Is there any way my sister can quality for Medicaid and be placed in a nursing home?

1 answer | Last updated: Sep 29, 2016
A fellow caregiver asked...

My sister in Alabama is living in an assisted living home but will not be able to stay there much longer because of her decline. She has Alzheimer's and a colon bag. The two conditions are becoming more than assisted living can handle. She sold her house about 3 yrs ago. We have been told by staff at nursing home she does not qualify for Medicaid because her house was not sold at fair market value. Her daughter who has power of attorney sold the house for the amount my sister owed on house (appox. 130,000. This took some months because the house was in poor condition. This was the only offer made on the house and she felt fortunate to get amount owed so it could be paid off. She could have chose to let the bank repossess the house but was trying to do right thing. However, now she need to go in a nursing home and is being told she does not qualify because of sell of house at less than fair market value which they say is approx. 155,000. There was not profit made by daughter or anyone. We desperately need help in figuring out a solution. Any advice would be appreciated.

Expert Answers

There are several reasons why your sister may be able to qualify for Medicaid coverage of nursing home costs despite what the nursing home staff said about the sale of her house. First of all, the decision about what is and is not fair market value (FMV) -- with regard to Medicaid eligibility -- is made by the state Medicaid program, not by the nursing home. Until your sister actually applies for Medicaid coverage and Medicaid reviews all her finances, including the value of the home, the nursing home itself cannot determine whether your sister will be eligible. In other words, what the nursing home says is not what counts.

Second, it sounds from your description of the situation that the amount your sister sold the house for was, in fact, a fair market value. Things like the condition of a house can significantly affect value, and a house that might otherwise be worth $150,000 could easily be worth $20,000 less because of poor condition. Also, the fact that it took months to sell the house for $130,000, and that was the only offer, are both strong evidence that $130,000 was the true FMV of that particular house, in that condition, at that time. The fact that other similar size houses, in different condition, in nearby locations sold for more does not change that.

Also, even if the house was sold for less than FMV, that would only disqualify your sister if she made the sale at that price for the purpose of getting around Medicaid assets rules in order to qualify for Medicaid nursing home coverage. In other words, if the purpose of selling the house was to pay off the mortgage, if it was not sold to a family member or friend, and if no one in the family took any profit out of the sale, then the actual amount it was sold for is unimportant. The sale was not an effort to avoid Medicaid rules, and therefore should not disqualify your sister.

Finally, you should know that even if, for some reason, Medicaid determines that your sister does not qualify for Medicaid because of the price of the house sale, the disqualification would only be temporary. The disqualification would only last for the number of months that the amount in question (let's say $25,000 -- the difference between the sale price and the supposed FMV) would have paid for her nursing home care, based on average nursing home costs in Alabama. Just as an example, if average nursing home costs in Alabama are $50,000 per year, the penalty would be six months without coverage ($25,000 would have paid for care for half a year).