(This article is adapted from How to Care for Aging Parents by Virginia Morris. See Next Avenue's interview with the author here.)
If you have elderly parents, don’t wait to learn about Medicaid — sometimes referred to by a litany of other state names, like Medi-Cal and MassHealth.
By any name, this is government insurance for people who have very little money that covers, among other things, the cost of home care and nursing home care when a recipient can no longer care for himself.
Unlike Medicare, which is fully regulated by the federal government, Medicaid is a joint program of both federal and state governments. The federal government sets guidelines, and states establish their own rules and programs within these broad parameters.
Some health care providers and nursing homes won’t take patients on Medicaid or will accept only a limited number because the reimbursement rates are low. In some areas, it may be difficult (or impossible) to find aides or other home care workers who will take Medicaid. As a result, Medicaid patients may have to settle for fewer choices and lower quality care.
Furthermore, Medicaid has largely switched over to managed-care plans, which means that your parent has to receive care from a particular list of providers. Her doctor and many specialists might not be in that group.
Who Can Qualify for Medicaid
Broadly speaking, to qualify for Medicaid, a person’s monthly income can’t be more than $2,000 or $3,000. His assets (not including a home, personal belongings, a car, and a few other things) can’t be worth more than $2,000 to $15,000, depending upon the state.
You’ll want to learn the rules that apply to your parent, because they’re complicated and vary not only by state, but sometimes by county.
In many states, if a person has meager assets, but his income is above the eligibility limit and below the cost of care, Medicaid will cover the difference.
In other words, if the state’s income limit for Medicaid is $2,000 a month and your parent’s income is $3,000 a month, but the cost of nursing home care is $5,000 a month, then Medicaid would pay the difference (being sure to leave him with a small spending allowance).
Also, most states are careful to protect a spouse who is living independently from becoming indigent. Generally, a spouse can keep the couple’s home and a significant chunk of the couple’s income and assets.
When Is a House Not a Home?
When determining a person’s eligibility, Medicaid does not include the value of his home (up to a certain limit). But that all changes when a home becomes merely a house.
As long as your parent, a spouse and/or any dependents live in his home, most states will not include it as part of his assets when he applies for Medicaid. However, if he has no spouse or dependents, and he moves out of his home — either because he sells it, moves permanently into a nursing home or other facility or dies — the empty house becomes fair game. Medicaid eligibility and/or the state will then go after the equity in the home to recoup what’s been spent on health care.
If an adult “child” lives in his parent’s home and cares for that parent for more than two years, some states allow the home to be transferred to the caregiver without penalty.
Protecting Assets to Qualify for Medicaid
Your parent may be able to protect some of his assets and still become eligible for Medicaid. But to do so, he must plan in advance. The sooner he acts, the more he will be able to protect.
Every state has its own rules, and those rules are complex and ever changing. If your parent wants to protect some assets, he should speak with a Medicaid planner, typically an elder law attorney, to sort it all out.
The most common way that people protect their assets before applying for Medicaid is known as “spending down,” which means that they spend money on items that Medicaid doesn’t count as an asset.
Purchases that are not counted in Medicaid equations in most states include a home, a car, home furnishings and other personal belongings, prepaid funeral expenses (a common tool in Medicaid planning), home renovations, or any payments to homemakers or aides.
If someone is near, but not quite at, the eligibility limits, sometimes he can, just start spending his money. Of course, gifts to others are not allowed.
For the time being, in most states, your parent can protect his assets by giving them outright to others or by putting them in an irrevocable trust. But this has to be done very early in the game — five years early, to be specific.
When a person applies for Medicaid, officials examine his financial records for the past five years to see what, if any, gifts or transfers have been made.
Anyone who has given a gift or otherwise transferred assets during this penalty, or “look-back” period, won’t qualify for Medicaid right away. (Transfers to a spouse or dependent do not count.)
Usually, the person must wait the number of months it would take to spend the amount that was given away on nursing-home care; the exact amount is determined by each state. In other words, if someone gives away $60,000 and nursing home care costs $6,000 a month, he would have to pay for his own care for 10 months.
If your parent chooses to give away his assets, set up a trust, or transfer property so he can go on Medicaid, he shouldn’t be zealous about it with the potential of being left penniless.
When There’s a Spouse
Under what’s known as the Community Spouse Resource Allowance, Medicaid will allow a spouse to keep the couple’s house, car, belongings, and, in some states, more than $100,000 in assets.
Medicaid also allows the spouse to keep all of her own income and, if her own income is not enough to cover her bills, some amount of her spouse’s income as well. If her income is dependent upon certain assets, sometimes these become exempt, too.
Let’s say a husband earns $3,000 a month, his wife earns $500 month and the husband enters a nursing home. The problem is, she needs $2,000 a month to pay her living expenses. In this case, Medicaid might allow her to keep $2,000 a month, leaving her husband with $1,500 a month and thus eligible for Medicaid.
In some states, all assets can be moved into the “well” spouse’s name and then that spouse simply refuses to contribute to nursing home bills. This can be done immediately before applying for Medicaid, with no “look-back” or exemption period.
For More Medicaid Information
Despite any downsides, Medicaid is a vital and welcome safety net. Learn more about it by talking with a counselor from the area agency on aging (Eldercare.gov or 800-677-1116) or from the State Health Insurance Program (Shiptalk.org). You can also contact the state Medicaid office (Medicaid.gov).
Note: State counselors can advise you on how to get Medicaid only if you are eligible; they cannot advise someone on how to protect assets before going on Medicaid.