Medicaid Eligibility For Nursing Home and Other Long-Term Care

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1 Medicaid Eligibility For Nursing Home and Other Long-Term Care Scott Hartsook Iowa Legal Aid 1111 Ninth Street, Ste. 230 Des Moines, IA ext March 1, 2018 Medicaid Eligibility Rules Applicant must meet level of care requirements. Applicant s income, not including the income of the applicant s spouse, must be $2,250 per month or less in Income up to $7,287 (and sometimes higher) is permitted with a Medical Assistance Income Trust (Miller Trust). Applicant s non-exempt resources must be $2,000 or less. Applicant must need care for 30 or more consecutive days. 1

2 Client Participation and Community Spouse Income Allowance The spouse receiving Medicaid keeps a personal needs allowance of $50/month ($140 for veterans receiving certain pensions). The community spouse who lives at home can keep part of the nursing home resident s income as a maintenance allowance if the community spouse s income is less than $3,090 per month in Other dependents can also receive an allowance. The applicant can also get a deduction for unmet medical needs, including delinquent nursing home and medical bills. The Medicaid spouse s remaining income is used to pay for nursing home care. IMPORTANT: The community spouse s income does not have to be used to pay for the nursing home expenses. 2

3 Community Spouse Resource Allowance Certain assets are exempt; e.g., one car, furniture, pre-paid funeral plans. The equity value in a home is limited to $552,000 if the applicant s spouse or certain children do not live in the home. All non-exempt assets of both spouses are considered to be available to pay long-term care expenses. In the initial attribution/division of resources, DHS will allow the community spouse to keep one-half of all non-exempt resources owned by one or both spouses, with two exceptions. The community spouse will receive a minimum of $24,720, and a maximum of $123,600 in The Medicaid application will be denied until all of the resources that are attributed to the nursing home resident are spent down to $2,000 or less. 3

4 In many cases, appealing the initial attribution of resources will increase the community spouse s resource allowance. Appealing the Initial Attribution of Resources Either spouse has 30 days to appeal. The community spouse can keep the resources needed to increase their income to the minimum monthly maintenance needs allowance in effect when the appeal is filed ($3,090 in 2018). 4

5 DHS uses the cost of a single premium, lifetime annuity to determine the resources that the community spouse can keep. See immediateannuities.com. Attribution rules changed drastically on February 8, The community spouse of a person who enters a nursing home on or after February 8, 2006 must include as part of the community spouse s income the income allowance that is received from the Medicaid applicant. Example Husband in nursing home applies for Medicaid. Husband Age 85 Income: $1,000/mo $50 $950 Home $140,000 Car $10,000 Wife Age 85 $3,090 Income: $1,000/mo $2,090 $950 $1,140 $40, Savings $50,000 $90,000 XXXXXXXXXXX $45,000 $45,000 5

6 Spending Down Resources to Become Eligible for Medicaid The nursing home resident is not eligible until all but $2,000 of the resources attributed to the resident are spent. Eligibility starts the first day of the month after the resources have been spent. IMPORTANT: Excess resources over $2,000 do not have to be spent on nursing home care. Excess resources can be used to: Buy items that can be used in the nursing home Pay debts of either spouse; Buy prepaid funeral plans for both spouses Buy exempt assets Repair/remodel homestead or pay down mortgage Pay expenses for community spouse Buy anything that benefits the nursing home resident or the community spouse Buy specific types of annuities Make gifts to people (in very limited situations) 6

7 It is generally best to make these types of expenditures to spend down resources only after the Medicaid applicant has been admitted to the nursing home or has been found to meet the requirements for Elderly Waiver services. Doing so will maximize the resources retained by the community spouse. Transfer of Asset Rules Eligibility rule: If a person or their spouse transfers assets for less than fair market value within five years before the Medicaid application is filed, or at any time after the application is filed, the person is ineligible for Medicaid for a period of time beginning at the time they would otherwise be eligible. Transfers made prior to February 8, 2006 have a three-year look-back period and the period of ineligibility begins at the time of the transfer. 7

8 The period of ineligibility is the number of months computed by dividing the value of the transferred assets by the average cost of nursing home care ($ through June 2018). Transfers that affect eligibility include gifts to people other than your spouse; transfers to churches and charities; removing a name from part or all of an asset; selling an asset for less than its fair market value; placing assets in certain types of trusts; disclaiming an inheritance; failing to make a spousal election against a will; and purchasing certain annuities, promissory notes, loans, mortgages and life estates. Spending money is not a transfer. Certain transfers do not cause Medicaid ineligibility: Transfer of home to a child who lived with applicant and provided care that kept the applicant out of a nursing home for two years; Transfer of any asset to a disabled child; Transfer of assets that would have been attributed to the community spouse; Transfer of home to a sibling with an equity interest who has lived in the home one year; Transfer to a spouse; Transfer in exchange for services; and Transfer was exclusively for another purpose. 8

9 If denying eligibility because of a transfer would cause the applicant an undue hardship, then Medicaid benefits must be approved. General rules for hardship: Imposing a penalty would deprive the residents of food, shelter or other necessities of life; Exhaustion of all means to recover the transferred resource; Remaining assets other than a home, household goods, a vehicle and $4,000 of burial funds are less than the average monthly cost of nursing home services. Hardship will not be found if resources were transferred to the person handling the financial affairs of the resident, or to that person s spouse or children, unless the resident demonstrates that payments cannot be obtained from the person handling the resident s financial affairs. 9

10 Claims against people who receive assets: If a person or their spouse transfers assets for less than fair market value within five years before the Medicaid application is filed, or while the person is receiving Medicaid, with the intent on the part of the person who receives the assets to gain Medicaid eligibility for the transferor, the DHS may file a claim against the person who received the assets for the amount of the Medicaid benefits, up to the uncompensated value of the transferred assets. Transfers that do not result in ineligibility generally do not result in a claim against people who receive the assets. Iowa s Estate Recovery Law Must repay the State for certain Medicaid benefits if assets are owned at the time of death. Repayment is due at death from the estate, and includes: Real & personal property; Funds in a burial trust; Jointly held property; Retained life estates; IRAs; Annuities; Other assets in which the person had a legal interest immediately prior to death. 10

11 Life insurance proceeds are not recoverable unless the estate is the beneficiary. Assets can be used to pay funeral & burial expenses, expenses of last illness, certain taxes and estate costs. Repayment may be waived if: Collection would cause an undue hardship (gross income less than 200% of poverty and assets less than $10,000); Estate goes to surviving spouse, or to offspring who are disabled, blind, or under age 21. Repayment is waived until their death, or the offspring becomes 21, to the extent of any inheritance. Waiver of repayment does not apply to assets in a Miller Trust. The state is the remainder beneficiary of the trust. The personal representative of the Medicaid recipient must report the death to DHS within 10 days. Personal representative is personally liable for the amount due to DHS if the recipient s estate is distributed without payment. 11

12 Additional Actions to Take to Protect Assets After final attribution, all resources allocated to the community spouse must be placed in the name of the community spouse in order for the applicant to become eligible & maintain eligibility. The following actions should be taken to maximize the resources for the community spouse: Transfer exempt assets to the community spouse; and Change community spouse s will to exclude spouse, and/or convert assets to assets that are not subject to applicant s spousal election rights. 12

13 Medical Assistance Income Trust (Miller Trust) A Medicaid applicant whose income is over $2,250 in 2018 must set up a Medical Assistance Income Trust (Miller Trust) to be eligible. A Miller Trust reduces the applicant s countable income so they qualify for Medicaid. Can generally only be used by a person whose income is $7,287 or less. Higher incomes are allowed if the applicant receives specialized care, such as Alzheimer s care. Income of the spouse is not counted in determining whether a Miller Trust is required. Only the applicant s income goes into the trust. Assets cannot be put into the trust. The Trust may pay the applicant the $50 personal needs allowance. The Trust may also pay the community spouse and other qualified dependents their appropriate income allowances. 13

14 The remaining balance in the trust (less a $10 monthly fee to trustee) goes to the nursing home or for other medical expenses. The Trust balance at the time of applicant s death goes to the state which is the remainder beneficiary of the Trust. Miller Trust Example Medicaid applicant s social security and pension checks totaling $2,300 are assigned to the trust. Trust pays: $50 to client $10 to trustee $2,240 to nursing home, if not diverted to dependents or used to pay medical bills Medicaid pays remaining bill to nursing home. 14

15 Information on the Internet Contains a more fully-developed analysis of Medicaid eligibility for long-term care Iowa Legal Aid s website which has numerous articles written for older Iowans that explain various aspects of Medicaid rules for long-term care dhs.iowa.gov/policy-manuals/income-maintenance The Iowa Department of Human Services Rules and Policy Manual Centers for Medicare & Medicaid Services 15