Will a one time financial gift affect Medicaid benefits?

A fellow caregiver asked...

If an individual is on Medicaid and receives a one time gift of $10,000, how does that affect her Medicaid eligibility benefits?

Expert Answer

Yes, a cash gift can affect her Medicaid eligibility. The effect of the gift depends on whether she's receiving regular Medicaid coverage for medical care or Medicaid coverage for long-term nursing home care. When deciding eligibility for either type of coverage, Medicaid looks at the total amount of someone's assets, not counting the person's home.

For regular medical coverage, Medicaid eligibility rules allow a person to keep $2,000 in assets ($3,000 for a married couple), plus the person's home, household possessions, a car and a few other assets such as a wedding ring, a limited amount of life insurance and a burial plot. If someone is receiving Medicaid medical coverage and her assets suddenly jump -- such as from a gift -- over that level, Medicaid can suspend her eligibility until she spends her assets down to $2,000. To get down to the $2,000 level, she can spend the money in any way she wants; it doesn't have to be on anything related to medical care.

For coverage of long-term nursing home care, the rules are more restrictive -- Medicaid doesn't allow a person to spend the extra assets. Here's how it works when someone's in a nursing home: To qualify for Medicaid coverage of nursing home care, a single person is allowed only up to $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). If someone is living in a nursing home and has Medicaid coverage but suddenly receives a gift that puts her total assets over the allowable limit, that money must be spent on her nursing home care until her assets are again down to the limit. She is not permitted to give the money away to relatives or friends, or to spend it on things other than her nursing home care.