Medicaid

Medicaid is a government program that does pay for long-term care and actually pays for about half of all long-term care in the U.S. It is a joint federal and state program providing health insurance for low income individuals and families.

There are three problems with relying on Medicaid to pay for our long term care. The first problem with relying on Medicaid to pay for our long-term care is that Medicaid is health insurance. We already know health insurance is not designed to cover long-term care.

Medicaid typically only pays for long-term care in a nursing home. Home Care and Assisted Living are typically NOT covered. Since it is a joint federal and state program, there are variations in what Medicaid covers in each state.

The second problem is that Medicaid is intended for low income people. You typically have to be broke or pretty close to it to qualify for Medicaid long-term care benefits. Medicaid will not pay for nursing home care if you have more than $2,000 in assets. Your primary residence is usually not counted if you intend to return home after recovery and your home equity does not exceed $500,000. States can raise the equity limit to $750,000.

There is also a monthly income limit to be eligible for Medicaid to pay for our Nursing Home care. Currently it is $60 a month for personal needs. Therefore, someone getting a monthly check from Social Security would have to turn his or her entire check over to the nursing home except for the $60.

Married couples do not have to use up all their resources to qualify for Medicaid. There is “protection” for the healthy spouse so they do not have to become impoverished. The healthy spouse can keep 50% of the couple’s assets, up to a limit of $109,000.

The third problem with relying on Medicaid to pay for your long-term care costs is Asset Recovery. Federal law requires state Medicaid programs to try to get paid back, or recover, for the benefits that Medicaid pays out for long-term care costs. Medicaid will try to “recover” the benefit dollars from the estate, or property, or the person who received the Medicaid benefits. The state may put a lien, or financial claim on assets, including real estate, owned by the Medicaid benefit recipient. The state will need to get repaid for the Medicaid benefits paid out before anyone else can receive any assets that belong to the Medicaid recipient.

Example:

Stacy is an 80 year old widow who lives on a 1200-acre ranch just north of Spearfish, South Dakota. She lives on her Social Security benefits and rent from her land. She eventually needs care in a Nursing Home and uses up all her savings. Her monthly Social Security benefits and rent do not cover the monthly cost for the Nursing Home. Stacy is able to apply for Medicaid to cover her Nursing Home bills even though she still owns her home on the 1200 acres (because she intends to return to her home if she ever recovers). However, once Stacy is approved for Medicaid benefits to pay for her Nursing Home the state Medicaid office places a lien on her property. If that property is sold while Stacy is alive the state must be repaid for any Medicaid benefits Stacy has received.

After Stacy passes away, the state will have to be repaid for the dollars Medicaid has spent for her care before any of her assets can be distributed to her beneficiaries.

You cannot give away assets to qualify for Medicaid. Federal law requires each state Medicaid office to ensure no assets were transferred or given away in the past five years before someone applies for Medicaid. This is called the “look back period” and Medicaid agencies are very good at discovering evidence of asset transfer. The penalty for transferring assets is being ineligible for Medicaid benefits for a period of time corresponding to the amount of assets that you transferred.

More details on Medicaid can be obtained from your state’s Department of Social Services.