Long-term custodial nursing home care for a spouse, parent, or grandparent can be very expensive, now averaging close to $6,000 per month. If you should need nursing home care, the expense may have to be borne by your spouse and family, seriously affecting their quality of life. If a spouse, parent or grandparent should need long-term care, the escalating costs of such care may be more than their savings can bear. In such a situation, the security and independence of the non-institutionalized spouse, parent or grandparent may be jeopardized, and family wealth that was intended to be left to succeeding generations may be consumed by nursing home expenses.
To date, the traditional remedies for addressing these concerns have largely been viewed as inadequate. Long-term care insurance has been considered impractical or too expensive. Health insurance, including post-retirement group insurance, generally does not pay for long-term care. Most government programs also fail to provide for long-term care, although Medicare may pay for a very limited amount of rehabilitative care after a hospital stay.
In certain situations, Medicaid may pay for long-term care. While some consider Medicaid assistance akin to welfare, facts show that a majority of nursing home residents receive some Medicaid assistance. Each person and family need to determine for themselves whether it is proper to utilize Medicaid assistance.
To qualify for Medicaid assistance, a person must be “medically needy” and 65 years or age or older, blind, or formally classified as “disabled.” To determine financial need, Medicaid recipients must satisfy both asset and income tests.
With respect to assets or resources, the following assets are not considered in determining Medicaid eligibility: the family residence and surrounding property, regardless of value; $2,000 in cash ($3,000 for a household of two, if both need Medicaid); household items; and the family car. A Medicaid applicant may also exclude the value of irrevocable burial plans.
With respect to income, if one spouse (the “institutionalized spouse”) should suffer a catastrophic illness or injury resulting in a need for long-term care, the remaining spouse (the “community spouse”) may retain all of his or her own income, regardless of amount. If the community spouse’s income is less than $1,839 per month, he or she may retain a portion of the institutionalized spouse’s income so that the community spouse’s income equals at least $1,839 per month. The institutionalized spouse is allowed to receive $45 per month for personal needs.
The community spouse may also retain the family home and other assets as described above. The value of the home is not included as a countable asset so long as the community spouse or a “reliant relative” (a relative who relies on the institutionalized spouse for financial, medical, or other help) lives in the home; the institutionalized spouse’s stay is expected to last six months or less; or the institutionalized spouse intends to return home.
With respect to a couple’s remaining assets, for asset determination purposes the value of all assets of both spouses is added together, except for the value of the non-countable assets. The couple’s assets are aggregated together regardless of whether the marriage is or short or long duration, whether there is a pre-nuptial agreement, and whether or not the two reside together. The timing for this valuation is the date of the institutionalized spouse’s entry into the care facility for a continuous period of 30 days or more, whether or not that spouse is then eligible for Medicaid. The community spouse is presumed to own and may retain the following: (i) all of the assets, if the total is less than $21,912; (ii) $21,912 if the total is between $21,912 and 43,824; (iii) half of the assets, if the total is between $43,824 and $219,120; and (iv) $109,560 is the total is above $219,120. The remainder of the combined assets are presumed to belong to the institutionalized spouse, and to be available for the institutionalized spouse’s health care costs. Since the institutionalized spouse may not have more than a limited amount of non-countable assets (generally $2,000, as described above) and still be eligible for Medicaid, any additional assets must be “spentdown” for the spouse to qualify for Medicaid assistance. In addition to privately paying for nursing home care, there are a variety of permissible ways the “spenddown” requirement may be satisfied.
Even a cursory examination of the income and resources limitations serves to illustrate the point that Medicaid assistance is intended to assist those in genuine need. However, increasing numbers of individuals and families who ordinarily would not qualify for Medicaid assistance nevertheless attempt to qualify for such assistance for economic and other reasons. To so qualify, many individuals and couples engage in self-impoverishment by giving their assets to family members and others. To discourage such planning, Congress has enacted strict transfer of assets rules.
Generally speaking, an applicant who transfers away his or her assets to children or others, through use of a trust or otherwise, may be ineligible for Medicaid assistance for 60 months in the case of uncompensated transfers or gifts made after February 8, 2006.
How do we help clients qualify for Medicaid assistance? In non-exigent situations (meaning where a spouse or parent is not already in a care center), we help clients consider the use of care contracts, irrevocable income only trusts, and other planning techniques. In emergency situations, where a spouse is already in a care center, we help clients prepare a complete Medicaid application, describing all of their assets, and then help them work creatively through the “spenddown” process. We also help clients revise their estate planning documents where appropriate (for example, an institutionalized spouse may no longer be able to serve as the agent for the community spouse’s financial power of attorney; and the community spouse may wish to minimize any inheritance payable to the institutionalized spouse should the community spouse somehow predecease the institutionalized spouse).
Is Medicaid planning a good idea? Individuals who wish to aggressively plan for Medicaid qualification should consider the quality of care they or their family members will receive. Moreover, while it is possible to become impoverished, and thus qualify for assistance, impoverishment results in a significant loss of control and independence. In addition, the state may impose a lien against the property of a Medicaid recipient age 55 or older for the value of benefits provided, and may recover on the lien when the recipient and his or her surviving spouse die (provided there are no surviving children living in the home who are under age 21 or who are blind or permanently disabled). In certain situations, the family home may have to be sold to provide the funds necessary to satisfy a Medicaid lien.
Medicaid was not intended to be an entitlement program. As federal and state governments seek to reduce Medicaid expenditures, and as states receive additional authority through block grant programs to determine eligibility, eligibility requirements almost certainly will be tightened. This can make Medicaid planning particularly precarious.
*This article previously appeared in The Enterprise