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Medicare, Medicaid & Nursing Homes
There is a good deal of confusion in the public’s understanding of the benefits provided by Medicare and those provided by Long Term Care (LTC) MassHealth (hereinafter referred to as “Medicaid”), when an individual goes into a nursing home. Briefly, the Medicare program is designed to cover medical needs (as opposed to custodial/nursing home needs) and is not a financially need-based program. To be eligible for Medicare, one has to be age 65 or disabled. Medicare pays benefits regardless of the financial status of the recipient (i.e., you can be well off and qualify for Medicare). Only if the nursing home stay is medically necessary and the patient is expected to recover, will Medicare pay some portion of nursing home costs for up to 100 days.
Unlike the Medicare program, the Medicaid program is need-based, providing benefits to those who pass three unique tests. The person must pass a medical, income and asset test. Regardless of age, anyone may qualify for Medicaid long-term care assistance provided they meet the three separate test criteria.
Medical Test: The community Home-Care Corporation assesses an applicant’s mental and physical capabilities to perform daily living activities (such as eating, toiletry, bathing, etc.). If the applicant is deemed medically qualified for a nursing home, then the individual must also meet the income and asset test.
Income Test: An applicant qualifies for the income test if the individual’s income is less than the cost of nursing home care. It is more complicated for a married couple. If the well spouse has his/her “name on the check”, then it is deemed the well spouse’s income. If that income does not cover the well spouse’s basic living expense, the well spouse is entitled a portion of the sick spouse’s income. The monthly income allowance, for the well spouse ranges from $2,030.00 to $3,090.00.
Asset Test: The asset test is the most difficult qualification for an applicant. Under this test, a person may own countable assets and non-countable assets. The total value of countable assets will determine a person’s eligibility for Medicaid. Non-countable assets will not affect a person’s eligibility. A single person, in a nursing home may have no more than $2,000.00 of countable assets. If only one spouse is seeking to qualify for Medicaid, the couple’s combined countable assets are evaluated differently. The well spouse may keep up to $123,600.00 of the couple’s combined countable assets determined on the first date of institutionalization. The sick spouse may retain $2,000.00.
If a person exceeds the Asset Test, the individual may still qualify for Medicaid immediately if the individual spends assets on non-countable expenses such as:
Household belongings, furnishings, personal effects and jewelry
A separate burial bank account for each spouse worth $1,500.00
Burial plots for the individual and/or members of the individual’s immediate family
Prepaid irrevocable burial contracts of any reasonable amount
Term life insurance policy (with no cash value) up to any amount
One car of any value (applicable for well spouses only)
Certain employer pension account & Keogh accounts (excluding IRAs)
Certain income producing assets.
To discourage people from simply giving their assets away to other family members and then applying for Medicaid benefits, the law provides that certain transfers of assets for “less than fair market” (i.e., gift) will be counted as part of the Medicaid applicant’s assets and a penalty period for LTC Medicaid eligibility will be imposed.
If you have gifted during the past five (5) years and apply for LTC MassHealth, you will be ineligible for coverage for a certain period of time even after you have less than $2,000.00 in assets. The length of the ineligibility period depends on how much you gave away and or when you did so. An elder law attorney can help you determine whether the date and value of the gift affects an individual’s LTC Medicaid eligibility.
Strategies to Protect Assets
One asset protection strategy is the purchase of Long Term Care (LTC) insurance. Payments made by a LTC insurance policy may eliminate the need for an individual to ever have to apply for Medicaid while preserving her assets. Provided an individual is healthy and desires to protect her assets in the event of long-term illness, payment for nursing home care or home health care will be available through the purchase of a policy of this nature.
While LTC Insurance is expensive and available only to healthy individuals, it helps to protect your primary residence in the event you require LTC nursing home care. Payments made by a LTC insurance policy may alleviate but not eliminate payments for nursing home coverage on most policies. Therefore, if you need to qualify for MassHealth benefits, in order to be eligible and avoid recovery efforts against the value of your primary residence by MassHealth, your LTC policy must cover nursing-home care for at least 2 years and have a daily pay rate of at least $125 per day for nursing-home care. Additionally, the value of your primary residence must be worth less than $858,000.00. The state Medicaid program will not cover long-term care services for those with home equity values above $858,000.
The second strategy to preserve assets, in the event an individual enters a nursing home with excess assets, is the immediate purchase of a Medicaid approved annuity. An annuity is a product sold by the insurance industry. Purchase of an long-term care Medicaid approved immediate annuity policy can result in immediate Medicaid eligibility as this policy converts excess assets into an income stream. The annuity must meet specific requirements for Medicaid for it not to be treated as an asset, so be sure to consult an attorney knowledgeable in Medicaid law for detailed information on these and other asset protection strategies.
Lastly, there are several exceptions to the law enabling assets to be passed to children of a LTC Medicaid applicant. Consult an attorney knowledgeable in Medicaid law for detailed information on these and other asset protection strategies for your particular situation.
Information provided by: Patricia Mello & Associates, P.C., Attorneys at Law
Consult an elder law attorney knowledgeable in Medicaid law for detailed
information on these and other asset protection strategies.