MEDICAID
PLANNING
There
are two Federal programs that pay the bulk of medical expenses for persons
over age 65. They are Medicare and Medicaid and they differ substantially
in what benefits are offered and how they operate. The following is an
overview of how the programs work and how a patient would qualify.
Medicaid versus
Medicare
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Medicare is a health insurance program
available to all persons who have reached 65 years of age, or who are considered
permanently disabled. It is not based on financial need and it offers
a variety of benefits. However, Medicare provides only very limited long
term care coverage - a maximum of 100 days under certain circumstances.
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Medicaid is a needs-based program designed
to provide medical assistance to the indigent, much like a welfare system
for medical care. Medicaid will cover long term nursing home care,
including custodial care.
Medicaid
is administered by the each state's Department of Medical Assistance and
it is funded by the Federal and State governments. Rules governing Medicaid
eligibility are generated by both the federal and state governments, although
the state must always act within the confines of federal law.
Medicaid Planning
The
Health Insurance Portability & Accountability Act of 1996, otherwise
known as Kassenbaum-Kennedy Act, restricts certain Medicaid planning activities,
but other options are still available.
Medicaid
planning involves transferring or applying an applicant's assets so as
to meet the income and asset parameters of the Medicaid program.
People are ineligible for Medicaid unless and until their "Countable Assets"
are below certain thresholds.
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Non-countable
Assets are assets which are not considered when determining
whether an individual is sufficiently impoverished to qualify for Medicaid
coverage. Some examples included:
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Primary residence (in certain circumstances, a residence
could fall under Countable Assets)
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One Motor Vehicle
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Life Insurance (with maximum of $1,500 cash value)
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Personal property and furniture, including those needed
for physical or medical conditions.
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Wedding/Engagement rings
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Pre-paid Funeral Account (with a reasonable balance)
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Burial Account ($1,500 maximum)
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Countable
Assets over a set limit
will disqualify an applicant from Medicaid coverage. Excess Countable Assets
must either be "spent down", or otherwise disposed of. All assets owned
by an individual which are not "Non-countable Assets" are "Countable Assets".
Please remember that for married individuals, all Countable Assets of either
spouse are considered available for use by both. In other words,
the marital assets are pooled without regard to which spouse owns what
assets. The state also ignores prenuptial agreements and any other
type of document which purports to restrict either spouse's access to the
other spouse's assets.
As of January 1, 2004, the first $92,760
in cash, savings certificates, stocks, and/or bonds are protected for,
and can be transferred without a penalty to, the community spouse. The
"Community Spouse" - the spouse who is NOT in the nursing
home - is to have this based on the Community Spouse Asset Allowance ("CSAA").
This amount can be modified by requesting a Fair Hearing.
At the Fair Hearing, the community spouse is given an opportunity to establish
why $80,000 is insufficient. If the community spouse has insufficient
other income on which to live, then additional assets can be retained to
generate extra income (based on an assumed return). If the community
spouse is able to identify specific needs (such as the need for a new roof,
or heating system), then additional assets can be retained.
The "Non-community Spouse" or the "nursing
home spouse" is only allowed to keep up to $2,000 in Countable Assets.
Some states
also impose an income cap rule (Massachusetts does not). An applicant is
allowed to have only a certain amount of income (dividends, interest, Social
Security, etc.) and if they're over the cap, they are ineligible for benefits.
This cap rule applies even if the income is insufficient to cover the expense
of medical care.
Medicaid
splits the assets of the applicant into two parts- Income and Resources.
The patient is to spend all of the income portion to pay for care and then
access the resources until the threshold is reached. After the assets have
all been used up, Medicaid will pay for the cost of long-term care.
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The income
portion consists of all monies earned on investments, gifts, inheritances,
annuities on the applicant's life, and any Social Security or pension payments
in the applicant's name. The applicant is allowed to keep a "personal needs"
income (about $70/month in 1999) and enough money to cover any insurance
premiums. (Please see below if the applicant is married since the rules
are different.)
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The resources
portion includes all the countable assets that don't fall under the income
definition. The applicant is allowed to retain $2,000 (or $3,000 if married)
and the rest is to be used for the expenses of long-term care. For single
persons who own a home, the house could be subject to a forced sale if
the applicant has been in a nursing home for at least one year and it has
been determined that they will not be returning to their personal residence.
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Married Applicants
are governed by a different set of rules than single patients. When a married
person applies for Medicaid benefits, the government takes a "snapshot"
of all the assets the couple owns. All of the countable assets in the snapshot
are considered to be available to pay for the cost of care regardless of
who owns the assets or who earned them. The community spouse is allowed
to retain half of the resources (up to a maximum of $80,000)
AND they must continue to live in the primary residence or the house will
be switched to a countable asset. The spouse is also allowed an income
of $2,000 per month and if the income falls below that cap, some states
allow some of the resources to be returned to the community spouse. However,
Massachusetts is one of several states that does not allow the resources
to be carried back to the community spouse. Instead, they allow the community
spouse to access the income of the hospitalized spouse in order to reach
the $2,000 limit.
Asset Transfers
For
many people, trying to qualify for Medicaid will only occur if their assets
are transferred. There are many restrictions on transfers and breaking
the rules can result in disqualification for Medicaid benefits. When a
patient applies for Medicaid, there is a Look-Back
Period, during which the government
looks for ineligible transfers. The look-back period is usually three years
unless assets have been transferred to a trust. Then the look-back period
is five years.
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The transfer of any countable
asset will result in a disqualification period, during which time the patient
cannot apply for Medicaid. The length of the disqualification period will
depend on the value of the property that was transferred and the manner
in which the gift was made.
In general, the transferor will be disqualified for one month for every
$5,010 in value transferred. For example, if the transferor made
a gift of property worth $50,100, the transferor would be disqualified
for a total of 10 months ($50,100/$5,010 = 10). Where the gift is
made to a trust, the disqualification period is limited to a maximum of
60 months (five years). Where the transferor makes an outright gift
of the property, the disqualification period is limited to a maximum of
36 months.
Medicaid
is allowed to recover their expenses against the probate estate of the
patient. There is also a Federal law that allows states to expand the assets
they can use to seek recovery and these could include joint assets, retained
life estates and other assets that typically avoid probate. Massachusetts
has not yet adopted the Federal changes, but it should be expected in the
near future.
Please
contact our office for more information on Medicaid Planning and strategies.