An Overview of Maryland Medicaid
What is Medicaid?
Many people believe that Medicaid is health insurance for "poor" people. Although partly true in that Medicaid is a needs-based program, it not only provides health insurance for those individuals who may not be able to afford private health insurance, it also helps pay for long term care at a nursing home. NOTE: Medicaid may also provide services in the home or at assisted living facilities for individuals who meet the eligibility requirements, but this guide will focus solely on long term care Medicaid that helps pay for care at a nursing home.
How Do I Qualify for Medicaid?
There are several eligibility criteria that must be met in order to qualify for Medicaid:
- Maryland Resident - A person is considered a Maryland resident for Medicaid purposes on the day they enter the State, if their intent is to remain in Maryland. For example, if an individual has a home in Virginia that was considered their primary residence, but then the individual moves to a nursing home in Maryland in order to be closer to his/her family, then the day that individual enters the nursing home is the day the individual becomes a Maryland resident for Medicaid purposes.
- U.S. Citizen - A person must be a U.S. citizen or a qualified alien.
- Aged, Blind, or Disabled - A person must be 65 or older, blind, or disabled.
- Medical Eligibility - A person must require skilled nursing care, rehabilitation services, and/or health related services above the level of room and board. Health related services above the level of room and board would include assistance to perform two or more activities of daily living (i.e. bathing, dressing, eating, toileting, transferring, walking, etc.).
- Income Eligibility- A person's monthly income (less certain allowable deductions) must be less than the monthly cost of care at the facility. If there is a spouse who resides in the community, that spouse's income is not counted in determining whether a person's income is less than the private pay rate at the nursing home.
- Asset Eligibility - A person cannot have more than $2,500 in "countable" assets as of the first day of the month in which they apply for Medicaid.
Generally, most people who apply for Medicaid meet the first five eligibility requirements without any problem. It is the asset limit, however, that causes the most confusion for applicants and results in the most denials. Oftentimes, "assets" are confused with "income" and people think that if their income is more than $2,500, then they will not qualify for Medicaid. As you can see from #5 above, this is not correct.
Income is the money received monthly from wages, Social Security, pension, required minimum distributions, interest or dividends, etc. As long as it is less than the private cost of care at the nursing home, a person meets that eligibility requirement. Assets, on the other hand, are things someone owns. For example: checking, savings, credit union, and money market accounts; certificates of deposit; mutual funds; stocks; bonds; life insurance; retirement accounts; annuities; houses; vehicles; household goods and furnishings; jewelry; etc.
Certain assets are not counted toward the $2,500 limit. The caseworkers refer to these assets as "exempt" or "excluded" assets. These may include the following:
- Primary residence - see Myth #1 below
- Household goods and furnishings and personal effects
- Burial plot
- Prepaid funeral (as long as it is irrevocable)
- Whole life insurance where the total face value of the policy(ies) does not exceed $1,500
- Term life insurance
- Assets which generate income that would provide additional income for a spouse in the community if that spouse's income was less than $1,839 (this may only apply if there is a spouse)
Here is where is it gets somewhat confusing. Other assets that may be counted toward your $2,500 limit, but will be valued at $0 are the following:
- Life estate interest in property
- Real property that has been listed for sale, but has not sold
The State considers these assets countable toward the $2,500 limit because theoretically these assets can be converted to cash to pay for the nursing home. Realistically, though, the State values them at $0 because the applicant is unable (at least for a time) to convert the asset to cash to pay the nursing home. Of course, if and when a property is sold, at that time, it will be counted toward the $2,500 limit and may cause an individual to lose eligibility.
And, to add even more confusion, if there is a spouse residing in the community, the State imposes a slightly different process, to provide some protection for the "community spouse." If an individual is married and wants to qualify for Medicaid, the individual must still have less than $2,500 in assets as of the first day of the month in which the individual applies for Medicaid, but the State allows the community spouse to keep a portion of the couple's assets.
So, how does Maryland determine what the community spouse may keep? The State takes a "snap shot" of the couple's assets on the first day of the month in which the institutionalized spouse entered the nursing home for long term care. The State will look at all the assets the couple owns (i.e., anything titled in the name of the institutionalized spouse, anything titled in the name of the community spouse, or anything titled jointly with another individual). The State then totals the value of all the assets on the snap shot date and divides in half. The community spouse may keep one-half of the assets, but only up to a maximum amount of $113,640 in 2012. (The minimum amount the community spouse may keep in 2012 is $22,728.) This amount is called the "community spouse resource allowance," or the "CSRA." Any amount above the CSRA is considered the institutionalized spouse's and must be spent down below the $2,500 limit before applying for Medicaid.
Moreover, if the rules are not confusing enough, applicants receive conflicting advice from nursing home social workers, hospital discharge planners, friends and family, and even caseworkers themselves.
Medicaid Myths: Fact or Fiction?
Myth #1: If I apply for Medicaid, the nursing home will take my house, or I will lose my home.
This simply is NOT true. As long as your house was your primary residence immediately prior to entering the nursing home and you intend to return home (this is a subjective intent), and as long as the equity value does not exceed a certain limit, then your house will be exempt and will not be counted toward your $2,500 asset limit. Please note, however, that if you resided in an assisted living facility before you were admitted to the nursing home, then for Medicaid purposes, your house is NOT considered your primary residence.
Myth #2: I am allowed to give away $13,000 per year to all my children and grandchildren.
Although the IRS allows such gifting, Medicaid rules do NOT. Once a person meets the six criteria listed above, the State will then "look-back" five years to determine what, if any, transfers for less than fair market value occurred over the past five years. The State is looking to see if a person gave away assets. So, if you gave away $13,000 per year to your children and grandchildren, the State will presume that such gifts were for purposes of qualifying for Medicaid and will impose a penalty period during which you will not be eligible for benefits. The penalty period is calculated by dividing the total value of all gifts by $6,800 - what the State says is the average cost of nursing home care per month in Maryland. The resulting number is the number of months that the State will not pay benefits. More importantly, though, is that the penalty period does not start until you are "otherwise eligible" for Medicaid (i.e., you have applied and have less than $2,500 in assets). So, who is going to pay for your care during the penalty period if you have less than $2,500 in assets and the average cost of nursing home care is $6,800 per month?
Medicaid Planning: A Final Thought
Although many people plan for their future, most people do not consider how to pay for long term care as part of the planning process. In fact, many people think that they will never need long term care, or that their health insurance or Medicare will pay if they have to go to a nursing home. Unfortunately, this is incorrect. Although Medicare may initially cover a small portion of nursing home costs, the only things that will pay for long term care are long term care insurance (which most people do not have and think is too expensive), Medicaid, or your hard-earned assets. And, as you can see from above, the Medicaid rules are difficult to navigate. That is why it is imperative to make long term care planning a part of your estate plan. It is never too soon or too late to implement an estate plan that will not only pay for your future care needs, but will also protect your assets so they can be passed on to your beneficiaries.