Qualification For Medicaid, And Medicaid Spend Down
In order to qualify for Medicaid, one must generally be over 65 years old. One must also be sufficiently ill, and need sufficient assistance to qualify for Medicare pursuant to what is referred to as one’s service priority level.
In order to qualify for Medicaid from a financial perspective without special steps being taken, a person must have an income under $2,022 per month (in Oregon, as of July, 2009). If a person has over this income, an income cap trust can usually be drafted to cure the problem.
In some cases, if a person qualifies as disabled for Social Security purposes, and has the necessary work history (in general, if the person has worked for five of the last ten years before becoming disabled), the person may be eligible for Medicaid even if under age 65.
Many people believe they must spend down their assets to nil in order to qualify for Medicaid. This is incorrect.
A single individual may keep personal property worth up to $2,000, plus a vehicle, and a house if the person or his/her spouse still lives in the house, as well as certain other assets in some circumstances. A married couple can keep considerably more if one spouse is still well, and does not need Medicaid.
On the other hand, if a couple is married, and neither has yet qualified for Medicaid, all of the non-exempt assets of either spouse (regardless of the name on the deed, title, or other asset) are considered available to pay for the cost of care. As outlined below, a portion of these available assets may be saved for the benefit of the well spouse. The rest must be spent or converted to exempt assets before the ill spouse can qualify for Medicaid. This is true even if there are non-joint children who think they should inherit a piece of property or other asset instead having it considered available to pay for the cost of care of a step-parent.
In addition to exempt assets including a house with a value of up to $500,000, a car if used to visit the ill spouse, and other items, a well spouse can often keep one half of non-exempt assets held by the couple at the time the ill spouse began a period of continuous care. (A break in care of less than 30 days is not considered a break in continuous care.) There are limits to this, however.
If the couple had non-exempt assets of less than $43,824 (in Oregon, in July, 2009), the well spouse can keep non-exempt assets of $21,912, even if this is more than half of the total non-exempt assets. On the other hand, if a couple’s assets total more than $219,120, all that a well spouse can keep without a special court order is $109,560.
In some situations a Spousal Support Order can be obtained by an elder law attorney. Such orders may protect assets which would otherwise have to be liquidated and spent for the cost of care of the ill spouse before he or she could qualify for Medicaid. This is NOT improper. Federal law allows for this because it is recognized that the well spouse should not have to go on welfare, and the income of the well spouse is often inadequate without additional principal needed to generate interest income.
If a couple has over $21,912 in non-exempt assets, it can be particularly important for the well spouse to contact an elder law attorney as soon as possible, because an elder law attorney may be able to help the spouse keep more than half of the assets.
There are a variety of additional exempt assets, or items that a person can keep, and still qualify for Medicaid.
For example, a person can keep burial funds (or life insurance) of up to $1,500. People sometimes do not realize, however, that they can often keep a much larger irrevocable burial plan (if purchased before qualifying for Medicaid).
A person can also keep their home in many circumstances if 1) the person reasonably expects to return home, or 2) a spouse, child under age 21, or a blind or disabled child resides in the home.
Certain things many people would consider assets may officially be counted as income items instead. Examples may include certain contracts for the sale of real estate, certain annuities, and the like. Qualifying items may not have to be sold or spent down, at least initially.
Other things, which most people might not consider available, such as IRAs for which there may be a penalty for early withdrawal, whole life insurance policies, etc., are frequently classified by Medicaid as available resources which may need to be cashed in and spent down.
Debts are NOT set off against assets in many circumstances. If a person owns property worth $50,000, and has consumer debts of $30,000, the person is considered to have available resources of $50,000.
Jointly owned property is usually considered not available if it cannot easily be split, and if the co-owner declines to sell. This situation often arises when a person owns real estate jointly with someone other than a spouse. The State can often force the sale of these properties after the Medicaid recipient dies, and can claim reimbursement up to the value of the Medicaid recipient’s interest in the property.
Spend down can be achieved by most transfers in which a person gets fair market value for property or cash. So long as what is purchased is an exempt asset, is considered an income item as discussed above, or is completely consumed (as with services, vacations, etc.), the purchase usually will lead toward spend down.
In the case of a married couple, spend down often should only be started after one spouse has entered long term care. This is because the goal with a married couple is often to have as many available assets on hand as possible at the start of continuous care for the ill spouse, so that the half of the assets that may be saved for the well spouse will comprise as large an amount as possible.
If expenditures are made before a person is considered to be in long term or continuous care, the expenditure would not qualify toward spend down, in most cases, and only the non-exempt property that still existed at the time that the period of care began would be considered for purposes of calculating the amount which could be saved from spend down.
If a person transfers property or money for less than fair market value (or if the person gives property or money away) this creates a period of Medicaid ineligibility. Under new legislation and administrative rules, the period of ineligibility may well only begin to run when the person has achieved spend down and would otherwise be eligible for Medicaid. This can create very significant difficulties, as a person may well be broke (or there may well be only limited assets which have been saved for, and are needed by, the well spouse), while still not qualifying for Medicaid because of a disqualifying transfer or gift.
However, there are some transfers that do not create periods of Medicaid ineligibility, and do not create federal criminal liability for people who assist with such transfers.
For example, one transfer that may not create problems (at least in Oregon, in July, 2009) is the transfer of a home to an adult child, who lived in that home with the elder, and who provided two years of uninterrupted care to the elder that delayed the elder’s entry into a long term care facility by at least two years. Care should be taken to ensure that such a transfer will not create problems, of course, as it can be very difficult to undo the harm caused by a transfer if it does not meet all necessary criteria (some of which are too complicated to adequately discuss in a summary such as this). Transfers of a home to a blind or disabled child, or to a child under age 21, or to a sibling in some cases, may also be appropriate, but care should be also used in such transfers.
A transfer to a spouse is also usually not considered a disqualifying transfer, even if something very valuable is transferred for free. Once spend down has been achieved, the well spouse’s resources are no longer considered available to pay for the ill spouse’s care. This can be very important in some circumstances.
Another area which may be of concern relates to estate recovery. Estate recovery is the process by which the state seeks reimbursement from the estate of a decedent who received Medicaid, in order to recover the cost of care provided by the state through Medicaid. Certain assets or interests in assets which the Medicaid recipient had during life, but which were exempt or otherwise not subject to spend down during life, may be subject to estate recovery. Handling estate recovery issues after a person has passed on, and planning for estate recovery before this happens, are complex and significant matters, with which an elder law attorney can also assist.
NOTE: The rules governing Medicaid in Oregon, and particularly the rules governing eligibility and spend down, are very complex. They also change very rapidly. The above address only a very few of the issues which may be of relevance in these matters, and should not be considered legal advice, nor should the above be taken as a statement of the only time that one might benefit from consulting a legal or other professional.
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