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Medicaid is a joint federal, state and city program which provides medical assistance for persons with low incomes and limited assets. It is available to persons who are eligible for public assistance or SSI (Supplementary Security Income). However, Medicaid is also available in some states for persons with higher incomes. In states like New York the Medicaid Surplus Income Program is available for persons over sixty-five or who are blind or disabled whose incomes are too high to qualify for public assistance or SSI, but who spend down any excess income on medical costs until they reach the Medicaid income level (see paragraph below on the Medicaid Surplus Income Program). Once this eligibility threshold is met Medicaid covers all types of medical care including hospital care, doctor bills, nursing home coverage, home care, and prescriptions. If you are on Medicare, then Medicaid covers the Medicare deductibles and many of the services not provided by Medicare.
This article primarily sets forth the Medicaid rules regarding assets, income and what is called "spousal impoverishment," that is, what income and resources the husband or wife of a Medicaid recipient in a nursing home can retain. We have also included information about Community Medicaid, which covers medical assistance received when one lives in their home, some adult homes, some assisted living facilities, and the most recent changes enacted by Congress and New York State. Since Medicaid recipients also often have Medicare as well, we begin with a brief overview of the different parts of the Medicare program.
Medicare is a federal program available to persons who are sixty-five years of age and older and certain disabled persons. Basically it is the health insurance component of Social Security. There is a Medicare Part A which covers hospital care and a limited amount of "skilled" nursing care and home health care. There is an optional Medicare Part B which covers part of physicians' costs and other medical services and supplies.
Medicare is the most cost-effective health insurance a senior citizen can buy! Everyone eligible should have Medicare coverage and take the optional Part B coverage at the earliest time allowable (unless they have carefully compared Part B to their own employer's retiree plan). Medicare, However is far from perfect; it is in fact a safety net with many holes. Medicare has certain deductibles, limited payment periods, and restrictions on the types of services covered. Two of the most severe restrictions are that it only covers nursing home care if it is "skilled" care rather than "custodial," and it covers only 100 days of nursing home care per spell of illness. A spell of illness begins with the first day of inpatient care in a hospital or nursing home and ends when the beneficiary has been hospital and nursing home free for 60 consecutive days.
Another variety of Medicare is Part C which is not traditional Medicare. Medicare Part C is managed care whereby insurance companies or medical providers have contracted with the Federal Government to provide comparable coverage without some of the deductions of Medicare, but with a specific network of approved providers. The attraction for Medicare subscribers to take Part C is that you do not have to pay for Medigap insurance. For people who are chronically ill, Part C is frequently less flexible than traditional Medicare Part A and B supplemented by a Medigap policy. If your Medicare Part C policy has credible drug coverage you do not need to purchase a Medicare Part D policy.
Part D is a separate policy for drug coverage at additional cost. Be sure to review whether you need to purchase Medicare Part D to help pay for drugs. These policies reduce the cost of prescriptions for the Medicare recipients until a threshold of several thousand dollars is spent, at which point the insurance covers almost 100% of your drugs above the threshold. If you have other drug coverage, make sure it is creditable or you will end up paying more for Part D coverage if you enroll later.
There are also Medigap or private Medicare supplemental insurance policies. These fill-in some of the gaps in Medicare coverage. For example most Medigap policies cover the 20% of physician's charges not covered under Medicare. However, most policies do not cover the part of the physician charges above the Medicare approved level. Also, new Medigap policies which cover nursing home care only cover 80 days of coinsurance and care which is "skilled" under the Medicare definition (this may not include all care which is received in a "Skilled Nursing Facility") and even this skilled care coverage is limited. Because of the limited coverage of Medicare and Medigap insurance, the only alternative for many persons facing extensive health care needs either at home or in an institution is the Medicaid program.
It is important to note that under Medicaid rules regarding transfers of assets (gifts) and spousal impoverishment, the guidelines for getting community based care which includes doctor visits, prescriptions, home health care and hospital coverage are very different from the rules for getting nursing home coverage. For example, in New York State transfers of resources (gifts) will not disqualify you from receiving community-based care including home health care, but will cause a disqualification period for nursing home care. The "spousal impoverishment" law only affects nursing home care.
An individual, in order to receive Medicaid, can currently have non-exempt resources of no more than $14,400. An exempt irrevocable funeral trust may in New York replace the previously allowable $1,500 in a burial fund. However, the spouse remaining in the community of an individual in a nursing home can retain significantly higher amounts of assets and still not affect the nursing home spouse's Medicaid eligibility. The asset rules for a community spouse are discussed below in the section on "Income and Resources of Institutionalized Spouse and Community Spouse."
An individual Medicaid recipient residing in the community can retain income of $800 per month plus an unearned income credit of $20 and receive Medicaid; an individual in an institution such as a nursing home is restricted to a personal needs allowance of $50 per month. Income allowed for a couple is $1,175 per month in 2013 plus an unearned income credit of $20 for some couples and $21,150 in resources in 2013. However, if only one person needs Medicaid it is usually advantageous for that person to apply in his or her behalf alone; the spouse must refuse to contribute his/her assets or income to the applicant's medical needs. The Medicaid agency must grant benefits, but reserves the right to pursue the non-contributing spouse for support in family court.
For many Medicaid recipients living in the community, the modest income limitation of $820 per month would not leave sufficient funds to pay all living costs. Under Federal Law, Medicaid recipients may join a not-for-profit pooled income trust to protect monthly income above $820 so it can be used to pay the Medicaid recipients bills. Each month all income above $820 is deposited in the trust and it can be applied to pay bills of, or for services of and for, the Medicaid recipient.
Medicaid recipients and applicants under the age of 65 may also, with the assistance of a lawyer, have a parent, grandparent, guardian or the Court create a trust which will work like a not-for-profit pooled income trust, but which can have the advantage of having a family member or friend be the trustee. Like the not-for-profit trust, all monthly income above $820 must be deposited in the trust and only bills directly benefiting the Medicaid recipient can be paid by the trust.
Under these Medicaid rules, an institutionalized spouse includes not only a person in a nursing home, but a person in a hospital who is expected to remain in such a facility for at least 30 consecutive days.
The rules previously described regarding a spousal refusal apply to nursing home Medicaid as well. Under these procedures, an individual can apply for Medicaid and his/her spouse can refuse to contribute income or resources to the applicants medical care. The Medicaid agency must provide benefits, but retains the right to pursue a support order against the refusing spouse in family court.
CAUTION: I Deficit Reduction Act of 2005 enacted Feb. 8, 2006, created major changes in the Medicaid Transfer of Asset rules: (1) created a five year look back; (2) calculate a penalty or waiting period from when a person is receiving institutional care and would be otherwise eligible; (3) created limits on home equity; and (4) required the state be a beneficiary on annuities.
When a person transfers assets and then receives or applies for Medicaid-covered nursing facility services, the local Department of Social Services ''looks back'' at financial transactions made within 60 months from the first date on which the person was institutionalized and applied for Medicaid coverage that includes nursing facility services. A transfer by either the Medicaid applicant or the spouse of the Medicaid applicant will affect the eligibility of the one applying for Medicaid for nursing home services, and some "nursing home-like" services in a hospital. These same transfers in New York, currently will not affect eligibility for Medicaid generally for home health care and hospital care as long as the individual is residing in the community and not "institutionalized." (Medicaid "waivered programs" are currently not affected by transfer of asset rules.)
An institutionalized person (that is, a person in a nursing home or receiving equivalent services in a hospital) is ineligible for Medicaid coverage for a period of time after a gift or transfer of resources by the person or his or her spouse. The person is ineligible for a period equal to the value of the resource divided by the average cost of nursing facility services to a private patient in the community. In New York City the average cost of nursing facility services for 2013 is presumed to be $11,350 per month. On Long Island it is $12,034. In Westchester, Orange, Putnam and Rockland it is $10,737.
The penalty period for transfers begins the first day of the first month during or after which assets have been transferred, or the date on which the individual is eligible for Medicaid and would otherwise be receiving institutional care based on an approved application but for the application of the penalty period, whichever is later, and which does not occur in any other period of ineligibility. Penalties for transfers don't begin to run until the applicant/recipient is in a nursing home, has exhausted all non exempt resources, and is "otherwise" Medicaid eligible. In other words, if a transfer has been made within the five year look back, the applicant who has made a transfer will under usual circumstances face a penalty based on that transfer once she has exhausted non-transferred funds.
No Medicaid planning which involves transfers of assets should be embarked upon without first consulting a knowledgeable attorney.
Under the transfer rules certain resources and transfers are exempt. A home is exempt if transferred to one of the following:
Certain other transfers of any resource are also exempt. The transfer is exempt if the resource was transferred to a spouse or to another for the sole benefit of the spouse, or transfers from a spouse to another for the sole benefit of the spouse; to a disabled child, or specifically to a trust established solely for the benefit of the disabled child; or to a trust established solely for the benefit of a disabled individual under age 65. If the transfer was to the spouse however, then the spouse is prohibited from transferring the resource without creating a waiting period.
Certain other transfers are exempt, for example, if the resource was intended to be disposed of at fair market value or the transfer was exclusively for a purpose other than to qualify for Medicaid. The law states that Medicaid also would not be denied if it would work an undue hardship. However, "undue hardship" may be difficult to establish.
Under these Medicaid rules an "institutionalized spouse" includes not only a person in a nursing home, but a person in a hospital who is expected to remain in such a facility for at least 30 consecutive days.
For community based care (including home health care) the rules previously described regarding a "spousal refusal" still apply exclusively. Under these procedures an individual can apply for Medicaid and his/her spouse can refuse to contribute income or resources to the applicant's medical care. The Medicaid agency must provide benefits, but retains the right to pursue a support order against the refusing spouse in family court.
All resources held by either spouse or both shall be considered available to the institutionalized spouse to the extent the value exceeds the Community Spouse Resource Allowance (CSRA). The CSRA is $74,820 or one-half the couple's resources as of the date of institutionalization to a maximum of $115,920. The resources of a community spouse include those transferred to the community spouse by the applicant/recipient as allowed by the rules on transfer of assets explained above. The Community Spouse Resource Allowance can also be increased if the spouse in the community has income (as discussed below) which is less than $2,898 per month and needs additional interest and dividends to bring his or her monthly allowance up to $2,898. However income will first be transferred from the institutionalized spouse to the community spouse before additional resources will be allowed.
Medicaid cannot be denied even if the community spouse decides to retain more resources than the allowable CSRA. The spouse applying for Medicaid may be required to execute an assignment of support in favor of the Medicaid agency, unless because of a mental or physical impairment he/she is unable to execute an assignment, or if to deny assistance would create an undue hardship.
Transfers between husband and wife should take place before the sick spouse goes on Medicaid. However, there is a reasonable amount of time provided to allow for transfers between husband and wife even after a Medicaid application has been filed or a decision on eligibility has been made provided good cause for the delay exists (90 days in New York City). Assets acquired by the community spouse after the month Medicaid eligibility for the institutionalized spouse is established will not be considered as available.
Income belonging to the institutionalized spouse and/or the community spouse is treated as available only to the spouse whose name it is in. Income in the name of both is considered to belong one-half to each. Income with nothing to indicate to whom it belongs is considered to belong one-half to each spouse.
The income of the community spouse is not deemed available to the institutionalized spouse. From his/her own income the nursing home resident retains a personal needs allowance ($50 per month) and must spend down his/her remaining income on medical care. The community spouse is allowed to retain a community spouse monthly income allowance of $2,898 unless a greater amount is established by fair hearing or court order. If the community spouse has less than $2,898, then income from the institutionalized spouse can be given to the community spouse to bring his/her income to that level.
If the community spouse has more than $2,898 in income per month, then Medicaid will suggest that he/she contribute 25% of the excess over $2,898 to the institutionalized spouse's medical care. But Medicaid will not be reduced if this amount is not paid.
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