Assisted living or nursing care is expensive and many older adults will need to use Medicaid to pay for it. To qualify for Medicaid benefits, many older adults “spend down” or try to reduce their assets to meet the financial requirements. But the rules are complex, so doing this without help from a Medicaid advisor could lead to penalties or denial of benefits for months forcing you to pay out of pocket for care.
There is a strategy that can help people qualify that’s often referred to as “Medicaid spend down.” In short, “spending down” involves reducing one’s income or assets to the point of eligibility.
It can be a good strategy as long as it’s done properly. The problem is, some people tend to start transferring or selling assets before they truly understand all the requirements.
Income Requirements
Some people earn too much income to qualify for Medicaid. This amount is called excess income. In order to qualify for Medicaid your Modified Gross Adjusted Income or MAGI must not be more than the cost of care.
Individuals are allowed to keep a monthly income amount for “personal needs” like haircuts, toiletries, food, etc. If you qualify for coverage in Iowa you are allowed $50 per month; in Nebraska it is $60.
Heres how it works:
It works almost like a deductible for car insurance. When you require care greater than your individual monthly income, you may be able to qualify for Medicaid. You are responsible for the bills up to your maximum monthly income amount; Medicaid will only pay those bills over the excess amount.
Any medical expenses paid for by Medicaid can be recouped from any assets leftover in that persons name. Thats why it is vital that you work with a knowledgable Medicaid advisor and elder law attorney in order to avoid this situation.
Asset Requirements
Each state’s Medicaid program has specific financial eligibility requirements that must be met in order to qualify for long-term care coverage. For instance in Iowa an applicant can have no more than $2,000 in assets in their name. In Nebraska, it’s $4,000.
Each state defines what is considered a countable asset and a non-countable asset for Medicaid eligibility, so you’ll need to confirm the laws in your state before taking action. The examples shown below are specific to Iowa and Nebraska Medicaid programs.
Countable assets typically include:
- Cash in checking and savings accounts
- Accumulated assets in investment accounts
- 401k and IRA retirement accounts
- Investment property
- Boats, RV’s, extra vehicles, additional homes
- Cash value life insurance greater than $1,500
- Annuities both deferred or currently liquidating
- Gifts given in the previous 5 years (“look back period”)
If, the applicant has done any business or personal legal work in the past you will want to make sure to divulge that information when working with your advisors. Trust documents and prior legal work can affect your eligibility.
How To Spend-Down
Most people are not aware of the various ways to reach Medicaid eligibility. Unfortunately people are often told that “you must spend all of your money down”. This is why I stress the fact that you must work with an experienced Medicaid advisor and elder law attorney when applying for Medicaid.
There are certain expenses that I like to refer to as “boxes” that qualify as a proper spend down without incurring any penalties.
Expenses that qualify as a spend down:
- Medical Expenses
- Home Improvements
- Financial debt
- Burial Plots
- Pre-paid funeral Expenses
- Attorney Fee’s
- Long-Term Care Planning
You would typically pursue a spend down on behalf of a family member who needs pricey, long-term care. If you have an elderly parent or grandparent who requires long-term nursing home or assisted living care, but who lacks the money to pay for it, you may consider helping your parent apply for Medicaid.
Married Couples
When only one spouse is entering long-term care or a nursing home facility and the other remains at home, the spouse remaining at home is given a greater allowance for assets and monthly income than a single individual. This helps prevent a healthy spouse from being forced to live in poverty simply because his or her partner needs high-cost care.
The specifics will vary by state. In Nebraska, for example, the spouse staying in the home is currently allowed to keep $128,640.00 in assets (and the same assets exempt for an individual are also exempt for the spouse), plus a maximum monthly “allowance” of $3,216 (and the spouse may retain all of his or her income).
If both spouses are applying for Medicaid, the limits are slightly different.
In Conclusion
Medicaid is a very complex subject and the eligibility rules vary by state. It is important that you verify the various requirements pertaining to your state before planning. Unfortunately, many individuals assume their only option to become eligible for Medicaid is to deplete their assets by paying for care or making unnecessary purchases. But they have other options, and they deserve to be informed!
At The Nebraska Asset Protection Group, we are committed to helping your senior clients accelerate their Medicaid eligibility while also guarding their assets in the most economical way. Our Medicaid Planners are well-versed on the limitations of Medicare coverage and the benefits that Medicaid offers for assisted or skilled nursing care. If you would like a free consultation to learn how we can help, give us a call today or click here to get started!