| Law Office of Attorney Russell P. Canevazzi 58 Sandwich Street Plymouth, Massachusetts 02360 (508) 746-3161 |
| NEWS |
Basic Rules of Nursing Home Medicaid Eligibility
Revised September, 2003
Introduction
For all practical purposes, in the United States the only "insurance" plan for
long-term institutional (i.e., nursing home) care is Medicaid. Medicare may
pay for medical expenses for some people who are not in a nursing home
setting, even young people, but that type of Medicaid, sometimes called "non-
institutional Medicaid" or "community Medicaid" is not the subject of this
article.
Medicare only pays for approximately 7 percent of long-term nursing home
care in the United States.1 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 to a better quality facility. The obvious disadvantage is the
expense; in Massachusetts, nursing home fees can be as high as $9,000 a
month. Without proper planning, nursing home residents can lose the bulk of
their savings.
Few individuals object to being responsible for themselves. For most
individuals, the object of long-term care planning is to protect some savings:
for their own care and well-being not covered by Medicaid, so their spouse
at home is not impoverished, or to save something for a disabled adult child.
This can be done within the rules of Medicaid eligibility.
In Massachusetts, Medicaid is administered by the Division of Medical
Assistance (the "DMA"). 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
Massachusetts and federal law as applicable.
Must Be Medically Eligible
You must be both medically eligible and financially eligible to qualify for
nursing home Medicaid. To be medically eligible, a person must be unable to
perform 2 or more of the 6 "activities of daily living": eating, bathing, toileting,
dressing, transferring (e.g., from bed to chair), and continence, or the person
must be suffering from significant cognitive impairment, such as from
Alzheimer's. 2
The Asset Rules
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 assets,
including life insurance and IRAs, except for (1) personal possessions, such
as clothing, furniture, and jewelry, (2) one motor vehicle (valued up to
$4,500 for unmarried recipients and of any value for community spouses),
(3) the applicant's principal residence (if it is in Massachusetts), and (4)
assets that are considered inaccessible for one reason or another.
The assets of an applicant's spouse are also deemed available to the
applicant, but there are special rules that somewhat protect the spouse at
home, discussed below. However, the income of the spouse at home is not
considered available to pay nursing home costs of the applicant.
The Home
The home will not be considered a countable 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
another dependent relative lives 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 noncountable resource.
As a result, for all practical purposes nursing home residents do not have to
sell their homes in order to qualify for Medicaid.
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 on the first day of the
month of the transfer. The actual number of months of ineligibility is
determined by dividing the amount transferred by $6,420 (this is the amount
the DMA considers equal to the average monthly cost of a nursing home and
is updated annually in November. See http://www.manaela.
org/libraryattorneys/keynumbers.cfm. For instance, if an applicant made gifts
totaling $90,000, he or she would be ineligible for Medicaid for 14 months
($90,000 / $6,420 = 14 months). Another way to look at this is that for
every $6,420 transferred, an applicant will be ineligible for nursing home
Medicaid benefits for one month.
There is no cap on the period of ineligibility. So, for instance, the period of
ineligibility for the transfer of property worth $350,000 is 55 months
($350,000 / $6,420 = 54.51 months). However, the DMA may only
consider transfers made during the 36-month period (60 months in the case
of some trusts) preceding an application for Medicaid, the "look back"
period. Effectively, then, there is a 36-month cap on periods of ineligibility
resulting from transfers. People who make large transfers have to be careful
not to apply for Medicaid before the 36-month look-back period passes.
The DMA has filed a waiver with the federal government seeking authority to
impose more restrictive transfer penalties than those currently allowed under
federal law. The waiver request, if approved, would not grandfather transfers
made in the past; the only exception to it is for certain transfers involving the
home within a limited dollar amount. The waiver would increase the look-
back period to five years for transfers of real estate and ten years for
transfers to irrevocable trusts. Much worse, the disqualification period would
begin not when the gift was made, but rather later, perhaps years later, when
the Medicaid application is filed. For example, suppose an 80 year old
grandmother pays her grandson's college tuition of $6,420. One year later,
she suffers a stroke and moves to a nursing home. She spends down her
money on the nursing home, and at age 82 runs out of money. Nonetheless,
at that point she will be disqualified from Medicaid and have no way to pay
for the nursing home, which could begin eviction proceedings against her.
Although it is unclear if and when the waiver request might be granted it is
more important than ever to be careful when making transfers.
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 anyone else for the spouse's benefit);
A blind or disabled child;
A trust for the benefit of a blind or disabled child; or
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 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:
A child under age 21;
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 "caregiver 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 such care that the applicant did not need to
move to a nursing home.
A transfer can be cured by the return of the transferred asset either partially
or in its entirety.
Estate Recovery
For persons dying before July 1, 2003, Massachusetts has the right to
recover whatever benefits it paid for the care of the Medicaid recipient only
from his or her probate estate. Given the rules for Medicaid eligibility, the
only property of substantial value that a Medicaid recipient is likely to own at
death is his or her home. Property that is jointly owned, in a life estate, or in a
trust, is not included in the probate estate and thus escapes estate recovery
for persons dying before July 1, 2003.
For persons dying on or after July 1, 2003, Massachusetts has the right to
recover against almost any interest the Medicaid recipient had at death. Thus,
if the Medicaid recipient died owning jointly held property, a life estate, life
insurance, an annuity, an IRA, or any other property or interest, it may be
subject to estate recovery. No regulations clarifying this new statute have
been promulgated, so many questions are unanswered at this writing, such as
to what extent a life estate may be recovered against. If you or your relative
previously conveyed property, but retained an interest, you should consult
with a qualified elder law attorney to determine how best to proceed.
Massachusetts does not seek recovery against the estates of those decedents
who owned long-term care insurance when they entered the nursing home,
provided the policy meets certain requirements of the Division of Insurance.
This exemption from estate recovery applies only if the applicant for
Medicaid checks the correct box on his or her application. Also, in late 2001
the DMA began taking the position that if the policy initially met the
requirements, was then partly used for long-term care services at home, and
upon entry to a nursing home the policy was spent down below the
requirements of Division of Insurance, that the estate would not be exempt
from estate 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 $60-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 he or she must pay to the
spouse that continues to live at home. However, the income of the spouse at
home is not considered available to pay nursing home costs of the applicant.
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.
The Community Spouse is entitled to keep a portion of the couple's assets.
The Community Spouse is entitled to keep one-half of the countable assets
valued as of the date when the applicant enters a nursing home or the hospital
on the way to the nursing home, with a minimum that can be kept of $18,132
and a maximum that can be kept of $90,660 (2003 figures). This calculation
is not affected whether the assets are jointly held by the couple or if they are
all in the name of the nursing home spouse. For example, if a couple owns
$100,000 in countable assets on the date the applicant enters a hospital, the
Community Spouse will be entitled to a resource allowance of $50,000 (one-
half of $100,000). If they have $250,000, the Community Spouse can keep
$90,660.
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 DMA 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 DMA may award a
larger MMMNA, but only after a Fair Hearing appeal before an
administrative officer within the DMA.) The MMMNA may range from a
low of $1,515 to a high of $2,267 a month (2003 figures). 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.
Unfortunately, often much of the nursing home spouse's income ceases on his
or her death, leaving the Community Spouse woefully short of income and,
since half or more of the couple's assets were forced to be spent on the
nursing home prior to Medicaid eligibility, with few assets to make up the
shortfall. This is a future crisis that can only be ameliorated when applying for
Medicaid for the nursing-home spouse…and much preferably before that
application is filed. If you are in this situation you should see a qualified elder
law attorney immediately!
Increased Resource Allowance for the Community Spouse
Where a couple's combined income is less than the MMMNA, the
Community Spouse can petition the DMA for an increase in the standard
resource allowance so that the additional funds can be invested in order to
generate income to make up the shortfall. Given current low rates of return,
this permits the low income Community Spouse to retain a substantial level of
savings above $90,660, while maintaining eligibility for the nursing home
spouse.
The Medicaid Application
Applying for Medicaid is cumbersome and tedious. Every fact asserted in the
application must be verified by documentation, which can grow several
inches thick. The application process can drag on for several months as the
DMA demands more and more verifications regarding such issues as the
amount of assets and dates of transfers. If the applicant does not comply with
these requests and deadlines on a timely basis, the DMA will deny the
application. In addition, after Medicaid eligibility is achieved, the DMA may
require eligibility redetermination every year. Although simple Medicaid
applications do not require an attorney's involvement, the complexity of a
given person's situation or the opportunities it presents are rarely obvious,
and it makes sense to work with a qualified elder law attorney in most
situations. Furthermore, common situations may delay or impede eligibility
without proper legal advice, including: a spouse residing in the community,
transfers, property/assets held jointly with anyone other than a spouse, trusts,
rental property, and real estate other than the primary residence.
The Medicaid rules are presently in a state of flux. In light of the changes
proposed in the federal waiver request, it is more important than ever for you
to keep in regular contact with your qualified elder law attorney so he or she
can advise you as the rules change.
Medicare pays only under certain circumstances. The care must be skilled
care, in a skilled nursing facility ("SNF"; not all nursing homes are SNFs),
and the SNF stay must follow with 30 days a hospital stay of 3 days or
more. If qualified, Medicare will pay (so long as skilled care is needed)
100% of the SNF charges for up to the first 20 days, and as much as a
further 80 days with a co-pay of slightly over $100 per day.
Massachusetts enacted legislation effective July 1, 2003 that purports to
change the requirement to 3 of 6 of the activities of daily living for new
applicants, while leaving the requirement at 2 of 6 activities of daily living for
those already on nursing-home Medicaid. However, it appears that this
discrimination between existing and new Medicaid recipient violates federal
law, and so as of this writing no action has been taken to implement the new
3 of 6 statute.
Revised September, 2003
Introduction
For all practical purposes, in the United States the only "insurance" plan for
long-term institutional (i.e., nursing home) care is Medicaid. Medicare may
pay for medical expenses for some people who are not in a nursing home
setting, even young people, but that type of Medicaid, sometimes called "non-
institutional Medicaid" or "community Medicaid" is not the subject of this
article.
Medicare only pays for approximately 7 percent of long-term nursing home
care in the United States.1 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 to a better quality facility. The obvious disadvantage is the
expense; in Massachusetts, nursing home fees can be as high as $9,000 a
month. Without proper planning, nursing home residents can lose the bulk of
their savings.
Few individuals object to being responsible for themselves. For most
individuals, the object of long-term care planning is to protect some savings:
for their own care and well-being not covered by Medicaid, so their spouse
at home is not impoverished, or to save something for a disabled adult child.
This can be done within the rules of Medicaid eligibility.
In Massachusetts, Medicaid is administered by the Division of Medical
Assistance (the "DMA"). 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
Massachusetts and federal law as applicable.
Must Be Medically Eligible
You must be both medically eligible and financially eligible to qualify for
nursing home Medicaid. To be medically eligible, a person must be unable to
perform 2 or more of the 6 "activities of daily living": eating, bathing, toileting,
dressing, transferring (e.g., from bed to chair), and continence, or the person
must be suffering from significant cognitive impairment, such as from
Alzheimer's. 2
The Asset Rules
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 assets,
including life insurance and IRAs, except for (1) personal possessions, such
as clothing, furniture, and jewelry, (2) one motor vehicle (valued up to
$4,500 for unmarried recipients and of any value for community spouses),
(3) the applicant's principal residence (if it is in Massachusetts), and (4)
assets that are considered inaccessible for one reason or another.
The assets of an applicant's spouse are also deemed available to the
applicant, but there are special rules that somewhat protect the spouse at
home, discussed below. However, the income of the spouse at home is not
considered available to pay nursing home costs of the applicant.
The Home
The home will not be considered a countable 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
another dependent relative lives 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 noncountable resource.
As a result, for all practical purposes nursing home residents do not have to
sell their homes in order to qualify for Medicaid.
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 on the first day of the
month of the transfer. The actual number of months of ineligibility is
determined by dividing the amount transferred by $6,420 (this is the amount
the DMA considers equal to the average monthly cost of a nursing home and
is updated annually in November. See http://www.manaela.
org/libraryattorneys/keynumbers.cfm. For instance, if an applicant made gifts
totaling $90,000, he or she would be ineligible for Medicaid for 14 months
($90,000 / $6,420 = 14 months). Another way to look at this is that for
every $6,420 transferred, an applicant will be ineligible for nursing home
Medicaid benefits for one month.
There is no cap on the period of ineligibility. So, for instance, the period of
ineligibility for the transfer of property worth $350,000 is 55 months
($350,000 / $6,420 = 54.51 months). However, the DMA may only
consider transfers made during the 36-month period (60 months in the case
of some trusts) preceding an application for Medicaid, the "look back"
period. Effectively, then, there is a 36-month cap on periods of ineligibility
resulting from transfers. People who make large transfers have to be careful
not to apply for Medicaid before the 36-month look-back period passes.
The DMA has filed a waiver with the federal government seeking authority to
impose more restrictive transfer penalties than those currently allowed under
federal law. The waiver request, if approved, would not grandfather transfers
made in the past; the only exception to it is for certain transfers involving the
home within a limited dollar amount. The waiver would increase the look-
back period to five years for transfers of real estate and ten years for
transfers to irrevocable trusts. Much worse, the disqualification period would
begin not when the gift was made, but rather later, perhaps years later, when
the Medicaid application is filed. For example, suppose an 80 year old
grandmother pays her grandson's college tuition of $6,420. One year later,
she suffers a stroke and moves to a nursing home. She spends down her
money on the nursing home, and at age 82 runs out of money. Nonetheless,
at that point she will be disqualified from Medicaid and have no way to pay
for the nursing home, which could begin eviction proceedings against her.
Although it is unclear if and when the waiver request might be granted it is
more important than ever to be careful when making transfers.
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 anyone else for the spouse's benefit);
A blind or disabled child;
A trust for the benefit of a blind or disabled child; or
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 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:
A child under age 21;
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 "caregiver 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 such care that the applicant did not need to
move to a nursing home.
A transfer can be cured by the return of the transferred asset either partially
or in its entirety.
Estate Recovery
For persons dying before July 1, 2003, Massachusetts has the right to
recover whatever benefits it paid for the care of the Medicaid recipient only
from his or her probate estate. Given the rules for Medicaid eligibility, the
only property of substantial value that a Medicaid recipient is likely to own at
death is his or her home. Property that is jointly owned, in a life estate, or in a
trust, is not included in the probate estate and thus escapes estate recovery
for persons dying before July 1, 2003.
For persons dying on or after July 1, 2003, Massachusetts has the right to
recover against almost any interest the Medicaid recipient had at death. Thus,
if the Medicaid recipient died owning jointly held property, a life estate, life
insurance, an annuity, an IRA, or any other property or interest, it may be
subject to estate recovery. No regulations clarifying this new statute have
been promulgated, so many questions are unanswered at this writing, such as
to what extent a life estate may be recovered against. If you or your relative
previously conveyed property, but retained an interest, you should consult
with a qualified elder law attorney to determine how best to proceed.
Massachusetts does not seek recovery against the estates of those decedents
who owned long-term care insurance when they entered the nursing home,
provided the policy meets certain requirements of the Division of Insurance.
This exemption from estate recovery applies only if the applicant for
Medicaid checks the correct box on his or her application. Also, in late 2001
the DMA began taking the position that if the policy initially met the
requirements, was then partly used for long-term care services at home, and
upon entry to a nursing home the policy was spent down below the
requirements of Division of Insurance, that the estate would not be exempt
from estate 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 $60-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 he or she must pay to the
spouse that continues to live at home. However, the income of the spouse at
home is not considered available to pay nursing home costs of the applicant.
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.
The Community Spouse is entitled to keep a portion of the couple's assets.
The Community Spouse is entitled to keep one-half of the countable assets
valued as of the date when the applicant enters a nursing home or the hospital
on the way to the nursing home, with a minimum that can be kept of $18,132
and a maximum that can be kept of $90,660 (2003 figures). This calculation
is not affected whether the assets are jointly held by the couple or if they are
all in the name of the nursing home spouse. For example, if a couple owns
$100,000 in countable assets on the date the applicant enters a hospital, the
Community Spouse will be entitled to a resource allowance of $50,000 (one-
half of $100,000). If they have $250,000, the Community Spouse can keep
$90,660.
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 DMA 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 DMA may award a
larger MMMNA, but only after a Fair Hearing appeal before an
administrative officer within the DMA.) The MMMNA may range from a
low of $1,515 to a high of $2,267 a month (2003 figures). 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.
Unfortunately, often much of the nursing home spouse's income ceases on his
or her death, leaving the Community Spouse woefully short of income and,
since half or more of the couple's assets were forced to be spent on the
nursing home prior to Medicaid eligibility, with few assets to make up the
shortfall. This is a future crisis that can only be ameliorated when applying for
Medicaid for the nursing-home spouse…and much preferably before that
application is filed. If you are in this situation you should see a qualified elder
law attorney immediately!
Increased Resource Allowance for the Community Spouse
Where a couple's combined income is less than the MMMNA, the
Community Spouse can petition the DMA for an increase in the standard
resource allowance so that the additional funds can be invested in order to
generate income to make up the shortfall. Given current low rates of return,
this permits the low income Community Spouse to retain a substantial level of
savings above $90,660, while maintaining eligibility for the nursing home
spouse.
The Medicaid Application
Applying for Medicaid is cumbersome and tedious. Every fact asserted in the
application must be verified by documentation, which can grow several
inches thick. The application process can drag on for several months as the
DMA demands more and more verifications regarding such issues as the
amount of assets and dates of transfers. If the applicant does not comply with
these requests and deadlines on a timely basis, the DMA will deny the
application. In addition, after Medicaid eligibility is achieved, the DMA may
require eligibility redetermination every year. Although simple Medicaid
applications do not require an attorney's involvement, the complexity of a
given person's situation or the opportunities it presents are rarely obvious,
and it makes sense to work with a qualified elder law attorney in most
situations. Furthermore, common situations may delay or impede eligibility
without proper legal advice, including: a spouse residing in the community,
transfers, property/assets held jointly with anyone other than a spouse, trusts,
rental property, and real estate other than the primary residence.
The Medicaid rules are presently in a state of flux. In light of the changes
proposed in the federal waiver request, it is more important than ever for you
to keep in regular contact with your qualified elder law attorney so he or she
can advise you as the rules change.
Medicare pays only under certain circumstances. The care must be skilled
care, in a skilled nursing facility ("SNF"; not all nursing homes are SNFs),
and the SNF stay must follow with 30 days a hospital stay of 3 days or
more. If qualified, Medicare will pay (so long as skilled care is needed)
100% of the SNF charges for up to the first 20 days, and as much as a
further 80 days with a co-pay of slightly over $100 per day.
Massachusetts enacted legislation effective July 1, 2003 that purports to
change the requirement to 3 of 6 of the activities of daily living for new
applicants, while leaving the requirement at 2 of 6 activities of daily living for
those already on nursing-home Medicaid. However, it appears that this
discrimination between existing and new Medicaid recipient violates federal
law, and so as of this writing no action has been taken to implement the new
3 of 6 statute.
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
| Please direct questions or comments to the email provided below. rcanevazzi@yahoo.com |