Risks of Giving Money to Families on Medicaid

Page Reviewed / Updated - Dec. 2016

Introduction

Well-meaning family members may want to provide financial support to an elderly relative to help supplement the care they are currently receiving. However, when that family member receives Medicaid assistance, such as assisted living care, there is a legitimate concern that giving them money may compromise their Medicaid eligibility. This article explores how, when and where it is possible to help a family member financially without hurting their Medicaid eligibility. Medicaid eligibility is a complex topic. At the basic level there are a variety of asset and income limits for eligibility. In many instances, providing additional funding could be seen as supplemental income that might result in the loss of Medicaid eligibility. Thankfully, a variety of techniques exists to provide additional support without risking the loss of Medicaid eligibility, or at the very least, minimize the effect of financial support on reportable income.

Sample Scenarios

A daughter would like to provide financial help to her elderly mother who has early onset Alzheimer's and lives in an assisted living facility. Her mother's Social Security and Supplemental Security Income (SSI) isn't enough to cover the cost of a private room in the residence, much less the type of clothes she's accustomed to, or for a computer to keep in touch with friends and family. The daughter has three options, each effecting the Mom’s Medicaid eligibility differently depending on the state in which her mother resides. 1) The daughter could choose to give money directly to her Mom. 2) She could pay for Mom’s clothes and a computer herself, or pay the assisted living facility directly for the difference for a private room. 3) She could establish a third party Supplemental Needs Trust (SNT) that pays Mom’s bills directly.

Impact on Medicaid Eligibility

Giving Money Directly

If the daughter decides to give the money directly to her mother and allows her mother to purchase items and pay bills herself, the money will count as unearned income. The increase in unearned income will reduce SSI payments by the same amount. Furthermore, depending how much additional money the daughter gifts her mother, she could disqualify her mother for Medicaid. This is true in all states. In short, the daughter is, at best, wasting her money, since any money she gives will lessen the public assistance her mother receives and, at worst, endangering her mother’s Medicaid eligibility.

Purchasing Items & Paying Bills on Someone’s Behalf

If the daughter pays Mom’s bills herself, for example, paying the assisted living community for the difference between a shared and a private room, then the money will be considered an in-kind payment. In-kind payments impact Supplemental Security Income and could lower public assistance payments made to the mother by up to one-third. Depending on the state in which the mother resides, the daughter’s assistance could also make her mother ineligible for Medicaid. However, in some other states, known as Family Supplementation states, the daughter is allowed to help her mother and her assistance has no impact on her mother’s Medicaid eligibility. Family supplementation was created to enable families to help in these situations without significantly harming the elderly family member’s Medicaid eligibility. What can be paid for is restricted differently in each state, so while family supplementation is an effective way to give Mom or Dad money to help pay their bills, it could cause some problems. It is best to check with a Medicaid expert in your state before doing so.

State-by-State Rules

As of January 2017, the following states have rules allowing or prohibiting family supplementation. Several states do not clear laws that prohibit or allow family supplementation. In these states, it is best to error on the side of caution and limit assistance until consulting with a Medicaid expert.
StatePolicy on Family Supplementation for Medicaid
Alabama No information
Alaska Allowed for room and board
Arizona Allowed for room and board
Arkansas Not allowed for room and board but permitted for other expenses such as phone and cable
California Not permitted
Colorado Allowed for items not covered by the Medicaid
Connecticut Allowed
Delaware Allowed
Florida Allowed when paid directly to assisted living residence / foster care home
Georgia Allowed
Hawaii Not permitted
Idaho Allowed
Illinois Allowed
Indiana No information
Iowa Allowed
Kansas Allowed for services not covered by Medicaid (KanCare)
Kentucky No information
Louisiana No information
Maine Allowed
Maryland Not permitted
Massachusetts No policy
Michigan No information
Minnesota Allowed
Mississippi No information
Missouri Allowed
Montana Not permitted
Nebraska Not permitted
Nevada Allowed for room and board upgrades
New Hampshire Allowed on a case-by-case basis
New Jersey Allowed for room and board upgrades
New Mexico Allowed
New York Not permitted
North Carolina Permitted to pay for a private room
North Dakota Allowed
Ohio No policy
Oklahoma Allowed
Oregon Not permitted
Pennsylvania Permitted for items not included in the room and board rate
Rhode Island Not permitted
South Carolina Not permitted
South Dakota Not permitted
Tennessee Allowed for room and board upgrades
Texas Allowed for amenities not included in the room and board rate
Utah Allowed
Vermont Not permitted
Virginia Allow for goods and services, but not allowed for room and board
Washington Allowed for items not covered by Medicaid
Washington DC No policy
West Virginia Allowed
Wisconsin Allowed for room and board and other items not covered by Medicaid
Wyoming Allowed for room and board

Using a Supplemental Needs Trust

If the daughter sets up a third-party Supplemental Needs Trust for her mom, then the daughter can put money into the trust, and the trust can pay for any goods or services not covered by Medicaid, such as clothing and technology, and it will have no effect on the Mom’s Medicaid eligibility. Whether or not the Trust can be used for the cost of a private room depends on the state, as described above. A “third-party” Supplemental Needs Trust (SNT) is a legal trust created for the benefit of a disabled person, typically over 65 years old, to enhance their quality of life while maintaining eligibility for government benefits which are funded by assets of a person other than the beneficiary, such as a family member. SNTs are traditionally not included as countable assets for Medicaid eligibility purposes (which, depending on each state, are limited to no more than $2000 for an individual, or $3000 for a couple), and thus, SNTs are an excellent option for those looking to help an elderly family member. SNTs have a variety of limitations. Funds are distributed by a trustee (the person in charge of the trust) and are paid directly to the third parties who provide the goods or services. Funds can only be used for supplemental items for beneficiaries (those for whom the trust was created) such as clothing, transportation, technology and travel. SNT funds cannot be used to purchase food, towards shelter costs, or for medical care which Medicaid would otherwise cover. Finally, the “remainder beneficiary” (the entity that receives the remaining funds once the beneficiary passes away) must be Medicaid.
If you or one of your family members is thinking about providing additional financial support to an elderly loved one, even if they are not currently on Medicaid, it is highly recommended that they contact a specialist who can help decide the best course of action that protects your elderly family member from losing Medicaid or prevents future difficulties in obtaining Medicaid.