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Medicaid Coverage of Nursing Home Care

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Eligibility for Medicaid nursing home coverage

Medicaid is a federal government program that pays long-term nursing home costs for people with low income and few assets (other than a house they own). Each state administers its own Medicaid program, with slightly different eligibility rules. Note also that Medicaid offers separate coverage for medical care. And in some states, Medicaid pays some of the cost of assisted living for eligible residents in participating facilities.

Medicaid nursing home coverage is available only to people who are unable to care for themselves at home. They must also meet their state's eligibility limits regarding income and assets, which differ depending on whether the resident is single or part of a married couple (see below). They may reside in any level nursing home that's certified by Medicaid and that accepts Medicaid payment. Be aware, however, that some nursing homes only accept Medicaid payment for a limited number of residents.

Unlike Medicare coverage for nursing home care, there's no Medicaid requirement of a prior hospital stay, no restriction to skilled nursing facilities, and no requirement that the person need skilled nursing care or still be recovering from an illness or injury in order for Medicaid to continue coverage. In other words, Medicaid -- unlike Medicare -- will cover residence in a nursing home purely to provide help with the nonmedical activities of daily living -- what's called "custodial care."

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Nursing home costs that Medicaid covers

Covered costs

For eligible beneficiaries, Medicaid pays the full cost of room and board in a nursing facility, plus any therapies that are part of the nursing home's regular resident care. Medicaid's payment also includes personal care items such as incontinence supplies and toiletries, as well as services such as bathing, grooming, and laundry.

There's no time limit on Medicaid nursing home coverage. And the Medicaid beneficiary has no co-payments to make.

Income levels for Medicaid nursing home eligibility

The income limits for Medicaid nursing home coverage eligibility are different for a single (unmarried, divorced, or widowed) person than for a married couple.

Income limits for Medicaid nursing home coverage: Single person

State Medicaid programs limit the income of an unmarried nursing home resident in two different ways. One way, used by some state Medicaid programs, establishes a monthly income eligibility limit, which varies from about $300 to $700, after regular medical expenses are deducted. If a Medicaid applicant has income higher than the Medicaid limit in one of these states, that person isn't eligible for Medicaid coverage of nursing home care.

Other states have no income limit but instead require the beneficiary to pay almost all income to the nursing home, with Medicaid paying the balance of the nursing home's charges. In these states, the Medicaid program allows the resident to keep only a small amount -- about $50 to $100 per month -- for personal needs. Some of these states also allow a small amount of income to be retained by the resident for upkeep on the resident's home, usually only for up to one year of admission to the nursing home, and only if a physician certifies that the resident might be able to return home.

Income limits for Medicaid nursing home coverage: Married couple

When one spouse enters a nursing home and the other spouse (often called the "community spouse") remains at home, Medicaid has special income rules for each.

Initial eligibility rules. For initial eligibility for coverage of nursing home care, Medicaid only considers income in the name of the person entering the nursing home. Income in the name of the community spouse is not counted at all -- the community spouse can keep all income in his or her name. (This is sometimes called the "name-on-the-check" rule). The exact amount of the Medicaid applicant's allowable income is determined by the specific Medicaid program in that state but is usually only $300 to $700, after regular medical expenses are deducted.

Post-eligibility rules. Once a married person in a nursing home has become eligible for Medicaid coverage, new income rules kick in. The person in the nursing home can keep only a small monthly allowance for personal needs (in some states as low as $30), plus amounts necessary to pay for uncovered medical costs. Some income that belongs to the spouse in the nursing home -- meaning income in the name of the nursing home resident -- can go to the community spouse if the community spouse's own income doesn't reach the monthly community spouse income allowance. This income allowance for the community spouse is between $1,750 and $2,739, varying from state to state. In other words, if the community spouse's own income is less than the state's income allowance, the nursing home resident's income can go to the community spouse until the combination of incomes reaches the income limit. Any remaining income in the name of the nursing home resident goes to Medicaid, to offset the cost of the nursing home.

Asset levels for Medicaid nursing home eligibility

Asset limits for Medicaid nursing home coverage: Single person

To qualify for Medicaid coverage of nursing home care, an unmarried person is allowed only limited assets. These include a maximum of $2,000 in cash, savings, stocks, or other "liquid" assets; a life insurance policy of up to $1,500 face value; and a burial plot and burial fund of up to $1,500.

In some states, an unmarried person can also keep his or her home if declaring in writing, upon admission to the nursing home, an intent to return home. However, states that permit this usually put a 6- or 12-month limit on the length of time a resident can keep the home without actually returning to it. If a Medicaid nursing home beneficiary is allowed to keep a house, Medicaid will seek reimbursement from the value of the house when it's sold.

WARNING! Medicaid does not allow asset giveaways. In determining how much an applicant for nursing home coverage has in assets, Medicaid examines that person's financial records for the five years prior to the application date and penalizes the applicant for any improper transfers made within that five-year period. See below, "Medicaid rules on asset transfers prior to nursing home coverage."

Asset limits for Medicaid nursing home coverage: Married couple

Medicaid has special nursing home coverage eligibility rules when one spouse enters a nursing home and the other spouse (the "community spouse") remains at home. Medicaid looks at the combined assets of both spouses. From that combined amount, Medicaid allows the community spouse to keep:

  • The house in which the community spouse lives. (If the couple sells the house, or the community spouse moves out, the value of the house or the proceeds from its sale become part of the couple's combined assets.)

  • A "Protected Resource Amount" (PRA) for the community spouse of between $21,912 and $109,560 (in 2010). Each state sets its own PRA between those minimum and maximum amounts.

  • All furniture, appliances, and other household goods.

  • One automobile.

  • Life insurance of up to $1,500, face value, for each spouse.

  • Two burial plots and a burial fund of up to $1,500 for each spouse.

Once these amounts are subtracted from the couple's combined income, all other assets are totaled to determine whether the nursing home spouse is eligible for Medicaid. The asset eligibility limit is set differently by each state.

Medicaid rules on asset transfers prior to nursing home coverage

5-year Medicaid look-back period for asset transfers prior to nursing home coverage

When someone applies for Medicaid coverage of nursing home care, Medicaid examines that person's assets to see if he or she falls below the Medicaid eligibility limit. But Medicaid doesn't simply look at what those assets are at the time of applying. Instead, Medicaid examines the applicant's financial records during the previous five years. If, within that time, the applicant has made a gift of funds or other assets to anyone, that gift will result in a delay of eligibility. The same is true of any asset transferred or sold for less than fair market value -- selling a car worth $20,000 to a grandchild for $5,000, for example.

If Medicaid determines that an applicant for Medicaid nursing home coverage has made an invalid asset transfer, the resulting delay is equal to the amount of the transfer divided by the average monthly nursing home cost in the state. For example, if the amount invalidly transferred was $25,000 and the average monthly nursing home cost in the state is $5,000, Medicaid eligibility would be delayed for five months ($25,000 divided by $5,000 = 5). The coverage delay begins from the date of the application for Medicaid.

Permissible asset transfers under Medicaid nursing home coverage rules

Some gifts or transfers within the five-year period prior to an application for Medicaid nursing home coverage are considered valid and don't result in any coverage delay.

Unmarried person. An unmarried person who applies for Medicaid coverage of nursing home costs can transfer the following assets without any penalty:

  • Home to a child. An unmarried Medicaid applicant can transfer title of his or her home to an adult child who's lived in the home for two years prior to the applicant entering a nursing home, during which time the adult child provided care that permitted the applicant/parent to live at home instead of entering a nursing home.

  • Home to a sibling. An unmarried Medicaid applicant can transfer full title of his or her home to a brother or sister who already has an ownership interest in the home and has lived there for at least the year prior to the Medicaid application.

  • Other exempt assets. An unmarried Medicaid applicant can transfer any other exempt asset -- such as a car or personal and household belongings -- to anyone.

  • Any asset to a blind, disabled, or minor child. An unmarried Medicaid applicant can transfer any asset, including a home, to a blind, disabled, or minor child.

Married person. A married person who applies for Medicaid coverage of nursing home costs can transfer the following assets without any penalty:

  • Home. A married Medicaid applicant can transfer home title to his or her spouse who remains living in the home (the "community spouse"). The community spouse can then, if he or she wants to, transfer title to an adult child or someone else. This double transfer takes the house out of the nursing home resident's estate and therefore is beyond the reach of Medicaid reimbursement when the community spouse dies.

  • Other exempt assets. A married Medicaid applicant can transfer any other exempt asset -- such as a car or personal and household belongings -- to anyone.

  • Any asset to a blind, disabled, or minor child. An unmarried Medicaid applicant can transfer any asset, including a home, to a blind, disabled, or minor child.

Reimbursement to Medicaid for nursing home coverage

Medicaid can seek reimbursement out of the family home

In every state, Medicaid allows a spouse who remains at home (the "community spouse") to keep the house he or she lives in. But once both the nursing home resident and the community spouse die, or the community spouse sells the house, Medicaid will seek reimbursement -- of the total amount it's spent on nursing home care -- out of the value of the house.

Medicaid will seek this reimbursement unless the house has been transferred out of the nursing home resident's name in one of the permissible ways discussed above. The community spouse who sells the house, or the heirs to whom the house is left when both spouses have died, must repay Medicaid the total that Medicaid has spent if they want to keep the house, or they must sell the house and pay Medicaid out of the proceeds of the sale.

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