Introduction to Medicaid Planning
Presented By: Amy Beacham
Hi, I’m Amy Beacham, Communications Director for Krause Financial Services. Today, we’re going to talk about the Medicaid program.
Medicaid is a joint federal- and state-funded program that pays for most of the long-term care costs in the United States. Medicaid pays for a person’s custodial care in a nursing home, including room and board, pharmacy, and incidentals. It is intended to provide financial assistance to those with limited means. Specific program requirements vary from state to state, but the following information will provide a general overview of Medicaid’s complex rules.
A Medicaid applicant must meet certain criteria to qualify. They must be a U.S. citizen or qualified alien. They must also be 65 or older, blind, or disabled. Also, they must be a resident of a Medicaid-approved facility–typically a skilled nursing home. The financial requirements are a little more complex, but they can generally be broken into two categories: income and assets.
An applicant’s income must be less than the private-pay rate of the facility. With many nursing home bills running $8,000 or more monthly, most applicants satisfy this requirement. However, some states may require a Qualified Income Trust, or a Miller Trust, to be established if the applicant’s income is above a certain amount.
In the case of a married couple, there are no limits on the income of the spouse at home, known as the community spouse. However, if the community spouse has a very low monthly income, they may be entitled to some of the institutionalized spouse’s income to help them with their monthly expenses. This is known as the Monthly Maintenance Needs Allowance.
The other major financial requirement involves an applicant’s assets. There are assets that are exempt for Medicaid eligibility, such as the primary residence, one vehicle, and personal effects. And there are assets that are countable, such as bank accounts, investments, and in many states, IRAs. Medicaid limits the number of countable assets an applicant can keep. In most states, this limit is only $2,000.
If the applicant is married, the community spouse can retain a separate amount known as the Community Spouse Resource Allowance. In some states, the community spouse can keep one standard allowance, while in others, the amount they can keep varies depending on the amount of assets they currently own with the applicant.
Countable assets in excess of the resource allowance must be spent down in order for the applicant to become Medicaid eligible. However, assets cannot simply be given away. At the time of the Medicaid application, the caseworker will review the applicant’s financial information from the previous five years to see if any gifts or transfers for less than fair market value have been made. This five-year period is known as the lookback period. If gifts have been made, the applicant will be subject to a period of ineligibility known as the penalty period. The length of this period is based on the total amount of gifts made.
An applicant can properly spend-down their assets by paying off debts, improving the family home, purchasing exempt assets, or purchasing a Medicaid Compliant Annuity. For more information on Medicaid Compliant Annuities and the Medicaid program, contact our office at 855-552-5893.
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