A growing number of United States residents are seeking long-term care in nursing homes. The Center’s for Disease Control estimated that, in 2015, approximately 1.3 million people resided in nursing homes, and that number is only expected to rise as the Baby Boomer generation ages. Long-term care is expensive, which makes planning for the future even more important. People often postpone moving into a nursing home for fear they will be forced to sell their house or other assets to do so. Below, we will explain how Medicaid may pay for long-term care, it’s estate recovery program, and what you can do to protect some of your assets while remaining Medicaid eligible.
First Let’s Discuss Long-term Care Costs
According to the U.S. Department of Health and Human Services, in 2016, the average cost for long-term care in the United States was:
- $225 a day or $6,844 per month for a semi-private room in a nursing home
- $253 a day or $7,698 per month for a private room in a nursing home
- $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit)
The cost generally depends on the type of care and the duration of time the care is needed, as well as the provider and the state in which the elder resides.
There are a few common ways an individual may pay for long-term care: (1) personal funds/assets; (2) a life insurance policy; (3) long-term care insurance; and (4) Medicaid. Because the above numbers are cost prohibitive to many individuals without the assets or long-term care insurance, people often look to Medicaid to pay for this care.
Using Medicaid for Long-Term Care
Medicaid is a government assistance program that is jointly funded by the states and the federal government. Each state administers the program according to federal guidelines. Because it is a government assistance program, Medicaid is only available to individuals who qualify. To qualify for long-term care with Medicaid, the individual must:
- Be a resident of the state in which he or she is applying for Medicaid;
- Be 65 years or older, permanently disabled, or blind;
- Have a monthly income and countable assets under a certain amount; and
- Have a need for long-term care.
How Much Money You Can Keep When Using Medicaid for Nursing Home Care
While each state has specific income and asset requirements, generally, in 2021, a single Medicaid applicant’s income cannot exceed $2,382/month and assets cannot exceed $2,000. For state specific requirements, click here. The rules differ when a person is married, and, again, the rules are state specific. Many states consider married applicants applying for Medicaid to be single applicants. Therefore, each spouse may have income up to the state’s income limit. However, if one spouse is seeking Medicaid for nursing home care, but the other spouse remains in the marital household, the “spousal impoverishment” rules apply. The spousal impoverishment rules allow the spouse remaining in the marital household to have income and assets of his or her own that are used to provide for his or her needs, without requiring that such funds be paid to the other spouse’s nursing home care. In 2021, generally, the spouse not in the nursing home may keep one-half of the couple’s combined assets up to a maximum amount of $130,380.
Medicaid includes the following when determining an individual’s income:
- Regular benefit payments such as Social Security retirement or disability payments
- Veterans benefits
- Interest from bank accounts and certificates of deposit
- Dividends from stocks and bonds
In addition to income, Medicaid examines the applicant’s assets. Assets that are generally counted when determining eligibility include:
- Checking and savings accounts
- Stocks and bonds
- Certificates of deposit
- Real property other than a primary residence
- Additional motor vehicles if an applicant has more than one
Assets not counted toward Medicaid eligibility include:
- Primary residence
- Personal property and household belongings
- One motor vehicle
- Life insurance with a face value under $1,500
- Up to $1,500 in funds set aside for burial
- Certain burial arrangements such as pre-need burial agreements
- Assets held in specific kinds of trusts
As you can see from the list above, a modest primary residence, personal property and household items, as well as one motor vehicle are all exempt assets that are not counted toward an individual’s assets when determining Medicaid eligibility. Importantly, a person’s primary residence will not be counted toward Medicaid eligibility if the individual has the intent of returning to the home, even if there is no realistic chance that this will happen, the home remains exempt. The home will also be exempt if a spouse not receiving Medicaid remains in the home.
Can a Nursing Home Take Your Home?
A common misconception is that nursing homes may take and/or sell a home when the homeowner enters the nursing home. This is untrue. However, if an individual uses Medicaid to pay for their long-term care, federal law requires states to recover, through the Medicaid Estate Recovery Program (“MERP”), the amount Medicaid spent on that individual’s behalf from his or her estate after death. Assets recoverable from an estate include real property, such as a house and any other personal assets. So, while Medicaid cannot possess your house and sell it when you live in a nursing home, once you die, the state is entitled to recover the amount expended for your care from your estate, which could include selling your home, preventing your family from inheriting it. If a spouse who was not receiving Medicaid is alive when the spouse receiving Medicaid assistance in a nursing home dies, the deceased’s spouse’s estate is exempt from Medicaid recovery. However, once the spouse who did not receive Medicaid dies, the state may recoup, from this spouse’s estate, money Medicaid spent on the other’s spouse’s care.
How to Avoid Medicaid Taking Your Home or Assets After Nursing Home Care
What happens if a person does not have enough assets or income to pay for long-term care, but he or she has too many assets to qualify for Medicaid? What if a person wants his or her family to inherit their house rather than have Medicaid sell it to recoup expenses paid? With some careful planning, and the help of a skilled estate planning attorney and/or financial planner, it is possible to become a Medicaid recipient, even if your current assets exceed the Medicaid limit, and it is also possible to pass along assets to your family after your death.
As an initial important note, there is a Medicaid “Look-Back Period,” generally 5 years, in which Medicaid may examine whether you have given away or sold assets for less than they are worth to meet Medicaid’s asset limit. Violating this rule may result in Medicaid ineligibility. For this reason, it is crucial that you plan well in advance of needing Medicaid and that you consult with the proper attorney and/or financial planner. With that understanding, below are some ways in which you could protect your assets while remaining a Medicaid beneficiary.
Because any assets placed into an irrevocable trust legally no longer belong to the grantor, an irrevocable trust allows the grantor to give away assets to qualify for Medicaid. It is important to note, however, that an irrevocable trust is subject to the look-back period.
In some states, individuals may create a Miller Trust wherein he or she places their income, which exceeds the Medicaid limit, into a trust. The income placed into the trust can only be used to pay the Medicaid recipient a monthly personal needs allowance (which varies by state) but may also be used to pay their spouse a minimum monthly maintenance needs allowance. Any leftover trust funds are used to pay the Medicaid recipient’s cost of care. Further, any funds remaining in the trust upon the Medicaid recipient’s death may be recovered by Medicaid to cover the cost of care.
These deeds allow any real property to automatically pass, outside of probate, to the beneficiary upon the grantor’s death. Property transferred under this deed is not generally considered as part of a decedent’s probate estate and is not usually subject to Medicaid reimbursement.
Consulting a Professional
As you have likely surmised, the rules and regulations concerning Medicaid are vast, and it is important to make thoughtful and calculated decisions concerning the same. If you or a loved one are considering Medicaid for future long-term care coverage, it is important that you speak to a Medicaid planning professional who can advise as to what is best for your specific circumstances. Speaking with an attorney or financial planner concerning asset protection while remaining Medicaid eligible may also be beneficial.
- Nursing Home Care, CDC, https://www.cdc.gov/nchs/fastats/nursing-home-care.htm?_ga=2.47025120.694811872.1610035118-587064989.1599010179
- Costs of Care, LongtermCare, https://longtermcare.acl.gov/costs-how-to-pay/costs-of-care.html
- Costs and How to Pay, LongtermCare, https://longtermcare.acl.gov/costs-how-to-pay/index.html
- Medicaid, Medicaid, https://www.medicaid.gov/medicaid/index.html
- State Medicaid Programs, Longtermcare, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/index.html
- 2021 SSI and Spousal Impoverishment Standards, Medicaid, https://www.medicaid.gov/medicaid/eligibility/downloads/ssi-and-spousal-impoverishment-standards.pdf
- Financial Requirements, LongtermCare, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements.html
- Financial Requirements—Assets, LongtermCare, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets.html
- Medicaid Estate Recovery, LongtermCare, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-estate-recovery.html
- Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances, Medicaid Planning Assistance, https://www.medicaidplanningassistance.org/medicaid-look-back-period/