Medicaid

What Is Medicaid?

Medicaid is a government medical assistance program for individuals and families who qualify for benefits because their incomes and assets fall below government-defined limits. Although Medicaid provides a wide variety of health and human services to extremely diverse groups, its primary interest to insurance agents and professional advisers is the role this government program may be expected to play in providing funds for extended nursing home stays.

The central concern in retirement planning is outliving available funds. Social Security, pensions and well-planned savings programs go a long way toward solving this problem; however, they don't meet a major concern connected with growing old-namely, providing for nursing home care.

Indeed, nursing home care can be a significant health care expense facing the elderly. According to the 2003 survey by GE Financial, the average annual cost of nursing home care in the U.S. is currently around $57,000. The annual cost varies from one nursing home to another and from one region of the country to another. According to the GE Financial survey, Alaska was the most expensive state with a $166,700 average annual cost, and Louisiana was the least expensive at $35,900.

Medicare vs. Medicaid

Consumers often confuse Medicare-the government's medical insurance program for the elderly-with Medicaid, the government's medical and assisted-living program for the poor. We'll distinguish them here only with respect to what each program provides toward nursing home costs.

Medicare pays only for stays in skilled nursing homes (those facilities that provide 24-hour licensed nursing care) and then only if admission: (1) follows a 3-day minimum hospital stay, and (2) is in an approved Medicare facility. Furthermore, Medicare coverage is limited to 100 days per episode of illness which means, after 100 days, if a patient returns to a nursing home with the same illness, benefits may not be available.

Medicaid provides a supplement to benefits provided by Medicare including nursing home care. Although Medicaid pays for extended nursing home stays-skilled care as well as custodial care-it does so only when patients meet extremely restrictive financial and income requirements.

Medicaid eligibility requirements vary from state to state. Broad general guidelines are drawn by the federal government, which pays a portion of the medical assistance costs; however, individual states actually administer the program. Thus each state determines:

eligibility,
the amount, duration and scope of service, and
reimbursement rates.
It is important for consumers to consult with elder-care attorneys regarding the specific Medicaid rules applicable in each state.

Who Qualifies for Medicaid?

Medicaid is available to the impoverished, as defined by law. Federal Medicaid law sets forth the parameters for eligibility, but the actual definition is determined under state law. As long as a person has income or countable assets, as defined by each state, available to pay for nursing home expenses, Medicaid is not available. Medicaid also considers the combined countable assets of the able-bodied spouse who does not need nursing home care. This spouse is referred to as the "community spouse." (An "institutionalized spouse" is the spouse domiciled in a long-term care facility.)

Financial Requirements-Asset and Income Tests

For calculation purposes, assets are divided into two categories: exempt assets and countable assets.

Exempt Assets

Exempt assets are the assets of a Medicaid applicant that are excluded from Medicaid financial requirements. Exempt assets include:

• Cash-value life insurance whose face value is less than $1,500, and all term insurance
  
• Personal property, including furniture, clothing, jewelry, etc., up to reasonable limits
  
• Burial funds up to $1,500, reduced by the face value of cash value insurance policies that are exempt
  
• Property used in a trade or business
  
• One automobile, within certain limits
  
• Home, regardless of value, provided it is the person’s principal place of residence and is in the same state in which the individual is applying for coverage
  
• Property owned jointly with the applicant, provided it is the principal residence of the other owners and they would be forced to move upon the sale of the property.
  

Although these assets may be exempt, they generally lose their exempt status when a Medicaid recipient dies. At this time, states may claim reimbursement from the decedent’s estate for benefits provided.

To compensate states for benefits paid to homeowners, for example, Medicaid authorities sometimes seek and are granted liens against the home which may be collected after the death of the recipient. In some instances, these liens may not be collected until after the death of other relatives living in the family home. A home may lose its exempt status if the individual has been institutionalized for at least six months. However, a home will remain exempt after that time period if:

• the community spouse or the applicant’s minor, disabled or blind child continues to live in the home
  
• evidence can be shown that the applicant may be able to return to the home.
  

Countable Assets-Unmarried Persons

Assets that are non-exempt are referred to as countable assets. A single individual may qualify for Medicaid in most states if that person has less than $2,000 in countable assets.

Countable Assets-Married Persons

Community Resource Allowance (CSRA)
Medicaid laws seek to protect the community spouse against spousal impoverishment by providing special asset eligibility rules. Federal law governs minimum and maximum asset amounts that the community spouse can retain without affecting the Medicaid benefits of the institutionalized spouse.

To calculate this amount, all resources held by either spouse or both spouses are added together, except for the exempt assets. The total is divided equally between the spouses. If the spouse’s half of the couple’s total assets exceed an amount determined by each state, the excess is attributed to the institutionalized spouse.

The community spouse resource allowance (CSRA) must be transferred to the community spouse within 90 days of the initial eligibility determination.

Income Limits

There are also income limits for Medicaid applicants. These, too, vary by state. There is no stated upper limit for nursing home patients in about 30 states. However, the remaining states have upper income limits, or "income caps," that govern eligibility.

Federal Medicaid law requires individuals living in long-term care facilities to contribute all of their income to cover resident expenses, subject to certain deductions. Allowable deductions include:

• a personal needs allowance of at least $60
  
• the community spouse’s monthly income allowance
  
• an income allowance for certain family members
  
• certain medical expenses
  

As mentioned above, the remainder of the income, after the deductions, must be used to contribute to the costs of care.