Despite what many people think, the government health care program for the elderly, Medicare, covers very few nursing home costs. Medicaid is the largest source of government funding for nursing home care. But getting Medicaid to pay for long-term care isn't always easy because the rules can be complicated. There are all kinds of myths out there about who qualifies for assistance.
Knowing the truth about eligibility for Medicaid-paid nursing home care is the key to getting the assistance you or a loved one may need. Here are some of the common myths you may hear about.
1. I have to give away everything I own to get Medicaid.
You don't have to be completely destitute to get Medicaid. States have different rules about asset limits, but in most states, if your spouse or dependent children live in your home, or if you might be able to return to it, you don't have to sell the home. You can also keep personal items, a car and some life insurance.
As to cash and income, most states use the asset guidelines used by the federal SSI program and an income limit tied to the SSI program. That program has a $2,000 limit on countable assets for one person ($3,000 for a couple if both spouses are receiving care long-term care). In the states that use income limits tied to SSI, you can make up to 300% of the SSI income limit ($2,205 per month in 2017) and qualify for nursing-home-only Medicaid. Other states have higher or lower asset and income limits.
2. If I give away assets to family or friends, I won't qualify for Medicaid.
It's true that some transfers of property or assets disqualify you from getting Medicaid for a period of time (called the penalty period). The value of the assets transferred determines the length of the penalty period. For instance, if you transferred a house worth $400,000 and the annual cost of a nursing home in your area averages $100,000, your penalty period would last for four year after you applied for Medicaid.
Certain transfers of property, however, won't disqualify you. Sometimes it depends on who receives the assets; other times, it depends on the type of property you're transferring. For instance, you won't be penalized for transferring property to your spouse. You can even transfer your house to your child who's under 21 years old, is disabled, or who has been living and the home and caring for you for the past two years or more. The point is, not all transfers cause problems with getting Medicaid—ask a Medicaid lawyer what applies in your state.
3. I have to wait five years after giving anything away to get Medicaid.
Your state's Medicaid agency will examine your financial records for the five years before you applied for benefits. But five years is not necessarily the length of time you will be disqualified from getting Medicaid (if you make a transfer of property not allowed by Medicaid). However, you may not have to wait five years before qualifying for assistance. Five years is the "look-back" period, not the penalty period.
How long you have to wait to qualify for Medicaid is based on the value of the property and the average monthly cost of nursing home care in your area. Again, if you transferred a $75,000 RV and the average cost of nursing care in your area is $3,000 per month, your ineligibility period will be 25 months ($75,000 / $3,000 per month = 25). The waiting period begins to run on the date you apply for Medicaid.
4. I can keep all our marital property when my spouse gets Medicaid.
There are some protections for at-home spouses (spouses who stay home while the other spouse goes to a nursing home).
An at-home spouse is allowed to keep one-half of the couple’s assets as long as it falls within the maximum set by state law. The maximum amount is called the "community spouse resource allowance." The amount will be somewhere in between $24,000 and $121,000, depending on your state. Check with your state’s Medicaid agency to find out the exact amount.
5. I won't be able to keep any income when my spouse goes into a Medicaid-paid nursing home.
You can keep all of your own income, and, if you need the financial support, you may be able to keep some of your spouse’s income as well. At-home spouses are entitled to keep an amount called the "minimum monthly maintenance needs allowance." Each state sets its own allowance amount, but in all states it is between $2,000 and $3,000. Medicaid doesn't count that amount of income when deciding whether the spouse needing a nursing home is financially eligible for Medicaid.
6. If I put my property in my spouse's name, I won't be eligible for Medicaid.
No. As a general rule, you can transfer assets and property to your spouse without jeopardizing your eligibility for Medicaid.
7. Medicaid rules that applied to my neighbor will also apply to me.
This depends on many factors, but none is more important than when your neighbor applied for Medicaid. There were major changes to the Medicaid rules in 2005. One change was that the look-back period was changed from three to five years. So, you may have a longer look-back period than your neighbor had.
8. As a "private pay" nursing resident, I must use up my assets before I can get Medicaid and can only "spend down" my assets on medical or nursing home bills.
This common belief is wrong for several reasons. First, as discussed above, you can qualify for Medicaid long before you spend or use up all of your assets (for instance, you're allowed to keep certain property as well as cash up to $2,000 or $3,000).
Also, you can "spend down" your assets not only on medical bills and nursing home costs, but also by buying "non-countable assets" like a car, personal effects, life insurance policy, or burial plots. In addition, you can pay off debts not related to medical or long-term care, including car loans, credit cards, and mortgages.
Sadly, some nursing homes push this myth to keep residents as "private pay" because those rates usually are higher than Medicaid reimbursement rates. It's against the law for a nursing home that's Medicaid-certified to tell you that you have to stay "private pay" until your personal assets are gone. Contact your state's Medicaid agency immediately if a nursing home violates this rule.
9. I can give away only $14,000 per year under Medicaid rules.
This is a federal gift tax rule; it has nothing to do with Medicaid law. You can give $14,000 to any one person, one time each year, and you won't have to pay any gift taxes or file a federal gift tax return. For Medicaid purposes, however, that same gift may trigger a penalty when the look-back period is examined by your state's Medicaid agency.
Knowing the truth about these myths should help you with your Medicaid planning. It's important to remember, though, that there are other pitfalls and myths in the Medicaid process, and the rules are different in every state. Talk to an experienced attorney long before the time you actually need Medicaid to make sure you protect your assets and get the assistance you need.