The Basic Rules of Nursing Home Medicaid Eligibility
The Basic Rules of Nursing Home Medicaid Eligibility
By Laura M. Krohn, Esq., Board Certified Elder Law Attorney
For all practical purposes, in the United States the only “insurance” plan for long-term institutional care is Medicaid. Medicare only pays for approximately 7 percent of skilled nursing care in the United States. Private insurance pays for even less. The result is that most people pay out of their own pockets for long-term care until they become eligible for Medicaid. While Medicare is an entitlement program, Medicaid is a form of welfare—or at least that’s how it began. So to be eligible, you must become “impoverished” under the program’s guidelines.
Despite the costs, there are advantages to paying privately for nursing home care. The foremost is that by paying privately an individual is more likely to gain entrance to a better quality facility. The obvious disadvantage is the expense; in Rhode Island, nursing home fees can be as high as $10,000 a month. Without proper planning, nursing home residents can lose the bulk of their savings.
For most individuals, the object of long-term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done within the following rules of Medicaid eligibility.
THE ASSET RULES
The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 ($4,000 in Rhode Island) in “countable” assets in his or her name. “Countable” assets generally include all belongings except for (1) personal possessions, such as clothing, furniture, and jewelry; (2) one motor vehicle; (3) the applicant’s principal residence (if it is in Rhode Island); and (4) assets that are considered inaccessible for one reason or another.
The Home
The home will not be considered a countable asset and, therefore, will not be counted against the asset limits for Medicaid eligibility purposes as long as the nursing home resident intends to return home or his or her spouse or another dependent relative lives there. It does not matter if it does not appear likely that the nursing home resident will ever be able to return home; the intent to return home by itself preserves the property’s character as the person’s principal place of residence and thus as a noncountable resource. However, the State of Rhode Island will place a lien on the home upon the Medicaid recipient’s death. Therefore, it is not advantageous to leave the home in the Medicaid applicant’s name and the applicant, or a family member, should seek the advice of an attorney whenever a home is involved. Of course, the sooner you do planning to protect the home, the better!
In Rhode Island, a home held in a revocable or irrevocable trust established on or after December 1, 2000, is an available resource and is not subject to the exclusion described immediately above.
THE TRANSFER PENALTY
The other major rule of Medicaid eligibility is the penalty for transferring assets. If an applicant (or his or her spouse) transfers assets, he or she will be ineligible for Medicaid for a period of time beginning on the date of the transfer.
Exceptions to the Transfer Penalty
Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility.
Special rules apply with respect to the transfer of a home. In addition to being able to make the transfer without penalty to one’s spouse or blind or disabled child, or into trust for other disabled beneficiaries, the applicant may freely transfer his or her home to:
(1) A child under age 21;
(2) 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
(3) 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 such care that the applicant did not need to move to a nursing home.
The law provides a very important escape hatch for those who find they must qualify for Medicaid during a period of ineligibility. A transfer can be cured by the return of the transferred asset, either partially or in its entirety.
ESTATE RECOVERY
The state has the right to recover whatever benefits it paid for the care of the Medicaid recipient from his or her probate estate. Given the rules for Medicaid eligibility, the only property of substantial value that a Medicaid recipient is likely to own at death is his or her home. Under current law, the state may make a claim against the decedent’s home only if it is in his or her probate estate. Property that is jointly owned, in a life estate, or in a trust, is not included in the probate estate and thus escapes estate recovery. Congress has given the states the right to seek estate recovery against such non-probate property; so far, Rhode Island has not acted on this new provision.
TREATMENT OF INCOME
When a nursing home resident becomes eligible for Medicaid, all of his or her income, less certain deductions, must be paid to the nursing home. The deductions include a $50-a-month personal needs allowance, a deduction for any uncovered medical costs (including medical insurance premiums), and, in the case of a married applicant, an allowance he or she must pay to the spouse that continues to live at home.
SPOUSAL PROTECTIONS
Assets
Medicaid law provides for special protections for the spouse of a nursing home resident, known in the law as the “community” spouse. The spouse of a married applicant is permitted to half of the countable/available assets, up to a yearly-designated amount, referred to as the “Community Spouse Resource Allowance”. An experienced elder law attorney can help the client develop appropriate spend down strategies that accelerate Medicaid eligibility. Each client’s situation is different and there is no “one size fits all” Medicaid planning strategy.
The determination of the level of the couple’s assets is made as of the date of institutionalization of the nursing home spouse. That date is the day on which he or she enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. \
Income
In all circumstances, the income of the community spouse will continue undisturbed; he or she will not have to use his or her income to support the nursing home spouse receiving Medicaid benefits. In some cases, the community spouse is also entitled to share in all or a portion of the monthly income of the nursing home spouse. The DHS determines an income floor for the community spouse, known as the minimum monthly maintenance needs allowance, or MMMNA, which, under a complicated formula, is calculated for each community spouse based on his or her housing costs. (Where the community spouse can show hardship, the DHS may award a larger MMMNA, but only after an appeal to fair hearing.). 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. If that does not cover the shortfall, the Community Spouse may be permitted to keep additional resources, which will then be invested to earn additional income, thereby making up the shortfall.
THE MEDICAID APPLICATION
Applying for Medicaid is cumbersome and tedious. Every fact asserted in the application must be verified by documentation. The application process can drag on for several months as the DHS demands more and more verifications regarding such issues as the amount of assets and dates of transfers. If the applicant does not comply with these requests and deadlines on a timely basis, DHS will deny the application. In addition, after Medicaid eligibility is achieved, it must be re-determined every year.
This outline is intended to provide the public with a broad explanation of the Medicaid program. If a person needs advice, they should call Laura M. Krohn at (401) 398-8383.
*The National Elder Law Foundation has certified Ms. Krohn. It is the only Elder Law Certification recognized by the American Bar Association. The Rhode Island Supreme Court licenses all lawyers in the general practice of law. The court does not license or certify any lawyer as an expert or specialist in any field of practice,