March 14, 2016
Most people cannot pay for their nursing home stay without government assistance. In fact about, 70% of people who live in nursing
homes in Kentucky have a portion of their bill paid by Medicaid.
Eligibility requirements to receive Medicaid assistance: 1) the individual must be in a nursing home; 2) the individual must need skilled
or intermediate nursing care; 3) the individual must meet specific financial requirements regarding income and resources.
The individual must be a nursing home facility – assisted living does not meet this criteria. The individual must need a certain level of
care. This care must be skilled or intermediate nursing care. The level of care is defined by regulation. See 907 KAR 1:022, section 4. Essentially the level of care is determined by your inability to accomplish at least two of six activities of daily living. The activities of daily living are eating, walking, bathing, dressing, toileting, and transferring. You must have been in a facility for 30 days or longer. You must be in a Medicaid eligible bed. The Commonwealth of Kentucky grants certificates of need to facilities designating the quota of Medicaid beds.
The final criterion for Medicaid eligibility is financial. The Medicaid office will review separately your income and your resources, which are
normally called assets.
A. Income Allowance for Single and Married Individuals
1. What is Income?
What does the Medicaid office consider income? The Medicaid office will consider all income, whether earned or unearned, including lump sums of money. This includes gross wages, net self-employment, Social Security payments, pension payments, IRA mandatory withdrawals, and Roth IRA withdrawals. Interest, dividends, annuity proceeds, gifts, and rental property income will also be included.
Medicaid does not consider the following to be income: Equity loan proceeds, reverse mortgage money taken as monthly income, any transfers between spouses, credit card cash advances, war reparations, or $90 of veterans administration pension benefit.
2. Allowed income
An institutionalized person may have income of $2163 or less per month. This is three times the rate of the federal maximum SSI, supplemental security income, level. The person’s income will be paid to the nursing home every month for the care received.
For a single person, the allowed income may cover, other than the nursing home tab, health insurance premiums and other health related needs, and $40 to cover personal needs such as haircuts.
3. Income for the Community Spouse
If an institutionalized person is married and their spouse does not need nursing home care, this person is referred to as the community
spouse. The Community Spouse may keep his or her income with no contributions required to be made to the institutionalized spouse. Thus, if community spouse makes $4000 a month income, she may keep all of this income for herself.
On the other hand, if the community spouse makes less than $1938.75 per month gross income in her own name, then the institutionalized spouse’s income may be transferred to the community spouse to bring her income to that level. This is called the community spouse income allowance or the minimum monthly maintenance needs allowance.
This income allowance includes a presumption that shelter costs $581.63 a month. To the extent that shelter costs actually exceed this
amount, the income allowance for the community spouse may be raised up to a maximum of $2931 a month. To calculate the shelter expense, add the community spouse’s rent or mortgage, property taxes, homeowners insurance, utilities expenses, and $34 or actual telephone expenses. This shelter expense is most useful where a community spouse resides in assisted living. Otherwise, it is unlikely that these expenses will exceed $581 per month and there will be no upward adjustment to the community spouse income allowance.
4. Excess Income & Qualified Income Trusts
For persons with more income than the maximum $2163 per month to be eligible for long term care Medicaid, his or her excess income must be placed in a qualified income trust, also referred to as a QIT or a Miller Trust. Thus, a person who would have too much income to qualify for Medicaid will use this legal fiat to separate from himself the income which would otherwise make him ineligible.
The QIT has several requirements: 1) It may only contain income (no resources); 2) it must be irrevocable; 3) it may only terminate at the death of the resident; 4) it must be placed in a separate bank account using the resident’s Social Security number; 5) no child support, alimony or home maintenance expenses may be paid out of the QIT; 6) the portion due to the nursing home for the patient’s charges must be paid before administrative costs; 7) lastly, the Department of Medicaid Services must be the named beneficiary.
The grantor and the trustee in the presence of a notary must sign these documents. The resident’s agent normally signs for the grantor. Elder law practitioners routinely provide QIT documents for clients. Many practitioners will share their document template request.
B. Resource Allowance for Single and Married Persons
1. What is a Resource?
A resource is any asset that an individual or couple own or have access to which may meet basic needs of food, clothing, and shelter. This
includes all assets owned by a revocable trust. It also includes a disclaimed inheritance because the person would have a right to assert a
claim.
Income is not an asset in the month of receipt. But if income is not spent in the first month then it becomes an asset the next month.
Medicaid does not consider liabilities. The value of assets are not reduced by the person's debt. One exception is rental property. A
mortgage debt will be subtracted from the fair market value of rental property. The Medicaid office will not reduce a person’s resources by the amount of his credit card debt, for example.
2. Single Persons
A person considered to be single by the Medicaid office is resource eligible when his or her countable resources are less than $2000.
Medicaid considers a person single if the person has never married, is widowed, is divorced, or married to a person who was also in a nursing home.
3. Married Persons
If a spouse lives at home, with the child, in a personal care residence or an assisted living facility, the spouse is still considered a community spouse. Medicaid rules were drafted to protect community spouses. A community spouse may keep half of the couple’s countable resources up to a maximum of $117,240.
This is called the community spouse resource allowance. For couples who have countable assets less than $23,448, the community spouse keeps all of the assets.
C. Exempt Resources
Resources that are excluded from consideration by Medicaid are homestead property and all contiguous property, one vehicle regardless of value, household personal effects, and qualified plans. For a single person, the home will lose its exempt status after the resident has lived in the nursing home six months. This exemption is not applicable for homes valued over $543,000. For a married person, the homestead is exempt as long as the community spouse resides in it.
A resident may own a life estate without any penalty to qualify for Medicaid. However, the Medicaid office will seek estate recovery up to the level as determined by the Medicaid tables.
The vehicle will be exempt if it can be used to obtain medical treatment for the resident. A letter from the family physician stating that the resident is capable of being transported in the vehicle is required for a single person. A vehicle owned by a community spouse is always exempt.
Pensions, IRA’s, Roth IRAs, 401K’s, and Keogh plans are exempt in Kentucky. Medicaid offices in Indiana consider qualified plans to be
countable assets. Medicaid offices in Ohio only consider the community spouses plan to be excluded from consideration.
Also excluded is property that is essential for support for the individual or spouse and that is used in a trade or business. In Kentucky
rental property is not considered a trade or business. A life insurance policy valued up to $1500, if it is designated as a burial reserve, is also excluded.
And an irrevocable funeral contract up to $10,000 per person is an exempt resource. Larger amounts may be approved but the Medicaid
office must review them in Frankfort rather than in the county where you apply.
Jointly held property will be considered a resource of the Medicaid applicant, unless that presumption is rebutted. The resident may show
that he or she does not contribute to or withdraw from the jointly held checking, savings, CD, or savings bond. A written statement from account holders verifying their interest in the account may demonstrate ownership.
Also, the resident’s name should be removed from the joint account. The resident can also show that litigation would be required to force the coowner to release his or her portion. This constitutes a co-owner’s refusal to sell.
D. Resource Assessment for Married Couples
A community spouse needs as much protection as possible from impoverishment that may be caused by the expenses of an institutionalized spouse. At the start of a continuous nursing home stay, the community spouse or someone on his or her behalf (with a proper POA) should visit the Medicaid office for a resource assessment. The form is referred to as a PA-22. This resource assessment is a calculation of the couple’s countable resources. Then that level of resources is compared to the Medicaid resource allowance to determine when the institutionalized spouse will be resource eligible for Medicaid.
The goal of the resource assessment is to permit the community spouse to keep half of her wealth. Converting countable resources that are over the community spouse’s share into exempt resources can maximize these assets for the couple. For example, a couple may own a home, one car, a savings account, a vacation cabin, IRAs and an insurance policy with a cash surrender value.
Excluded from consideration by the Medicaid office will be the home, the car and IRAs. Included will be the savings account, the vacation cabin, and the cash surrender value of the insurance policy. The total value of the countable assets is added together. The community spouse keeps half of the value and the institutional spouse keeps $2000. The remaining must be spent down before the institutional spouse will be eligible for Medicaid. If half of the couple’s countable resources is more than $117,240, then the excess amount will also have to be spent down.
Instruct your client to never ever leave the Medicaid office without a piece of paper in hand signed by the caseworker containing the listing
of countable assets in a resource assessment. The date is critical. Anything spent for the couple after that date is considered part of the
spend-down to qualify the institutional spouse. Even if you are missing items or have incorrect values, the paper is critical to lock in the date upon which the couple can begin spending down their assets.