4. Medicaid

Medicaid is a joint federal and state program that pays for medical care for individuals who cannot pay their own medical bills. To qualify for Medicaid, an individual must have limited income and few assets. Medicaid eligibility rules are complicated, and different states apply different rules.

However, Medicaid pays for the majority of our nation’s nursing home costs. Unlike Medicare, Medicaid will pay for both skilled and custodial care. Medicaid pays for physician-approved hospital stays, medical care, prescription drugs, and skilled nursing home care. (There are exceptions in certain states). The disadvantage in relying on Medicaid is that you may be forced into a nursing home, since Medicaid usually does NOT pay for home care. Further, your choice of nursing homes will be limited.

Income Limits
The income of a Medicaid nursing-home patient—usually Social Security and pension income—will be used to pay the costs of long-term care. The patient may keep a “personal-needs allowance,” which averages $30 per month. (This varies by state.) However, if the Medicaid nursing-home patient is married, the at-home spouse has the right to keep a certain amount of income, which can vary between $1,452 and $2,232. If the at-home spouse has income in his or her name alone, he/she is allowed to keep that income as well and it does not have to go toward the spouse’s long-term care costs. Generally speaking, if the individual has enough income to pay for his/her own care, he/she will not qualify for Medicaid, even if asset requirements below are met.

Asset Limits
Before a Medicaid applicant can qualify for Medicaid, he/she must “spend down” his/her assets until only $2,000 remains, (this varies by state). The at-home spouse may keep assets ranging between $17,856 and $89,280, depending on state of residence. Assets (not including house and car) above this have to be “spent down.” In determining Medicaid eligibility, the couple’s assets are evenly divided. The nursing home patient spends half down to the state’s criteria, which averages around $2,000. The only way the at-home spouse can keep the maximum of $89,280 is if half of the assets are equal to or exceed the maximum of $89,280.

Transferring Your Assets to Qualify for Medicaid
Many people think a solution to qualify for Medicaid is to falsely impoverish themselves by giving their assets away. The 1993 budget bill (OBRA ‘93) changed the transfer of asset guidelines to qualify for Medicaid’s nursing home benefit dramatically. This legislation requires the Medicaid program to “look back” thirty-six months prior to the application for benefits to see if assets have been transferred. The look-back period is sixty months if assets were transferred to an irrevocable trust. The applicant is ineligible for the number of months equal to the amount of the transfer divided by the state’s average cost of nursing home care. Estate Recovery for Medicaid Benefits Federal Law requires every state to recover what it spent for the care at the death of the second spouse. State rules and practices for estate recovery vary significantly. Some states are stricter than others. In some states, placing a lien on your home is part of the estate recovery act.