Planning A Funeral Based On Certain Customs

Protecting your Future: Medicaid has 2 sets of rules

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Spend-down. Look-back. Penalty period. Transfer.

These are just some of the terms Medicaid uses to determine eligibility for long-term care coverage.

Medicaid is a combined federal and state program that pays for long-term care at home (community Medicaid) or in a nursing home. Asset, income and gift rules vary for community Medicaid versus “nursing home†Medicaid eligibility.

Community Medicaid

To qualify for community Medicaid, an individual cannot make more than $787 per month and cannot own more than $13,800 in assets. A married couple cannot make more than $1,137 per month and cannot own more than $20,100 in assets. Applicants can “spend down†excess income to the allowed amount by paying for medical expenses.

Nursing home Medicaid

To qualify for nursing home Medicaid, an individual can keep $50 per month (the excess goes to the nursing home) and cannot own more than $13,800 in assets. For married couples, the spouse at home can keep $2,739 per month and can own between $74,820 and $109,560 in assets. If the spouse at home makes more than $2,739 per month, he or she may have to contribute some of the excess to the spouse’s cost of care.

For married couples, the residence and one car are exempt (not counted as assets). Everyone can have a burial trust worth up to $1,500 or any amount in an irrevocable pre-need funeral trust.

Asset transfer rule

Community Medicaid and nursing home Medicaid also differ in “look-back†and gift rules. A nursing home Medicaid application asks if you transferred (gifted) any assets in the last five years, hence the “five-year look-back period.†If the answer is yes, the transfer creates a penalty period, which causes a period of ineligibility for Medicaid coverage.

For example, Ann applies for Medicaid. She transferred $100,000 in the last five years. The penalty period is 9.8 months, calculated as follows: $100,000 divided by $10,163, the Medicaid regional rate for nursing home care in our area. Ann either has to ask for the gifts back or needs other resources to pay for her care during the penalty period.

Community Medicaid does not have a look-back period, so Ann would qualify for community Medicaid despite the $100,000 transfer, if she is otherwise eligible.

Medicaid rules are specific and complex. Elder law planning works with the rules to allow Medicaid coverage and protect assets for heirs, using tools such as the Medicaid Asset Protection Trust and Caregiver Agreements, which were discussed in previous columns. Future columns will explore other elder law asset protection techniques, such as “spousal refusal†and the “gift and loan†strategy.

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