Medicaid Planning and Asset Protection in New York State
Please Note: Medicaid rules are complex and subject to change. The description below is a brief overview and is not meant to be comprehensive, nor is it meant to be nor is it legal advice.
Individuals sometimes confuse Medicare and Medicaid. Medicare is the national health insurance program for individuals 65 and over which, for the most part, covers doctor’s visits, hospital care, surgery and medical supplies, among other things. Enrollment in Medicare is based on age, not on need or medical necessity. Except on a limited basis and unless there is a skilled nursing (medical) need, Medicare does not cover long-term care for home care or nursing home care. This is where Medicaid comes in. Medicaid is a government health insurance program for poor people. Medicaid covers home care, to assist with activities of daily living, and nursing home care under certain circumstances. (For the purpose of this article, the discussion of Medicaid will be limited to its coverage of home care and nursing home care.) Here is how it works:
Medicaid will pay for home care or nursing home care if the applicant qualifies financially and medically. Frankly, to qualify for Medicaid you must be poor (or have transferred your assets out of your name in a way that is legally permissible) and your medical condition must be such that a nurse determines you need the care Medicaid can cover.
Individuals, including those who are 65 or older or disabled or blind, are eligible for Medicaid home care, called community Medicaid, in 2017 if their income is no more than $825 a month and their total assets are no more than $14,850. (For a couple, the eligibility figures are $1,209 a month income and $21,750 in assets.)
This writing will cover 1) Community-based Medicaid, for individuals who live at home and are seeking coverage for home care; and 2) Institutional Medicaid, for individuals who are seeking coverage for nursing home care. Different eligibility rules apply for the two types of Medicaid.
Community-Based Medicaid to pay for Home Care
Community-based Medicaid covers home care that has been pre-approved. An individual 65 or older may qualify for community-based Medicaid if their income exceeds the 2017 monthly limit of $825 by doing what is called "spending down" to required income limits. An otherwise eligible person may qualify for Medicaid by paying to the provider the amount that is equal to their "spend down" OR by:
1. Reducing their current income by using recent medical bills as deductions on income; or
2. Reducing their current income by establishing a supplemental needs trust (also known as a pooled income trust) and depositing into the trust the excess income above the 2017 monthly income allowed.
The pooled income trusts frequently are used to reduce excess income to zero. However, the establishment and administration of the trust is complicated and specific rules need to be followed. A pooled trust is a trust account with a non-profit organization that handles many trust accounts for senior citizens and disabled individuals. Many non-profits do this work, including NYSARC Trust Services, at http://www.nysarc.org/trust-services. The Medicaid client must deposit their excess income into the pooled trust every month and then every month the client (or someone assisting them) will pay some or all of the client’s bills from their trust account. Trust money can never be given to the client directly; it always must be paid to a third party, such as a landlord, a credit card company, a vendor, or even a family member who is being reimbursed for expenses spent on behalf of the client. Trust guidelines must be followed.
It is important for the Medicaid client to spend the money in the trust on a monthly basis because upon their death, the money leftover remains with the trust. In other words, if the Medicaid applicant allows their money to accumulate in the pooled trust, the money, upon the client’s death, would go to the trust company, and not to the client’s heirs.
Regarding excess resources above the $14,850 level, an otherwise eligible individual may qualify for community-based Medicaid by transferring their excess assets to another individual or into an irrevocable, income-only trust. Medicaid transfer penalties do not apply for community-based Medicaid, thus an individual can transfer assets away and in the next month be eligible for community-based Medicaid if their assets are below $14,850 and their income is below $825 a month. However, transferring assets to become eligible for community-based Medicaid could create a penalty period if the individual later applies for institutional Medicaid to pay for nursing home care.
Aside from being financially eligible, a client also must be medically eligible to receive home care through Medicaid. In other words, it must be determined that medically the client needs home care assistance. The applicant must need assistance with their activities of daily living, such as dressing, bathing, toileting, ambulating, transferring from bed or chair to standing, shopping, cooking, eating and/or cleaning. Medicaid applicants seeking home care must join a Medicaid Managed Care Plan. There are many Medicaid Managed Care Plans to choose from. The applicant should analyze the plans to make sure the plan's offerings match the applicant's needs. Once a Managed Care Plan has been chosen, the plan will send a nurse to the applicant's home to conduct an assessment of the applicant's needs. This assessment will go a long way towards helping the Managed Care Plan determine how much care (i.e. how many hours of home care) it will provide to the applicant. As a check to make sure the Managed Care Plan will offer the proper care needed for the home care applicant, an independent agency also will evaluate the applicant.
Institutional Medicaid to pay for Nursing Home Care
Different rules apply for institutional Medicaid than for community-based Medicaid. The key difference regarding financial eligibility is that if an individual transfers assets to become eligible for institutional Medicaid, this will create a penalty period for the applicant, preventing Medicaid acceptance for a period of time, based on the amount of the transfer. The rules regarding transferring assets and penalty periods are complex.
A new law went into effect in February 2006, extending the so-called “look-back" period for asset transfers for individuals to 60 months, while maintaining the 60-month “look-back" period for transfers to trusts. When an individual applies for institutional Medicaid now, the agency that oversees Medicaid in the county where the application is filed will “look-back” five years by reviewing the individual’s financial statements to see if the individual transferred away any assets during that period.
For example, if an individual transferred away $100,000 to reduce their assets to get below the Medicaid eligibility level of $14,850, the individual would face a period of ineligibility for Medicaid because of the transfer, called a penalty period. If the individual lived in New York City, to determine the penalty period, for 2017 you would divide the $100,000 by $12,000, the approximate monthly regional average cost of nursing home care in the city. If you divide $100,000 by $12,000, the approximate penalty period is 8.3 months, meaning the individual would have to pay privately for nursing home care for up to nine months, before being eligible for Medicaid. (This is an approximation. Different regional average rates for nursing homes apply for different regions in the state.)
The penalty period will begin to run when the applicant is admitted to the nursing home and the person has applied for Medicaid. When applying for institutional Medicaid, the applicant is required to provide to the local Medicaid agency all bank, brokerage and financial statements covering the five-year look-back period.
If the individual seeking institutional Medicaid has a spouse, this so-called “community spouse” is allowed, under 2017 guidelines, to retain $3,022 in monthly income (the so-called “minimum monthly maintenance needs allowance”) and $74,820 in assets, or one half of the couple’s assets up to a maximum of $120,900 (the so-called “community spouse resource allowance”). These income and asset levels are allowed so that the spouse living in the community does not have to become impoverished for the spouse going into the nursing home to qualify for Medicaid.
The community (also known as the well) spouse may sign what is called a “spousal refusal” document saying that they refuse to use their assets to pay for the medical care of their institutionalized spouse. However, depending on the amount of income or assets that the community spouse has, the community spouse may be sued by the local Medicaid agency for support. A well spouse also may use a spousal refusal in the situation where the spouse seeking Medicaid is requesting Medicaid-covered home care. It is strongly advised that an individual consult an attorney before signing a spousal refusal.
If an individual or a couple have too much resources to qualify for institutional Medicaid, under some circumstances the law allows for certain Medicaid planning techniques to be used to help an individual qualify for Medicaid. Likewise, if an individual has created a Medicaid penalty period because of prior transfers, the individual may be able to take other Medicaid planning actions to reduce the penalty period. These technics and actions are complex and should not be done without consulting an attorney.
The Medicaid application process is complex, lengthy and can be quite frustrating. All applicants and their family members are advised to have patience when submitting an application.