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An Idaho Medicaid Primer

A Medicaid Primer

Medicaid benefits are the result of the Social Security Act signed into law in 1965, Lyndon B. Johnson. Medicare (confusing, I know) was created at the same time. The two programs with similar sounding names are quite different. Eligibility for Medicare is by age not by income and offers the same benefits to all who qualify. Medicaid, on the other hand, is available only to those who qualify. The Medicaid program consists of range of services to low income seniors, disabled individuals, families and children.

In Idaho, the Idaho Department of Health and Welfare (“H & W") administers the Medicaid program and provides services for nursing home care and through the Home and Community Based Services (HCBS), or “Aged and Disabled (A&D) Waiver" for qualified individuals age 65 or older, general medical care, skilled nursing, assisted living, and in-home care services. [1]

Eligibility Requirements

To be eligible for Medicaid, a person age 65 or older must: (1) have a medical need; (2) be income qualified; and (3) be asset (“resource") qualified.

Medical Need

The participant must either need now or be likely to need long term care services for a period of at least 30 consecutive days. Medicare covers hospital or other medical costs for individuals over 65 and, thus, hospital stays will not trigger Medicaid eligibility.

Income Qualified

Monthly income to qualify for Medicaid in 2013 is limited to $2,130. Income is broadly defined and includes anything that can be used to pay for food or shelter including cash, pensions, in-kind payments, inheritances, gifts, awards, rent, dividends, interest, or royalties the participant receives during a month.

Resource Qualified

To qualify for Medicaid in 2013 the participant can have no more than $2,000 worth of assets (“resources"). A resource is any asset that could be used to pay for long term care or could be liquidated to pay for long term care. This includes “cash, personal property, real property, and notes receivable. A participant, or spouse, must have the right, authority, or power to convert the resource to cash. The participant must have the legal right to use the resource for support and maintenance." If the asset can be converted and spent within 20 working days, it is considered a “liquid" resource.

Excluded Assets

There are a number of assets owned by a participant that are not counted as resources when qualifying for Medicaid. These excluded assets include: (1) a home with equity up to $750,000. If the equity value is over $750,000 and the participant’s spouse, child under 21, or disabled child resides in the home, then the equity value is not a countable resource when qualifying for long term care; (2) a single vehicle; (3) burial funds up to $1,500; (4) burial plot or irrevocable contract for burial services; (5) household goods personal effects; and others.

Eligibility for Married Participant

Single persons are limited to $2,000 of countable resources. Married persons are limited to $3,000 of countable resources if both are receiving Medicaid. However, if just one spouse needs Medicaid, Federal rules apply to determine the maximum amount the non-institutionalized spouse may retain and the participant still maintain eligible. Historically, the spouse was also required to be impoverished. The Federal Spousal Impoverished rules were passed to prevent this.

Estate Recovery

Although a participant’s residence is a non-countable asset, its equity is available to H & W to offset the costs of Medicaid benefits paid out on behalf of the participant. H & W is under statutory mandate to place a lien on the estate of a Medicaid recipient who is over age 55 when receiving benefits. This lien is designed to recover an as much of benefits Medicaid paid on behalf of the recipient as possible. However, there are limits. For example, no claim for recovery will be made until after the death of the participant, or, in the case of a married participant, until after the death of the surviving spouse.

If there is no surviving spouse, H & W can record a lien on real property to preserve it for estate recovery and the lien may be placed regardless of the recipient’s age. This lien will be removed if the participant no longer needs Medicaid services.

Exceptions

In certain situations, H & W will not seek recovery on these liens. These situations include (1) where the recipient was under the age of 55 when she received Medicaid benefits; (2) the recipient was the victim of a crime; (3) the value falls below a minimal amount (defined the H & W rules); (4) where recipient’s spouse, child under age 21, or disabled child continues to reside in the home; or, (5) where the recovery would cause “undue financial hardship."

Asset Transfer

If H & W will not grant eligibility if the participant has too many assets or if H & W is going to recover the value of the benefits paid from the participant’s asset, why not just give the assets away before applying? Congress thought of this and imposed strict rules concerning the gifting of assets. As a general rule, a gift made within five years of applying for Medicaid be counted as an available resource that would have been available to pay for long term care services. A gift is any transfer made for less than fair market value. The applicant, after making a gift, has the option to wait until the transfer falls outside the 60 month look-back period, [2] or be subject to a penalty period, as described below.

Penalty for Gifts

As noted above, the look-back period is 60 months for all gifts (transfers for less than fair market value). The look back period is counted from the date of the application for qualified services or the date of the transfer, which is later.

The penalty period is not so much a penalty as it is a simply a period of time in which H &W will not pay the benefit or the time the applicant will have to wait to become eligible for Medicaid. The penalty period is determined by dividing the amount transferred by the average statewide cost of a long-term nursing facility per month as determined by H & W. The result (quotient) of the calculation is the number of months that Medicaid will not pay for long term care.

For example, an applicant transfers her home with a fair market value of $240,000 to her sister; the average cost of long term care for 2013 (as determined by H & W) is $6,923 per month. To determine the penalty period, divide the amount of the gift – $ 240,000 by the average cost – $6,923/month which gives the penalty period in months – 34.67 months (rounded up to 35 months). If this applicant applies for Medicaid during the 60 month look-back period, the penalty or waiting period will be 35 months, or the amount of time H & W figures it will take the applicant to spend on care the amount he gave away.

By the way, the penalty period starts running on whichever date is later in time: (1) the first day of the month after the transfer took place or (2) the date the individual would have been eligible for long term care services, if not for the transfer.

[1] The Idaho Medicaid manual is found at I.D.A.P.A. § 16.03.05.101 et seq. Since the point of this discussion is how trusts can be used in Medicaid planning, the individual provisions are not referenced here.

[2] The Medicaid application asks only about gifts made within the previous 60 months.

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