A Guide to Medicaid Programs
If you’re reading this, you likely already recognize just how expensive medical care can be these days. From prescription drugs to surgeries to care in an assisted living facility or nursing home, healthcare costs can have deleterious effects on your family’s finances.
But Medicaid can often take care of most or even all of those costs — if you’re eligible for coverage. This article will explain in simple, jargon-free language, the various rules and procedures associated with obtaining Medicaid coverage.
Before we dive in, bear in mind that Medicaid is a system based on a combination of federal and state laws. Many of the laws vary from state to state; the system is also undergoing changes, since several jurisdictions are at different stages of the more than a decade-long process of updating their Medicaid rules and procedures.
All of this makes for a complex puzzle. The only way to determine the best course of action for your particular situation is to consult an attorney who specializes in Medicaid planning. It’s no different than consulting a CPA to manage your taxes. In fact, effective Medicaid planning is in many cases a good deal more complicated than tax planning.
That said, this post will equip you with a solid foundation on what to expect with the Medicaid qualification process, and the important questions to ask your Medicaid planner — saving you time and money when you consult them.
- What is Medicaid?
- What are the differences between Medicaid and Medicare?
- What is covered by Medicaid? What will Medicaid pay for?
- What are the Medicaid requirements to qualify for coverage for nursing home care?
- Who is eligible for Medicaid? How do I check if I’m eligible for Medicaid?
- What counts as household income?
- What if your income exceeds the prescribed Medicaid limits?
- When should you apply for Medicaid?
- Next steps
Medicaid is a joint federal-state program aimed at providing medical care to certain population groups within the United States. The program is mostly administered by the individual states.
The following table summarizes the key differences between Medicaid and Medicare.
|Administered by state governments.||Administered by the federal government.|
|Qualification is based primarily on income.||Qualification is based primarily on age and disabilities.|
|Generally covers children, pregnant women, elderly people, and people with disabilities.||Generally covers people over the age of 65, and people with certain disabilities.|
|Requires annual renewal / recertification.||No renewal / recertification required.|
Medicaid will pay for most medical expenses for a person with coverage, including prescription drugs, hospital stays, and nursing care. In some cases, a person may be covered under both Medicaid and Medicare (“dual eligible”). In those instances, Medicaid no longer pays for prescription drugs, which will instead be covered by Medicare.
The following sections outline what Medicaid does and does not cover.
- Physician services
- Family nurse practitioner services
- Dental services
- Hospital inpatient and outpatient services
- Medical diagnostic lab and X-ray services
- Nursing services for people aged 21 or above
- Prescription drug coverage
- Optometrist services and eyeglasses
- Prosthetic devices
- Home care for individuals eligible for nursing services
- Personal items such as clothing, grooming items, cosmetics
- Reading materials, TVs, radios, or phones
- Flowers, plants, or other gifts purchased by or for a beneficiary
- Private room, except when medically required
- Food other than food provided by the facility
- Activities and events other than those provided by the facility
- Special services or ‘extras’ not included in a facility’s Medicaid payment
In addition to coverage explained above, some states also offer a Home and Community Based Services (HCBS) program, which provides Medicaid to elderly people outside of nursing homes. Generally, HCBS coverage is limited to certain types of disability and certain geographic regions.
- Adult day health services, including medical, nursing, psychiatric, psychological, physical, occupational, and speech services
- Personal care
- Home health aide services
- Respite care services
Some states extend HCBS coverage to include assisted living facilities in addition to nursing homes, provided that the facility is Medicaid certified. Note, however, that room and board expenses at assisted living facilities are not covered by Medicaid, as opposed to nursing homes, where those expenses are also covered.
Medicare can cover an eligible person’s nursing home care if:
- such care has been deemed necessary by a physician
- they have been hospitalized for medically necessary inpatient hospital care for 3 or more consecutive days, excluding the date of discharge
- they require skilled care on a daily basis for a condition for which they were hospitalized, and
- they are admitted to a nursing home within 30 days of being discharged from the hospital
There are two types of requirements to qualify for Medicaid: financial requirements, and non-financial requirements. The key points are summarized below.
Generally, beneficiaries must:
- be US citizens or lawful permanent residents
- be residents of the state in which they are receiving benefits
- satisfy certain criteria related to age, pregnancy or parenting status
- fulfil various “level-of-care” requirements depending on the type of benefits being sought
Medicaid provides benefits to eligible children (under the age of 19), pregnant women, people aged 65 or over, people with disabilities, and, in some states, adults with a low income. Each of these groups must satisfy certain financial requirements, which vary based on the state.
In general, most applicants must have income and financial resources below a certain value. Depending on the state, this value for income / resources can be as little as $235 and as much as $4,784 or higher — some states even have no income limit. The lower the limit, the less money you’re allowed to have to be eligible for Medicaid; the higher the limit, the more money you can have while still qualifying for benefits.
The table below summarizes the key income limits in different states.
[medicaid income eligibility 2021 – Income Limits]
- No income limit; entire income except $35 to go towards cost of care.
- Income must be less than the cost of nursing home care.
- No income limit; entire income except $50 to go towards cost of care.
- No income limit; entire income of each spouse except $50 to go towards cost of care.
- No income limit. Income over $62 to go towards cost of care.
- No income limit. Income over $62 (per spouse) to go towards cost of care.
- No income limit. Income over $1,157 to go towards cost of care..
- No income limit. Income over $1,157 (per spouse) to go towards cost of care.
- Cannot exceed the cost of nursing home care.
- No income limit; entire income except $65 to go towards cost of care.
- No income limit; contribution towards cost of care determined by monthly income.
- No income limit; contribution towards cost of care determined by monthly income of each spouse.
- Aging waiver is $1,073. New choices waiver is $2,382.
- Aging waiver is $1,073 per spouse. New choices waiver is $2,382 per spouse.
In addition to the income levels outlined above, applicants must typically also have the value of certain assets below a threshold limit defined by the state.
Essentially, what is calculated is the applicant’s net equity — the price that their assets / resources can be reasonably expected to fetch if sold on the open market in the region where the asset is located, after deducting any debts on those assets.
Assets typically excluded from consideration towards Medicaid are:
- principal place of residence (your home) up to a value of about $603,000
- one automobile of any value
- household goods and personal items
- funeral and burial funds up to a value of $1,500
- term life insurance policies
- up to $2,000 in cash
Note that there are exceptions to the above rules in some states.
For the purpose of Medicaid, household income refers to income from all sources as defined under the IRS’s MAGI rules — this includes all dependents in the same housing unit with a tax-filing obligation, regardless of their age or how they are related to the applicant. A person living alone is also considered to be a household.
Based on the state in which the applicant lives, there are two ways through which one may manage their income and resources to qualify for Medicaid, as outlined below.
This method considers both the applicant’s income as well as their medical care costs; if their care costs are likely to consume the majority of their income, they can become eligible regardless of their level of income.
Some states allow applicants to create a trust that holds all their income that is in excess of the limit. The money in the trust no longer counts towards the Medicaid limit; however, it can only be used for medical purposes and to pay Medicaid premiums.
Some states offer applicants a standardized template to open this type of QIT or “Miller trust”. This template eliminates the need for an attorney to create such a trust for you.
With a Medicaid application, applying too early or too late can both have severe disadvantages. Generally speaking, it is advisable to apply only after making sure that the applicant qualifies. Doing otherwise can result in a disqualification window, during which one cannot re-apply, and in which time medical costs may mount rapidly.
For instance, if an applicant has given any gifts within a 5-year period of the application, this may disqualify the applicant for a period of time proportional to the value of the gift.
A gift is defined as any transfer of assets for less than fair market value, and this can even include a check that the applicant wrote someone for Christmas, their birthday, or even school or college. For married people, this rule applies regardless of which of the two spouses is applying or which of the two has given a gift.
The duration of the disqualification window is calculated by dividing the total value of the gifts by the value of the average cost of nursing home care for the applicant’s specific condition.
On the other hand, applying too late can mean having to pay thousands of dollars of medical bills yourself. If the applicant or their spouse has given gifts within the last 5 years, it is highly recommended to consult an attorney specializing in Medicaid law, before submitting an application.
The Life Care Planning Law Firms Association (LCPLFA) is a nationwide network that offers planning, asset management and protection, as well as a host of other legal services. Website: www.lcplfa.org
The National Academy of Elder-Law Attorneys is a collective with extensive experience in, and a special focus on, elder law and Medicaid planning. Their site offers zip-code and specialty-wise search. Website: www.naela.org
Discover the best senior living options, including nursing homes, assisted living facilities, and home care options, with advanced search by location, reviews, and pricing comparisons. Website: www.seniorsite.org