What is Medicaid?
Medicaid became law in 1965 as a jointly funded cooperative venture between the Federal and State governments to assist States in the provision of adequate medical care to eligible needy persons. On average, the Federal government finances 57% of total program costs. In 1997, the government spent $90.8 billion on Medicaid. The States spent $70.4 billion.
Medicaid is America’s largest single purchaser of nursing home services and other long-term care, paying for about half of all the nursing home care provided in the U.S, covering about two-thirds of the nearly $1.6 million nursing home residents nationwide.
Medicaid pays for medically necessary care for patients in skilled or intermediate care nursing homes or in intermediate care facilities for the mentally retarded. Medicare beneficiaries who have low income and limited resources may receive help paying for their out-of-pocket medical expenses from their State Medicaid program.
In order to qualify for Medicaid, an individual must meet financial eligibility requirements. These vary from state to state but generally include limits on the amount of monthly income or assets an individual is allowed to have. Certain assets are not countable in determining an individual’s eligibility including the applicant’s home, car and essential personal property. In most states an individual cannot have more than $2,000 in assets. In New York, the amount is $3,850.
Significant changes were made in 1988 for some nursing home patients by protecting assets of the institutionalized person's spouse living in the community. Medicaid policy specifies that when a legally married individual needs Medicaid to help pay for nursing facility services, a portion of the couple's income and assets may be protected for the spouse at home, (the community spouse). The following is a summary of most states spousal protection rules:
If the patient or his representative transfers assets or sells them for less than market value, he may be ineligible for payment of the cost of care. The sanction period is based upon the value of the assets transferred away. Certain transfers are allowable, such as the transfer of a homesite to a spouse or disabled child and transfers of property, which would not have made the individual ineligible.
The lookback period is 3 years (5 years for transfers to a trust) from the date of application or institutionalization, whichever occurs later. A sanction is applied for a period of time based on the value of the asset and begins the month the asset is transferred. The length of the sanction is determined by dividing the value of the transferred assets by the average monthly Medicaid cost for nursing home care (which varies from state to state from $3,000 in Georgia to $8,125 in New York). The sanction begins with the month of the transfer. During the sanction period the individual may be eligible for Medicaid but Medicaid will not pay for institutional services.
When a Medicaid recipient in a nursing home dies, Medicaid files a claim against the estate to recover expenses paid by Medicaid. Estate recovery is usually waived if there is a spouse or dependents who continue to live on the property, the total assets in the estate are less than $5,000, Medicaid charges are less than $3,000, or in cases of hardship.
Medicaid planning using transfers and especially trusts is best done in conjunction with an Elder Law attorney familiar with the both federal and state Medicaid rules and case law, in addition to Federal and state income and gift tax rules.
Medicaid became law in 1965 as a jointly funded cooperative venture between the Federal and State governments to assist States in the provision of adequate medical care to eligible needy persons. On average, the Federal government finances 57% of total program costs. In 1997, the government spent $90.8 billion on Medicaid. The States spent $70.4 billion.
Medicaid is America’s largest single purchaser of nursing home services and other long-term care, paying for about half of all the nursing home care provided in the U.S, covering about two-thirds of the nearly $1.6 million nursing home residents nationwide.
Medicaid pays for medically necessary care for patients in skilled or intermediate care nursing homes or in intermediate care facilities for the mentally retarded. Medicare beneficiaries who have low income and limited resources may receive help paying for their out-of-pocket medical expenses from their State Medicaid program.
In order to qualify for Medicaid, an individual must meet financial eligibility requirements. These vary from state to state but generally include limits on the amount of monthly income or assets an individual is allowed to have. Certain assets are not countable in determining an individual’s eligibility including the applicant’s home, car and essential personal property. In most states an individual cannot have more than $2,000 in assets. In New York, the amount is $3,850.
Significant changes were made in 1988 for some nursing home patients by protecting assets of the institutionalized person's spouse living in the community. Medicaid policy specifies that when a legally married individual needs Medicaid to help pay for nursing facility services, a portion of the couple's income and assets may be protected for the spouse at home, (the community spouse). The following is a summary of most states spousal protection rules:
- The community spouse is allowed to keep one half of the couple's assets, with a minimum of $17,856 and a maximum of $89,280 (current as of 1/1/2002).
- The protected share is calculated by assessing the value of all assets owned separately or jointly by either spouse at the point the individual becomes institutionalized. The homesite is generally not counted in determining the value of assets since the homesite is protected for the spouse.
- The nursing facility spouse must spend his half of the assets on his care prior to becoming Medicaid eligible. A nursing home recipient is allowed a maximum of $2,000 in assets.
- The protected assets, including the homesite, must be transferred to the name of the community spouse.
- Once assets have been allocated following spousal impoverishment rules, spousal financial responsibility ends and each spouse will be treated separately for Medicaid purposes.
- A portion of an institutionalized, married, Medicaid recipient's income may also be allocated to the community spouse.
- Income is allocated for the needs of the community spouse if the community spouse's income is less than 150% of the poverty level (currently $1,452). It is also possible to allocate additional income to the community spouse for excessive shelter costs.
- Income may also be allocated for the needs of other dependents.
If the patient or his representative transfers assets or sells them for less than market value, he may be ineligible for payment of the cost of care. The sanction period is based upon the value of the assets transferred away. Certain transfers are allowable, such as the transfer of a homesite to a spouse or disabled child and transfers of property, which would not have made the individual ineligible.
The lookback period is 3 years (5 years for transfers to a trust) from the date of application or institutionalization, whichever occurs later. A sanction is applied for a period of time based on the value of the asset and begins the month the asset is transferred. The length of the sanction is determined by dividing the value of the transferred assets by the average monthly Medicaid cost for nursing home care (which varies from state to state from $3,000 in Georgia to $8,125 in New York). The sanction begins with the month of the transfer. During the sanction period the individual may be eligible for Medicaid but Medicaid will not pay for institutional services.
When a Medicaid recipient in a nursing home dies, Medicaid files a claim against the estate to recover expenses paid by Medicaid. Estate recovery is usually waived if there is a spouse or dependents who continue to live on the property, the total assets in the estate are less than $5,000, Medicaid charges are less than $3,000, or in cases of hardship.
Medicaid planning using transfers and especially trusts is best done in conjunction with an Elder Law attorney familiar with the both federal and state Medicaid rules and case law, in addition to Federal and state income and gift tax rules.
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