Before we take a deep dive into the Medicaid eligibility parameters, we should explain why this jointly administered federal/state government program may be relevant to you one day. Fact is, according to studies, most seniors will need help with their activities of daily living at some point in time, and many will ultimately reside in nursing homes.
When you read this, you may think that you do not need to worry about the cost of nursing home care, because you will qualify for Medicare when you reach the age of 65. Since most elders will need living assistance, it would be logical to assume that the program will pay for it. The truth is, however, that Medicare will not pay for a long term stay in a nursing home. Medicare will pay for up to 20 days in a nursing facility for rehabilitation following a 3-day hospital stay, and then for up to another 80 days if certain requirements are met, with a sizable co-pay. That’s it.
Nursing homes are very expensive, so this is a situation that should be taken quite seriously. If you spend a good bit of time in a nursing home, and your spouse does the same, the financial impact on your family can be devastating.
Medicaid will pay for long-term care, and therefore it is important for seniors that are enrolled in the Medicare program. However, you are probably aware of the fact that Medicaid is only available to people with sparse financial resources. In the state of Ohio where we practice law, the Medicaid asset limit is just $2000 for an unmarried person, and $3000 for a married couple both on Medicaid.
This is not much, but that sum is supplemented by some resources that do not count when you apply for Medicaid to pay for long-term care. If you are a married homeowner and the healthy spouse resides in your home, your residential property would not protected if there is equity of $585,000 or less in Ohio as of this writing.
An applicant can retain ownership of one motor vehicle, and personal belongings and household effects are not counted. Unlimited term life insurance is allowed, and you can have up to $1500 worth of whole life insurance. Certain pre-paid burial or funeral contracts can be exempted.
If you are married, and you are applying for Medicaid to pay for a stay in a nursing home, your spouse would be able to retain a certain amount of property other than the residence where he or she resides.
The healthy spouse can keep half of the couple’s shared assets that are considered to be countable under Medicaid regulations. This is called the Community Spouse Resource Allowance (CSRA). In Ohio in 2019, the maximum allowance is $126,420. There is also a minimum allowance of $25,284, so a healthy spouse can keep this amount, even half the countable marital assets exceeds that sum.
The income of a Medicaid applicant must be used for the cost of long-term care, except for a $50 per month allowance. However, if a healthy spouse is relying on the income, this requirement is waived to the extent necessary to bring the health spouse’s income to a certain minimum monthly level. The healthy spouse would qualify for a Monthly Maintenance Needs Allowance. The maximum allowance this year is $3160.50, and the minimum is $2114.00 a month.
What do you do about the assets that you have that are countable? You could give direct gifts to your loved ones, which would essentially be inheritances received in advance. Another option would be to fund an irrevocable Medicaid trust.
This is somewhat easier said than done, and it takes careful planning do it correctly, because there is a five-year Medicaid look back period. You are penalized and your eligibility is delayed if you make a gift of assets within five years prior to the date of your application submission.
The duration of the penalty will depend upon the extent of the divestitures in relation to the cost of nursing home care in Ohio. To explain using a simple example, let’s say that the state declares that the average cost of nursing home care is $6,570.00 a month.
If you give away $180,000 two years before you apply for Medicaid, your eligibility would be delayed by just over 27 months because of the gift.
Why would you create a Medicaid trust? Certain types of irrevocable trusts can hold gifted assets and preserve them for the family even if the makers of the trust apply for Medicaid. To have this effect, each transfer to the trust must be made at least 5 years before the Medicaid application. The family can then use the funds from the trust to pay for comforts for the Medicaid recipient that Medicaid would not pay for. But the Medicaid applicant and spouse, if married, cannot have any direct interest in or access to the trust assets, and cannot retain the right to revoke or terminate the trust.
This is a basic explanation of what are complex and tricky laws and rules applicable to Medicaid. Seemingly innocent and minor mistakes can have costly and perhaps irreversible impact, so it is best to consult an experienced and trained elder law attorney about how to qualify for Medicaid. The sooner you start to plan, the more successful you can be in protecting wealth.
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