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Medicaid Eligibility for Nursing Home Care

Nursing home care, or “long term care” (LTC), is a difficult but
necessary option to consider when a loved one needs more
care than the family can provide. The financial burden of LTC
can be as overwhelming as the emotional stress of these situations. In
Mississippi, the average cost of nursing home care generally runs over
$4,600 per month. Medicare may pay some of the costs for the first
100 days, after which LTC expenses must be paid by long term care
insurance, private payments, or Medicaid.
There are many misconceptions about Medicaid eligibility for LTC.
Medicaid will pay nursing home costs for persons who are disabled (as
defined by Social Security law) and whose income and “countable” assets
are under certain limits. While these limits are low, a number of assets
are excluded in determining “countable” assets. These “non-countable
assets” include: up to $500,000 equity value of the residence (unless it
is owned in a revocable living trust); all household furnishings; up to
two automobiles, based on use; certain inherited interests in property;
some income-producing property; assets used in trade or business for
self-support; certain mineral and timber rights; term life insurance
policies; prepaid or designated funeral contracts and burial plots; certain
retirement accounts in pay-out mode (the distributions are counted
toward income determination); and certain types of annuity accounts.
The Medicaid applicant will not be disqualified if she or her spouse
owns any of these assets. The Medicaid applicant
may have monthly gross income
of up to $1,869 and countable assets of
not more than $4,000 to qualify for LTC Medicaid. (Applicants
with income over the limit can still qualify using an “income
trust” that we can prepare for them.) If the applicant is married,
the “community spouse” living at home may keep all of his own
separate income each month and will not be required to pay any
of his income for the spouse’s nursing home care. In addition, if
the community spouse’s separate income is less than $2,541 per
month (2007), he will be able to keep enough of the applicant’s
income to get the community spouse’s total income up to
$2,541 per month (the “monthly maintenance needs allowance”).
The community spouse may own any amount of non-countable
assets plus separate countable assets of up to $101,640 (the
“community spouse resource allowance”). Assets may be transferred
from the nursing home spouse to the community spouse’s
ownership to achieve these levels. In addition, the applicant
(nursing home spouse) may have separate income of up to $1,869
and separate countable assets of up to $4,000. The separate
income of the nursing home spouse (Social Security, pension,
IRA distributions, etc.) must be applied to pay nursing home
cost, but the community spouse’s income and assets need not be
spent for this care. The “Three-Year Rule”.
Many people have heard: “You have to wait 3 years after
giving anything away to get Medicaid.” The Truth: For gifts
made before February 8, 2006, the disqualification isn’t always
3 years long and in many cases there is no disqualification at
all. True, the 3-year “look-back” means that the Medicaid agency
will look back at all transfers and gifts of property made prior to
February 8, 2006 and within 3 years prior to the date of Medicaid
application, including sales for less than market value. Medicaid
may refuse to pay nursing home benefits for a period of time based
on the amounts and dates of such gifts. For some transfers involving
trusts, the “look-back” actually goes back 5 years. However, the
rules penalizing transfers do not apply to all transfers. The Deficit
Reduction Act of 2005 (“DRA”), which became effective February
8, 2006, changed the look-back for transfers made on or after
February 8, 2006, the effective date of DRA. The new law
requires disclosure of all transfers made after the effective date
and within five (5) years prior to Medicaid application, whether
they were transferred to a trust or otherwise.

Transfer Penalty. Assets can be transferred to a spouse
without penalty, but if assets are given to others in order to qualify
for Medicaid or get assets out of the Medicaid recipient’s estate,
there may be a waiting period before Medicaid will begin to
pay LTC expenses. If assets were given away (that is, without any
value in return) to persons other than a spouse or disabled child
prior to February 8, 2006, and if the giver applies for Medicaid
within 36 months after such gift, Medicaid will refuse to pay the
giver’s nursing home care for a number of months based on
the state average nursing home cost. For example, a $31,000 gift
made in December 2005 would cause a 10-month period of
ineligibility from the date of the gift (or until October 2006), so
that the applicant would now be eligible for Medicaid if all other
eligibility factors are met. This ineligibility period can extend
beyond 36 months, however, so that a $310,000 gift made before
February 8, 2006 and within 36 months prior to Medicaid
application would result in a 100-month period during which
Medicaid would not pay for nursing home care.

Under the DRA, the penalty period for gifts made on or
after February 8, 2007 does not begin to run until the Medicaid
applicant has entered a nursing home and is otherwise financially
eligible for Medicaid based on a filed application. Therefore, if the
applicant gave away $46,000 on March 1, 2006 (after the DRA
effective date) and goes into a nursing home and applies for
Medicaid March 1, 2010 (within the five year look-back period),
he would not qualify for Medicaid even though the ineligibility
period for such transfer under the new law is 10 months and it
has been more than 10 months since the gift. His ineligibility
period begins when he files the application, and he must private
pay for his nursing home for the additional 10-month ineligibility
period before Medicaid will begin. Certain types of transfers
are exempt from such a waiting period. Estate Recovery: Federal
law requires that each state Medicaid agency seek to recover reimbursement
from the estate of each deceased Medicaid recipient for nursing home services paid
by Medicaid after the recipient was 55 years of age. This claim
against the Medicaid recipient’s property at death will be waived
by Medicaid if there is (a) a surviving spouse, (b) a surviving
dependent who is blind, disabled, or under twenty-one (21), or (c)
undue hardship as determined by Medicaid or by court order.
Medicaid benefits can be an essential resource to pay for
long-term nursing home care, but the DRA has dramatically
changed the Medicaid eligibility rules. We can help families plan
for such assistance and apply for it at the appropriate time. It is
imperative that gifts not be made and that a Medicaid application
not be filed prematurely. Call us for help with Medicaid planning
and application.

Richard A. Courtney, CELA
Certified by the National
Elder Law Foundation