Medicaid is the major source of health insurance for low-income individuals and families, covering nearly 70 million Americans. The Affordable Care Act (ACA), enacted on March 23, 2010, significantly expanded the Medicaid program to cover millions of uninsured Americans. However, in June 2012 a Supreme Court ruling on the ACA made the Medicaid expansion optional for states.
Due to the ongoing changes of Medicaid in both its delivery and benefits, complex issues remain. For this reason, this blog appears in two parts. Part 1 covers the essentials that you need to know if you are considering applying. Part 2, which will appear in two weeks, discusses Medicaid Planning and Asset Protection.
Medicaid has strict standards for eligibility. The first test in most states is that applicants 65 and older cannot own more than $2,000 in assets. (The ACA created a national Medicaid minimum eligibility level of 133 percent of the federal poverty level for those under age 65.) In meeting this criteria, assets are designated as either countable or exempt. Countable assets include checking and savings accounts, stocks and bonds, certificates of deposits, and real property other than your primary residence. Exempt assets include your personal residence, personal property and household belongings, life insurance with a death benefit under $1,500, up to $1,500 for burial expenses, certain burial arrangements, and assets held in specific kind of trusts (addressed in Part 2). For additional information, see the website of the U.S. Department of Health and Home Services.
The Deficit Reduction Act of 2005 (DRA), which makes Medicaid eligibility more difficult, imposes a cap on the home equity value of an exempt residence when the owner is in a nursing home. For 2016, the cap is $552,000. States retain the option to increase the cap to $828,000. The exempted value may increase annually based upon the Consumer Price Index. Fortunately, when an individual’s spouse or minor, blind or disabled child lives in the residence, the cap does not apply.
Upon the death of the Medicaid recipient, assets lose their exempt status. Therefore, the state may claim reimbursement from the recipient’s estate. For example, medical authorities can sometimes place a lien against the home, collectable after one’s death (or at the death of certain relatives in the home) to compensate for Medicaid benefits paid to the homeowner.
Medicaid applicants also must meet income tests that vary state from state. While some states have no income limits for recipients in nursing homes, others have income caps in determining eligibility for nursing home coverage. When no income limits are imposed, the applicant qualifies for Medicaid as long as her monthly income is less than the monthly cost of private nursing home care. In addition, apart from a small personal needs allowance, all of the person’s income must cover the cost of the nursing home care. Any remaining balance is paid by Medicaid.
The Medicare Catastrophic Coverage Act of 1988 mandated special eligibility rules for couples when one member needs nursing home care. Known as the spousal impoverishment rules, they protect income and resources for the well spouse within certain limits. For 2016, the maximum limits are $2,980.50 for monthly needs, a monthly housing allowance of $597, and a limit of $119,220 for other resources. For additional information, visit www.Medicaid.gov.
Qualifying for Medicaid requires meeting very strict standards, and eligibility rules may vary from state to state. Consider reviewing your elder care planning with a CERTIFIED FINANCIAL PLANNER™ professional to determine how to best meet your objectives.
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