • Waiver program, married couple but only one spouse receiving services:
    • The income limit for the Medicaid Waiver is $2,022.00
    • Asset limit is $ 22,480.00
  • State funded program, single applicant:
    • There is no income limit for individuals who qualify for the state funded CHCPE
    • Asset limit is $32,868.00
  • State funded program, married couple, one or both spouses receiving services:
    • There is no income limit for individuals who qualify for the state funded CHCPE
    • Asset limit is $43,824.00

Under both the CHCPE State-Funded program and the CHCPE Medicaid Waiver, if there is a Community Spouse, he or she may keep additional assets, subject to the spousal assessment rules (see question #8).

Additionally, under both the CHCPE State-Funded program and the CHCPE Medicaid Waiver, additional assets can be kept when a Connecticut Partnership approved Long Term Care Insurance policy has paid for your care.  The amount you can protect (keep) is equal to the benefits paid by the policy.

For all programs, ownership of a home does not preclude eligibility nor does ownership of a motor vehicle required for transportation of the applicant. In most circumstances, however, the State will place a lien on the home for the amount of assistance that has been paid out.

7. I am a single person; when am I eligible for Medicaid in a long term care facility such as a nursing home?

Income: Unless your monthly income exceeds the “state rate” for care in a nursing home (most unusual) your income will not be an impediment to your eligibility for Medicaid. Your income will be diverted to the nursing home (less a personal needs allowance of $69.00 per month that you are allowed to keep). Medicaid will pay the nursing home the difference between the state rate and your income.

Assets: Your cash assets must be spent down to $1,600.00. You may keep clothing and personal effects appropriate for your room, a prepaid funeral contract and burial plot, and a term life insurance policy (described in question #5).  In certain circumstances you also may keep your home as long as you are making a good faith effort to sell it.

8. I am married and require care in a long term care facility; what income and assets can my spouse keep?

Income: Your income is treated the same as the income of a single person (described in question #7) but with one important difference. The important difference is that the spouse who stays at home, called a “Community Spouse”, is entitled to a minimum monthly income (called the Minimum Monthly Needs Allowance, or “MMNA”) established by federal law.  The MMNA increases every January 1.  At the present time, the MMNA is $1,821.25, and, depending on housing costs and other expenses, can be increased to a maximum of $2,739.00 (without a DSS hearing). If your spouse does not have enough income to get to the MMNA, your income can be diverted to make up the short fall. Here is an example:

  • Frank, the institutionalized spouse, receives $1, 600.00 per month from social security and a $900.00 per month pension from his former employment. Sally, the community spouse, receives $1,200.00 per month from social security. At least $621.25 of Frank’s income will be diverted to Sally to bring her total income up to the MMNA.

Assets: The community spouse can keep all excluded assets such as the home and a car. Your cash assets (however they are titled) are divided with each spouse being deemed as the owner of ½. The community spouse can keep his/her ½ but there is a minimum of $21,912.00 and a maximum of $109,560.00 (without a DSS hearing).  Cash assets for this purpose include all bank accounts, stock accounts, annuities, cash value in life insurance policies, and retirement accounts. 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, and bank and stock accounts worth $100,000.00. In addition to that each spouse has a $25,000.00 IRA and a $25,000.00 annuity. 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 can keep the life insurance policy because it has no cash value;
    • The bank and stock accounts, IRA accounts and annuities will be deemed owned ½ by each spouse. Sally will be able to keep $100,000.00 of these assets (allocated any way she chooses) and Frank will be deemed the owner of $100,000.00 of assets. Frank will need to spend down his $100,000.00 to $1,600.00.

 

9. What is “spending down” and what are some spend down strategies that work?

When an individual or couple’s income and included assets place them above the Medicaid eligibility limit, certain “spend down” strategies can be implemented to help the individual or couple reach the required asset limit and to qualify for Medicaid.  Spending down must be done properly so as to not transfer assets or make a gift in a way that will result in a penalty.  Proof of valid spend down expenses must be submitted to the Department of Social Services for their review.  It is advisable to check with your elder law attorney before making spend down decisions, even if you do not believe they will impact your eligibility for Medicaid.

Here are some examples of expenditures that may be used to “spend down”:

  • If you have a mortgage or equity credit line, use cash to pay it off or reduce the balance;
  • If you need repairs or improvements at home, make them;
  • Purchase a pre-paid irrevocable burial fund for up to $5,400.00 for the applicant and purchase a prepaid burial fund of a “reasonable amount” (used to purchase the casket, grave site, urn, outer burial container, headstone or marker, etc.);
  • Purchase a pre-paid irrevocable burial fund for up to $5,400.00 for the applicant’s spouse and purchase a prepaid burial fund of a “reasonable amount” (used to purchase the casket, grave site, urn, outer burial container, headstone or marker, etc.);
  • Purchase a new car that saves you money on gas;
  • Enter into “Care Contracts” with family members or friends to assist the applicant with his or her daily routine, errands, and transportation;
  • Prepay for dental or vision care; and/or
  • Purchase comfort necessities for an individual going into a nursing facility

 

10. If it appears probable that one of us will require long term nursing home care in the near future, are there gifts I can make that will not create a penalty period?

Yes. Here are some examples:

  • You can gift your home to a child who has lived in your home for at least two (2) years before the start date of your need for an institutional level of nursing home care if the child, by living with you, has allowed you to remain in the community for that period of time;
  • You can gift your home to a child who is younger than 21 years of age, or is blind or disabled, and is living in the home;
  • You can gift your 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.

 

11. What is the five year “look back” rule concerning gifts and transfers for Medicaid?

Generally, the “look back” period is the period of time that DSS will review past financial statements and other documents to see if an applicant made any transfers or gifts for the purpose of becoming eligible for Medicaid.  Transfers include any transfer 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 Deficit Reduction Act of 2005 changed the look back period: for transfers made prior to February 8, 2006, the “look back” period is 36 months (3 years), but 60 months (five years) if the gift was made to or from a trust; for transfers made after February 8, 2006, the look back period is 60 months (five years).

If you make a gift after February 8, 2006 to anyone but your spouse and apply for Medicaid less than five (5) years after having made the gift, you must report the gift on the Medicaid application. That gift may trigger a Medicaid penalty period. Here are two examples:

  • John gave $99,590.00 to his son, Frank on March 1, 2006 to help Frank buy a home. Four years later, John had a stroke and now requires long term nursing home care. John is under the income and asset limits required to be eligible for Medicaid.  Frank files a Medicaid Application for John on February 1, 2010.  Because this is 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 10 months from the date Frank would otherwise be eligible to receive Medicaid assistance.
  • Same facts as in (A) except Frank does not file the Medicaid Application for John until March 2, 2011. 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.

It is important to remember that the “look back” period is simply a defined time period that DSS can review an applicant’s finances and transfers.  It does not mean that all transfers or gifts made during that time period will automatically result in a penalty; an individual may have made a valid transfer or gift for a purpose other than achieving Medicaid eligibility.  Furthermore, even if a transfer or gift is made that does incur a penalty, a penalty does not permanently disqualify a Medicaid applicant; a penalty simply postpones an applicant’s eligibility.  Because there are many exceptions, and transfers and gifts are reviewed on a case by case basis, it is important to consult with a knowledgeable elder law attorney when thinking about Medicaid Planning or applying for Medicaid.

12. Should we give our home to our children now as a Medicaid planning strategy?

This is a very tough question with an answer that is very sensitive to the family dynamics of each applicant’s situation.  In general, if both spouses are alive, the answer is no. That is because the home is an exempt asset as long as one spouse is living there.  By giving it to children, it loses its exempt status.  If one spouse already has died, it is a closer call.  Consider the following, however, to determine if you are simply trading one risk (owning a home and needing long term nursing home care) for another set of risks (giving it to the children):

  • The home will be an asset available to creditors of your children.
  • If a child dies before you, the home will be an asset of the child’s estate.
  • If a child enters divorce proceedings, the home is an asset that will need to be disclosed on his financial statement.
  • Possible loss of tax advantages that accrue to an older resident homeowner that are not available to children homeowners.
  • If you have a number of children, do all names go on the deed? Only one?

Most of the issues can be addressed, but the decision about what to do is not a simple one as often is suggested and requires a detailed analysis of the pros and cons.