Is Medicaid due the money meant for his burial?
My father has been on Medicaid for the past 4 years. At that time, he had a life policy for $9,000. It was meant for a burial policy. He has no other assets. At the time, my brother and I were the beneficiaries of the policy. We learned that it has a cash value of $3500 dollars. Two years ago, someone told us that we needed to be the owners of the policy, which we did. Medicaid has now asked us what the cash value was since it was over the $2000 dollar limit. Can we use the $3500 dollars to pay up his life policy or will Medicaid get the money?
Expert Answer
In order for your father to have qualified for Medicaid medical coverage, he had to have very few assets. Among the assets he would have been permitted, however, would be a life insurance policy with a cash value of (in most states) no more than $1,500, plus a burial plot, and also a separately maintained fund to pay funeral expenses, or a prepaid funeral service plan, also usually with a limit of $1,500. For whatever reason, it seems that the Medicaid program in the state where your father lives did not consider that the cash value of his life insurance policy was high enough to disqualify him when they were deciding on his eligibility for Medicaid four years ago. (Maybe at the time he became eligible for Medicaid, four years, ago, its cash value was much less than it is now. Or, maybe they weren't even aware of the policy.)
Now that you and your brother own the policy, it should be out of reach of Medicaid because it's no longer your father's asset. (While Medicaid can consider assets transferred from the Medicaid beneficiary to someone else in the five years before applying for Medicaid nursing home coverage, this rule does not apply to regular Medicaid medical care coverage.) On the other hand, if Medicaid did not know of the policy at all when your father applied four years ago, Medicaid may want to review eligibility based on the policy's cash value at the time he applied. If that's the case, you may have to demonstrate that the purpose of the policy, as you have said, was for his funeral and burial expenses. If you use some of the money to buy a burial plot and the remainder is not more than $1,500 (for funeral/burial expenses) and up to another $1,500 as the remaining cash value of the policy, then he should still be eligible for Medicaid and Medicaid will have no claim on the value of the policy.