It is often said that if someone has to go into a nursing home, that the State will take their property in order for the person to qualify for Medicaid. This may seem like what occurs, but the State does not actually take property. This article will give an overview of the process to qualify for Medicaid coverage for long term care.
Medicaid provides medical care for the poor. It does not provide health care to anyone owning substantial assets or income. If you apply for Medicaid, you will have to disclose your income and assets as well as the assets of a spouse. Unlike Medicare, Medicaid can also cover long term nursing home care to those who qualify. However, rather than take your property to pay for nursing home care, if you have “countable resources,” then the State will simply deny qualification for Medicaid until those resources have been “spent down.” Not all assets are “countable.”
In order for a person to qualify for Medicaid to cover long term care (nursing home), there must be an application made to the Department of Social Services in the county of residence of the applicant. The application includes information such as marital status, date of birth and date of marriage, and must be submitted with five years of bank\financial records. There are three tests which are the main considerations for long term care: the Medicaid Asset Test; the Medicaid Income Test and the Medicaid Needs Test. Typically, a physician will provide a form in which it is stated that the person cannot perform the activities of daily living (“ADL”). These are key life tasks that seniors must be able to perform without assistance to be safe & independent, including eating, toileting, bathing, dressing and mobility. If a patient is unable to perform three or more of the ADLs, then they medically would qualify for Medicaid.
The Asset Test is to determine if the patient has assets in excess of the maximum allowed. A patient can only have $2,000 in financial resources. In addition, the patient may own a car used for the patients’ transportation and personal belongings. If the patient owns a residence, then that is non-countable if the patient intends to return home. This exemption is for equity in a residence not exceeding $585,000. However, once the patient dies, then the State can file an estate lien which would require the personal representative of the estate to sell the home and reimburse the state up to the amount it has paid out for the patient’s care.
The Income Test is to determine if the patient has sufficient income to cover their own care. If he or she does, then the application would be denied.
If the patient is married, then the spouse’s resources are considered as available also. For a married couple, the one who is in the nursing home is the “institutionalized spouse” and the one who remains at home is the “community spouse.” This is true even if they have a premarital agreement which provides for separate ownership of their assets. For the community spouse, there is a “Community Spouse Resource Allowance” (“CSRA”) which is equal to one-half of the couples non-exempt assets. There is a minimum and maximum that the Community Spouse can keep. For 2019, the CSRA is a maximum of $126,420 and the minimum is $25,284. For example, if a couple has $100,000, the spouse can keep $50,000. If a couple has $500,000, the spouse may keep $126,420. The excess would have to be spent down before Medicaid would begin paying.
If it is determined that a gift of assets has been made within five years prior to the application, then a penalty will be assessed based on the value of the gift. The penalty is determined by dividing the value of the gift by the cost of the monthly private pay rate for nursing homes. This number is established by the State each year. For 2019, that amount is $6,810. If a gift was made within the 5-year period of $100,000, then this is divided by $6,810 to determine the number of months of disqualification. In this example, it would be 14.68 months, rounded to 15 months.
There is planning which can be done even if the assets are in excess of those allowed. This can be from making intentional gifts early enough to avoid the 5-year lookback or to change countable resources into exempt assets.
John W. King, Jr. is a licensed attorney at Stubbs & Perdue, P.A. with 38 years of experience. He is certified by the North Carolina State Bar as a specialist in Commercial, Business, Industrial Real Estate, Residential Real Estate, and also in Estate Planning and Probate. He can be reached at 252-633-2700.