Navigating Medicaid Means Testing
By most people’s standards, a nursing home can be very expensive. It is not unusual to pay anywhere between $5,000 and $10,000 a month to a facility for an individual (or double that cost for a couple). Medicaid means testing ensures that the people who have the greatest financial need for coverage receive Medicaid benefits.
After Medicaid means testing, nursing home residents who have collected significant savings during their life must pay for this expense out of their own pockets. This is because the law requires the individual to sell all assets except their home/car to cover this expense. Then, after death, the individual’s estate is required to sell the previously excepted house and car to repay the Medicare expenses that the government had paid for during the Medicaid recipient’s life.
Digging deeper, Medicaid’s rules also take into account an applicant’s medical circumstances, income, assets transferred in recent years and whether the recipient is married and whether that spouse is also in a long-term care facility. Those who have accumulated some savings over their working lives and who wish to pass on some of the wealth to future generations could benefit from speaking to a knowledgeable elder law lawyer. An attorney with this background can help potential Medicaid recipients to navigate the complex means tests and legally optimize their application.
Asset Limits for Medicaid Means Testing
In 2021, assets taken into consideration for means-testing for Medicaid include everything a single person or couple owns except for the following:
- “Personal belongings”
- A car
- Irrevocable burial trusts
- The Medicaid applicant’s homestead (where they either reside currently or intend to return to) provided the applicant’s equity interest in the home does not exceed $603,000.
“Medicaid’s rules also take into account income, assets transferred in recent years and whether the recipient is married and whether that spouse is also in a long term care facility.”
An applicant who is single may have up to $2,000 in assets (except for items in the list above) after which the remaining must be liquidated and used to pay for the assisted living care. (eg: if an applicant has $200,000, $198,000 goes to the nursing home).
For married applicants of which both are going into assisted living facilities, the asset limit is $3,000 not including the except items listed above. So if an applicant couple has $200,000, $197,000 goes to their nursing home
For married couples in which one spouse-applicant plans to live in an assisted living facility and the other in the community, the maximum value of the eligible assets that may be left with the community spouse is $130,380. So if a single applicant couple has $200,000, $69,620 goes to the nursing home where the institutionalized spouse is staying.
Income Limits for Medicaid Means Testing
Single medicare applicants may make up to $2,382 per month in income, of which they must pay it all, minus a $130 personal needs allowance, towards their care at the assisted living facility. Applicants who are married may either be married to a spouse in assisted living care or to a spouse who is not. If both spouses are applicants who will be living in a nursing home, they may have a combined $4,764 of which all save a $130 personal needs allowance each must be paid to the nursing home. The non-applicant spouse of a medicare recipient (the so-called community spouse) may keep up to $3,259/mo of the institutionalized spouse’s income with any amount over that going to the nursery home.
There are no Medicare application limits on a community spouse’s income.
A home and car may not be considered as assets for the purposes of means-testing during the Medicaid application process. However, the federal government retains the right to recover the home and automobile after the Medicaid recipient passes away. This is done to recoup the nursing home costs paid by Medicare prior to the recipient’s death.
Uncompensated transfer rule
Applicants who transferred assets in the past five years (the “Medicaid lookback” period) prior to their application can be made ineligible for Medicaid. This refers to any asset that had been transferred for less than its fair market value. Commonly given advice in the Estate Planning practice of law is for a client to transfer up to $15,000 per year to family to avoid certain taxes. However, such transfers can make the transferer ineligible for Medicaid for the next five years after the transfer.
Potential Medicaid applicants can, however, “spend down” their assets by making payments for non-eligible assets such as the addition of wheelchair ramps, stairlifts and bathroom accessibility features. They may also prepay for funeral and burial expenses and pay down debt without affecting their eligibility.
Customized trusts called Qualified Income Trusts (QITs) can be formed to contain assets and income that can be sheltered from this rule. However, it is highly recommended that applicants who are in need of Medicaid funds but are “over-income” and/or “over-assets” consult an experienced Medicaid professional such as an attorney to structure their finances prior to making an application.
South Florida Law
South Florida Law is a full-service estate planning, business and real estate law firm that can assist families in employing a variety of strategies during Medicaid means testing to become Medicaid eligible. We can also proactively work with families, couples and individuals to protect their homes from Medicaid’s estate recovery program. The best time to begin planning for Medicaid is years before nursing home services are needed. Contact us today for a consultation by calling (954) 900-8885 or via our contact form.