Page Reviewed / Updated - October 14, 2020
Expert Reviewed By: Joshua Iversen, President, Syzygy Financial LLC
Medicaid - Medicaid is a jointly funded state and federal health insurance program for low-income people of all ages. For the relevancy of this page, the focus will be on Medicaid Long Term Care for seniors and disabled individuals. Via the state plan, Medicaid provides medical care, such as physician visits, and non-medical support services, such as in-home personal care assistance. Nursing home care is also provided via the state plan. If a senior is financially and medically qualified, Medicaid will pay nearly all of his or her long-term care costs.
Medicaid Waivers - Also called Home and Community Based Services (HCBS) Waivers, 1915(c) Waivers, & 1115 Demonstration Waivers, these are state-specific programs that provide long term care and support to individuals outside of nursing homes. Generally, these services are provided at home, in an assisted living facility, in an adult foster care home, or in adult day care. Unlike Medicaid nursing home care and state plan personal care assistance, Medicaid Waivers are not entitlement programs. They have enrollment caps, and once the participant caps have been filled, there are waiting lists.
Cash and Counseling - Cash & Counseling is a specific type of Medicaid program available in many states. The phrase, though dated, is still used to describe a program in which the recipients receive funds for care and are given the flexibility to select their own care providers. More modern and accurate phrases include "consumer directed care", “participant directed care”, and “self directed care”. In many consumer-directed programs, family members can be "hired" as care providers. This means they can be paid for the personal assistance they provide a loved one. In some states, even spouses can be hired and paid to provide care.
To be eligible for Medicaid long term care, one must be both financially qualified and have a medical need for care. Eligibility requirements are specific to the state, the Medicaid program or waiver, and one's age group. Therefore, there are hundreds of different sets of eligibility rules for Medicaid long term care services throughout the USA. Having said that, there are some general rules that apply.
The medical (functional) requirements for Medicaid long term care differ significantly by state. Generally speaking, any person who requires ongoing skilled nursing care, is mentally impaired with Alzheimer's/dementia or is unable to care for him or herself will qualify. If skilled nursing care is not required, then many Medicaid programs link eligibility to the number of ADLs (activities of daily living) with which an individual requires assistance. This can include dressing, bathing, eating, cooking, etc. Most states require a "nursing home level of care", but each state defines that level of care differently.
When determining eligibility for Medicaid long-term care, each state considers an individual's finances differently. However, in all states, both one's income and one's assets are consideration factors for elderly applicants and have limitations for qualification. It is important to recognize that even if one's income or assets exceeds these limits, with careful planning, many individuals can still qualify for Medicaid.
Medicaid Income Limits
States use one of two approaches to determine if an individual meets their Medicaid income limits. There are income cap states, which are said to have "categorically needy” Medicaid. And there are non-income cap states, which have "medically needy" or "spend-down" Medicaid. Income cap states, which may also be called special income rule states, set a hard income limit at 3 times the SSI payment amount, also called the Federal Benefit Rate (FBR). In 2020, this limit is $2,349 a month. Please note, in most cases, this figure is for nursing home Medicaid and Medicaid HCBS Waivers. Those applying for personal care assistance and other long-term care support via a state Medicaid plan generally have a lower income limit. Which varies based on the state in which one resides. Being over the income limit does not mean one cannot still qualify for Medicaid in income cap states. See the section, “Qualifying and Applying for Medicaid” below.
Non-income cap / medically needy states allow applicants who have income over the limit to still qualify for Medicaid if they have high medical bills relative to their income. In simple terms, one can “spend down” their excess income (the income over the Medicaid limit) on medical bills / care assistance. Once one has spent their income down, in Medicaid-speak, to the Medically Needy Income Limit (MNIL), they are eligible for Medicaid for the rest of the spend down period. (This period differs based on the state, but is between one and six months.) The MNIL limit varies greatly based on the state in which one resides, but tends to be somewhere between approximately $107 and $1,050 / month. Learn more about the medically needy pathway to eligibility here.
2020 Medicaid Income Qualification Type by State
Income Cap States / Categorically Needy
Spend-Down States / Medically Needy
Medicaid applicants' financial resources are also a major factor in eligibility. Resources are also referred to as "assets" and "countable assets." Most states' asset limit for a single individual is $2,000, though the range for 2020 is between $1,600 and $15,750. Having said that, there are a considerable number of exceptions made when determining what qualifies as "countable". For example, the Medicaid applicant's primary home, vehicle, jewelry, clothing, and furniture can all be considered "non-countable" or exempt assets.
If a senior’s financial assets exceed the Medicaid eligibility requirement, but his or her income does not cover their long-term care costs, he or she is considered to be in the "Medicaid Gap." In this situation, some seniors will "’spend down" their assets on their long-term care costs (pay for their care costs out of pocket) until they become eligible. (For other ways to “spend down” excess assets, see our Strategies to Spend Down Assets to Gain Medicaid Eligibility). It’s important that one does not give away assets or sell them under fair market value to meet Medicaid’s asset limit. Past asset transfers for up to 5 years preceding the application date are considered. This is called the Look-Back Period, and if violated, can lead to a period of Medicaid ineligibility.
Married couples can have considerably higher asset limits, but only if one spouse is not applying for Medicaid. The non-applicant is referred to as the "community spouse". In 2020, in most states, the community spouse is permitted up to $128,640 in countable assets. This is in addition to the assets the applicant spouse is able to keep. More on joint assets. Persons whose assets exceed Medicaid’s countable limits should not automatically consider themselves ineligible. Read the Qualifying section below for more information.
There are several other eligibility considerations and factors often thought to impact eligibility when, in fact, they do not. Medicaid long term care services are available to individuals 65 and over, or younger if they are officially considered disabled. Marital status does not directly impact eligibility but does so indirectly by changing the income and asset limits. One's veteran status has no impact on eligibility. Although there may be other assistance options available to veterans.
Applying for Medicaid or choosing when and how to apply is not as straightforward as one would think. There are several reasons for this complexity. First, married couples can apply jointly or separately. And how they choose to apply dramatically changes their financial eligibility requirements. Second, while there are hard definitions for income and assets, there is also considerable wiggle room within those definitions. This is because there are many Medicaid planning techniques that can be applied to improve the chances of being accepted.
Qualifying When Income Exceeds the Limit
When one's income exceeds Medicaid’s eligibility threshold, the excessive income can be allocated to a trust. Thereby legally lowering their income level to meet the eligibility threshold. These trusts are referred to by several names, including Income Cap Trusts, Miller Trusts and Pooled Income Trusts. The process of creating or contributing to a trust is a complicated one; it is possible to disqualify oneself for Medicaid if not done correctly. Therefore, it is recommended one consult with a Medicaid Planning professional or an attorney if they are considering this approach.
Qualifying When Assets Exceed the Limit
It is rare for the total value of a Medicaid applicant's assets to be less than $2,000 (most states' limit in 2020). Meeting this limit is often a matter of restructuring one's assets so they can be considered non-countable assets and / or placing excess assets into trusts. As mentioned before, one cannot simply give away their excess assets. Medicaid looks into asset transfers as far back as 60 months before the application date.
How one structures their assets to gain Medicaid eligibility largely depends on the amount by which they exceed the asset limit. One simple and common technique when one exceeds the asset limit by less than $15,000 is to create a funeral trust. Given that funerals are inevitable, it is logical to allocate money in advance to cover the cost and by doing so it helps qualify for Medicaid. Learn more about funeral trusts.
There are also other, more complicated techniques that help families qualify for Medicaid even if their assets are $100,000 or more beyond the limit. For families in this situation, we strongly encourage them to consult with a Medicaid planner. There is also a veterans' pension alternative to Medicaid that is available to U.S. veterans with higher assets. Compare Medicaid and veterans' pensions here.
Qualifying One Spouse for Medicaid
Oftentimes, one spouse requires care in a residential facility and the other remains healthy and lives at home. The spouse living at home is known as the “community spouse” or “well spouse”. While the non-applicant’s income is not considered in the eligibility process of their spouse, the couples’ assets are considered jointly owned. Therefore, the couple may have to spend down assets or reallocate them in order for the applicant spouse to meet the eligibility limit. For these reasons, it is strongly recommended that couples in this situation contact a Medicaid planning professional.
Working with a Medicaid Planner
As mentioned before, the financial eligibility rules for Medicaid are very complex. There are approaches and strategies that help seniors gain eligibility. There are also a variety of different professionals who can provide help. In addition to Medicaid planners, there are Area Agencies on Aging case managers and geriatric care managers who can provide assistance.
Seniors can apply for Medicaid in their state of residence by obtaining an application from their local Medicaid office. Or, many states now allow candidates to apply online.
Medicaid applications are generally processed within 45 days after receipt or in 90 days if a disability determination is necessary. However, a family should add several weeks to that figure in order to collect the necessary paperwork for the application process. Re-applying for Medicaid in a different state, either for oneself or for a family member, is complicated. Medicaid does not transfer from state to state, read more here.
The services covered by Medicaid vary from program to program and from state to state. What follows are general Medicaid benefits which are typically available in most states.
In all states, Medicaid pays for long term nursing home care, provided the facility is Medicaid certified.
The number of state Medicaid programs helping with assisted living is increasing, and this trend looks like it will continue until assisted living assistance is available nationwide. As of mid 2019, in 44 states and the District of Columbia, Medicaid pays for some assisted living fees, mostly by way of Medicaid Home and Community-Based Services Waivers. To be clear, Medicaid will not pay for room and board or rent in assisted living communities. However, there are other programs open to Medicaid beneficiaries that can help. In addition, there are assisted living-like programs that may not be called assisted living, but provide a very similar experience. Read each state's assisted living policy and learn about specific Medicaid waivers here. Often positioned as an alternative to assisted living or nursing home care, adult foster care is covered by Medicaid in many states. Read states’ adult foster care policies here.
Medicaid in all 50 states through Medicaid HCBS Waivers and some regular Medicaid programs will cover adult day care and / or adult day health care for some beneficiaries. Interestingly, some states choose to only cover adult day care and not adult day health (medical) care and other states choose to do the reverse. Still other states elect to cover both options. Specific state policies and waivers are available here.
Medicaid, through HCBS Waivers and some regular Medicaid "personal care assistance" programs, will pay for home health care. Many waivers also offer support for personal care (non-medical home care), as well as a variety of other chore services in and around the home. State by state information and waivers are available here.
Once an individual has been accepted into the Medicaid program, generally speaking, there are no monthly payments. And co-pay amounts are non-existent or very minor. However, applicants may incur some costs during the Medicaid application process if they elect to use certain types of assistance.
There are Area Agencies on Aging that have case managers and benefits counselors who can help with the application process for no charge. There are also private Medicaid Planners who have a much stronger incentive to ensure a senior’s acceptance into the program. Private Medicaid planning fees are typically several thousand dollars. It is worth noting that private Medicaid planners can very quickly pay for themselves if they are able to help a family retain some of their assets or get the candidate into the Medicaid program sooner. This is because even one month of out-of-pocket long term care costs can greatly exceed any Medicaid planning fees.
Medicaid applicants should be aware of Medicaid Assistance Estate Recovery (MAER), more commonly referred to as the Medicaid Death Tax. Should a Medicaid beneficiary have assets that were unavailable, for a variety of reasons, when the individual was receiving Medicaid benefits, the state may claim those assets after the individual passes away. In most cases, the asset which is claimed, is the home in which the Medicaid enrollee was residing. In some cases, by working with a planning professional, this action can be avoided. Learn more about Medicaid planning.