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For all practical purposes, in the United States the only “insurance” plan for long term institutional care is Medicaid. Medicare only pays for approximately 7 percent of skilled nursing care in the United States. Private insurance pays for even less. The result is that most people pay out of their own pockets for long term care until they become eligible for Medicaid. While Medicare is an entitlement program, Medicaid is a form of welfare – or at least that’s how it began. So, to be eligible, you must become “impoverished” under the program’s guidelines.
Despite the costs, there are advantages to paying privately for nursing home care. The foremost is that by paying privately an individual is more likely to gain entrance and have more options on better quality facilities. The obvious disadvantage is the expense; in Ohio, nursing home fees average $9,000 – $12,000 a month. Without proper planning nursing home residents can lose the bulk of their savings.
For most individuals, the object of long-term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done within the following rules of Medicaid eligibility.
THE ASSET RULE
In Ohio, Medicaid is administered by the Department of Job and Family Services (DJFS). However, in order to qualify for federal reimbursement, the state program must comply with applicable federal statutes and regulations. So, the following explanation includes both Ohio and federal law as applicable.
The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in “countable” assets in his or her name. “Countable” assets generally include all belongings except for (1) personal possessions, such as clothing, furniture, and jewelry, (2) one motor vehicle, (3) the applicant’s principal residence (if it is in Ohio), (4) retirement accounts that are in “payout” status (5) prepaid funerals and burial sites (6) assets that are considered inaccessible for one reason or another.
THE HOME
The home, with equity under $688,000 (2023), is considered an exempt asset and, therefore, will not be counted against the asset limits for Medicaid eligibility purposes as long as the nursing home resident intends to return home or his or her spouse or other qualified dependent relatives live there. It does not matter if it does not appear likely that the nursing home resident will ever be able to return home; the intent to return home by itself preserves the property’s character as the person’s principal place of residence and thus as a non-countable resource. As a result, for all practical purposes nursing home residents do not initially have to sell their homes in order to qualify for Medicaid. However, once on Medicaid, the nursing home resident will not have sufficient resources to maintain the home and the home will be subject to Medicaid Estate Recovery when the applicant dies.
THE TRANSFER PENALTY
The other major rule of Medicaid eligibility is the penalty for transferring assets. If an applicant (or his or her spouse) transfers assets, he or she will be ineligible for Medicaid for a period of time beginning at the time he or she is otherwise qualified for Medicaid. The actual number of months of ineligibility is determined by dividing the amount transferred by $7,453 (2023). For instance, if an applicant made gifts totaling $100,000, he or she would be ineligible for Medicaid for about 13 ½ months ($100,000 divided by $7,453 = 13.41). Another way to look at this is that for every $7,453 (2023) transferred, the applicant will be ineligible for nursing home Medicaid benefits for one month.
The maximum period of ineligibility, no matter the size of the transfer or transfers, is 60 months. However, there is a trap for the unwary in the way the rules are written. The DJFS may only consider transfers made during the 60-month period preceding an application for Medicaid, the “look back” period. Thus, if a person transfers $500,000 to his children and applies for Medicaid only 50 months after signing the deed, he will be ineligible for about 67-1/8 months ($500,000 divided by $7,453 = 67.08) following the transfer. If, instead, he waits 61 months to apply for Medicaid, the DJFS will not take the transfer into account. A penalty period may be eliminated by returning all of the transferred funds.
Exceptions to the Transfer Penalty
Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include:
(1) A spouse;
(2) A blind or disabled child;
(3) A trust for the benefit of a blind or disabled child; or
(4) A trust for the benefit of a disabled individual under age 65 (even for the benefit of the applicant under certain circumstances.)
Special rules apply with respect to the transfer of a home. In addition to being able to make the transfers without a penalty to one’s spouse or blind or disabled child, or into trust for other disabled beneficiaries, the applicant may freely transfer his or her home to:
(1) A child under age 21;
(2) A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home; or
(3) A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least 2 years prior to the applicant’s institutionalization and who during that period provided such care that the applicant did not need to move to a nursing home.
ESTATE RECOVERY
The state has the right to recover whatever benefits it paid for the care of the Medicaid recipient from the estate. Given the rules for Medicaid eligibility, the only property of substantial value that the Medicaid recipient is likely to own at death is the home. Under current law, the state may make a claim against the decedent’s probate or non- probate estate. Property that is jointly owned, in a life estate or trust is included in the estate and is subject to recovery.
TREATMENT OF INCOME
When a nursing home resident becomes eligible for Medicaid, all of his or her income, less certain deductions, must be paid to the nursing home. The deductions include a $50 per month personal needs allowance, a deduction for any uncovered medical costs (including medical insurance premiums), and, in the case of a married applicant, an allowance he or she must pay to the spouse that continues to live at home. Qualified Veterans or their widows may be able to keep an additional $90.
If the individual applying for Medicaid’s monthly gross income (not including a spouse’s income) is over $2,742 (2023) the income is considered too high to qualify for Medicaid. The only way to qualify when this happens is to set up a Qualified Income Trust (QIT) and properly funnel the excess income through every month the individual is on Medicaid.
SPOUSAL PROTECTIONS
Assets
Medicaid law provides for special protections for the spouse of a nursing home resident, known in the law as the “community” spouse. Under the general rule, the spouse of a married applicant is permitted to keep one-half of the couple’s combined assets (as of the date of institutionalization) up to $148,620 (2023). There is a minimum resource allowance for the community spouse of $29,724 (2023).
So, for example, if a couple owns $90,000 in countable assets on the date the applicant enters the hospital, they will be eligible for Medicaid once their assets have been reduced to a combined figure of $2,000 for the applicant and $45,000 (one-half of $90,000) for the community spouse. If the couple owned $250,000 in assets, they would not become eligible until their savings were reduced to $148,620 ($2,000 for the nursing home spouse plus a maximum of $148,620 (2023) for the community spouse). If the couple owned $30,000 in assets, they would not become eligible until their savings were reduced to $29,724 ($2,000 for the nursing home spouse plus the minimum of $27,724 (2023) for the community spouse).
The determination of the level of the couple’s assets is made as the date of institutionalization of the nursing home spouse. That date is the day on which he or she enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. It is advantageous for the couple to try to have as much money as possible in their names on that date, up to $297,240 (2023), so that the amount the community spouse is allowed to keep will be as high as possible.
Income
In all circumstances, the income of the community spouse will continue undisturbed; he or she will not have to use his or her income to support the nursing home spouse receiving Medicaid benefits. In some cases, the community spouse is also entitled to share in all or a portion of the monthly income of the nursing home spouse. The DJFS determines an income floor for the community spouse, known as the minimum monthly maintenance needs allowance, or MMMNA, which, under a complicated formula, is calculated for each community spouse based on his or her housing costs. (Where the community spouse can show hardship, the DJFS may award a larger MMMNA, but only after an appeal to a fair hearing). The MMMNA may range from a low of $2,288.75 (2023) to a high of $3,715.50 (2023) a month. If the community spouse’s own income falls below his or her MMMNA, the shortfall can be made up from the nursing home spouse’s income.
Increased Resource Allowance
When the income of both the institutional spouse and the community spouse is less than the MMMNA, they may petition the DJFS for an increase in the standard resource allowance so that these additional funds may be invested in order to generate income to make up shortfall. This sometimes can permit the community spouse to retain a substantial level of savings. Unfortunately, the DJFS may not award an increased resource allowance described above and the applicant must appeal the determination to a fair hearing.
THE MEDICAID APPLICATION
Applying for Medicaid is cumbersome and tedious. Every fact asserted in the application must be verified by documentation. The application process can drag on for several months as the DJFS demands more and more verification regarding such issues as the amount of assets and dates of transfer. If the applicant does not comply with these requests and deadlines on a timely basis, the DJFS will deny the application. In addition, after Medicaid eligibility is achieved, it must be redetermined every year. Contact an attorney with extensive work in Elder Law
Prepared by:
Kyla A. Williger, Esq.
KRUGLIAK, WILKINS, GRIFFITHS & DOUGHERTY CO., L.P.A.
Updated 01/2023