Medicaid Qualification

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Medicaid is a joint federal-state program that provides health insurance coverage to low-income children, seniors and people with disabilities.

In addition, it covers care in a nursing home for those who qualify. In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. As for home care, Medicaid offers very little. While Congress and the federal Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) set out the main rules under which Medicaid operates, each state runs its own program. As a result, the rules are somewhat different in every state, although the framework is the same throughout the country. The following describes the rules in place in Mississippi Resource (Asset) Rules

In order to be eligible for Medicaid benefits a nursing home resident may have no more than $4,000 in “countable” assets.

The spouse of a nursing home resident — called the ‘community spouse’ — is limited to assets up to $109,560 (in 2009) in “countable” assets (see Medicaid, Protections for the Healthy Spouse). This figure changes each year to reflect inflation.

All assets are counted against these limits unless the assets fall within the short list of “noncountable” assets. These include:

personal possessions, such as clothing, furniture, and jewelry; one motor vehicle;
the applicant’s principal residence, together with all adjoining real estate;
prepaid funeral plans and a small amount of life insurance; and
Assets that are considered “inaccessible” for one reason or another.

The Home

Nursing home residents do not have to sell their homes in order to qualify for Medicaid, as long as the nursing home resident intends to return home. Additionally, the house may be kept if the Medicaid applicant’s spouse or another dependent relative lives there.

The Transfer Penalty

The second major rule of Medicaid eligibility is the penalty for transferring assets.

Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state. The penalty divisor in Mississippi for 2009 is $4,600. The period of ineligibility starts on the first day that the individual would have otherwise qualified for Medicaid but for the penalty.

There is no limit on the number of months a person can be ineligible.

However, the Mississippi Division of Medicaid may look only at transfers made during the 60 months preceding an application for Medicaid (or 36 months for transfers made prior to February 8th, 2006). This is called the “look-back period.” Effectively, then, there is now a 60-month limit on periods of ineligibility resulting from transfers. This means that people who make large transfers must be careful not to apply for Medicaid before the 60-month look-back period passes. Additionally, while under prior law, the penalty period began to run on the first of the month of transfer, under transfers made after enactment of the Deficit Reduction Act of 2005 (February 8, 2006), the penalty does not begin until the person is otherwise qualified for Medicaid – in other words, the penalty will not begin until the individuals sick enough to enter the nursing home, and poor enough to qualify for Medicaid. Some strategies for transferring assets remain available, but these are very complex and beyond the scope of this web site. Asset transfer planning such as this is very complicated, and should not be done without prior consultation with an experienced elder law attorney.

Exceptions to the Transfer Penalty

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include:

A spouse (or a transfer to anyone else as long as it is for the spouse’s benefit);
A blind or disabled child;
A trust for the benefit of a blind or disabled child;
A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty:

The applicant’s spouse;
A child who is under age 21 or who is blind or disabled;
Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the
Medicaid applicant, under certain circumstances);
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
A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Congress has created a very important escape hatch from the transfer penalty: the penalty will be “cured” if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned.

Is Transferring Assets Against the Law?

You may have heard that transferring assets, or helping someone to transfer assets, to achieve Medicaid eligibility is a crime. Is this true? The short answer is that for a brief period it was, and it’s possible, although unlikely under current law, that it will be in the future. As part of a 1996 Kennedy-Kassebaum health care bill, Congress made it a crime to transfer assets for purposes of achieving Medicaid eligibility. Congress repealed the law as part of the 1997 Balanced Budget bill, but replaced it with a statute that made it a crime to advise or counsel someone for a fee regarding transferring assets for purposes of obtaining Medicaid. This meant that although transferring assets was again legal, explaining the law to clients could have been a criminal act. In 1998, Attorney General Janet Reno determined that the law was unconstitutional because it violated the First Amendment protection of free speech, and she told Congress that the Justice Department would not enforce the law. Around the same time, a U.S. District Court judge in New York said that the law could not be enforced for the same reason. Accordingly, the law remains on the books, but it will not be enforced. Since it is possible that these rulings may change, you should contact your elder law attorney before filing a Medicaid application. This will enable the attorney to advise you about the current status of the law and to avoid criminal liability for the attorney or anyone else involved in your case.

Treatment of Income

The basic Medicaid rule for nursing home residents is that they must pay all of their income, minus certain deductions, to the nursing home.

The deductions include a $44-a-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 for the spouse who continues to live at home if he or she needs income support. A deduction may also be allowed for a dependent child living at home. Mississippi is known as an “income cap” state, meaning that eligibility for Medicaid benefits is barred if the nursing home resident’s income exceeds $2,022 a month (for 2009), unless the excess above this amount is paid into a “(d)(4)(B)” or “Miller” trust. If you live in an income cap state and your income exceeds these limits, it will be necessary for you to execute one of these trusts, and you should consult an elder law attorney before applying for Medicaid. For Medicaid applicants who are married, the income of the community spouse is not counted in determining the Medicaid applicant’s eligibility. Only income in the applicant’s name is counted in determining his or her eligibility. Thus, even if the community spouse is still working and earning $5,000 a month, she will not have to contribute to the cost of caring for her spouse in a nursing home if he is covered by Medicaid. Additionally, if the community spouse is earning less than $2,739.00 per month, some of the institutionalized spouse’s income may be diverted to the community spouse up to this threshold maximum.

Protections for the Healthy Spouse

The Medicaid law provides special protections for the spouse of a nursing home resident to make sure she has the minimum support needed to continue to live in the community.

The so-called “spousal impoverishment protections” work this way: if the Medicaid applicant is married, the countable assets of both the community spouse and the institutionalized spouse are totaled as of the date of “institutionalization,” the day on which the ill spouse enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. (This is sometimes called the “snapshot” date because Medicaid is taking a picture of the couple’s assets as of this date.) In general, the community spouse may keep all of the couple’s total “countable” assets up to a maximum of $109,560 (in 2009). Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order. Additionally, the at-home spouse may obtain a court order or hearing to increase this amount. 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. But what if most of the couple’s income is in the name of the institutionalized spouse, and the community spouse’s income is not enough to live on? In such cases, the community spouse is entitled to some or all of the monthly income of the institutionalized spouse. This figure, known as the minimum monthly maintenance needs allowance or MMMNA. In Mississippi, the MMMNA is allowance is up to $2,739 (for 2009) per month. If the community spouse’s own income falls below his or her MMMNA, the shortfall is made up from the nursing home spouse’s income. In exceptional circumstances, community spouses may seek an increase in their MMMNAs either by appealing to the state Medicaid agency or by obtaining a court order of spousal support. To do so, you should consult an Elder Law attorney, prior to making any transfers and prior to filing a Medicaid application.

Estate Recovery and Liens

Under Medicaid law, following the death of the Medicaid recipient a state must attempt to recover from his or her estate whatever

benefits

it paid for the recipient’s care.

However, no recovery can take place until the death of the recipient’s spouse, or as long as there is a child of the deceased who is under 21 or who is blind or disabled. While states must attempt to recover funds from the Medicaid recipient’s probate estate, meaning property that is held in the beneficiary’s name only, they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate. This includes jointly held assets, assets in a living trust, or life estates. Given the rules for Medicaid eligibility, the only probate property of substantial value that a Medicaid recipient is likely to own at death is his or her home. However, Mississippi has not yet broadened its estate recovery to include non-probate assets at this date, and therefore may not make a claim against the Medicaid recipient’s home if it is not in his or her probate estate. In addition to the right to recover from the estate of the Medicaid beneficiary, state Medicaid agencies must place a lien on real estate owned by a Medicaid beneficiary during her life unless certain dependent relatives are living in the property. If the property is sold while the Medicaid beneficiary is living, not only will she cease to be eligible for Medicaid due to the cash she would net from the sale, but she would have to satisfy the lien by paying back the state for its coverage of her care to date. The exceptions to this rule are cases where a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there. Whether or not a lien is placed on the house, the lien’s purpose should only be for recovery of Medicaid expenses if the house is sold during the beneficiary’s life. The lien should be removed upon the beneficiary’s death. However, check with an elder law specialist in your state to see how your local agency applies this federal rule.