VIRGINIA MEDICAID: THE ELIGIBILITY RULES
Medicaid, which was established as a health care safety net for the poor, has become the long-term care insurance of the middle class. Its basic rules of spousal protection and transfer penalties are as follows.
Spousal Protection Provisions -The SnapshotThe asset calculations under spousal impoverishment all derive from the holdings of the husband and wife on the day one of them becomes institutionalized. In effect a "snapshot" is taken of their assets on that date. Institutionalization occurs on the first day of a stay in a hospital or long-term care facility that lasts for 30 consecutive days or more. From the amount of the couple's total assets on the date of institutionalization a "community spouse resource allowance" is calculated for the healthy spouse. Presently, the spouse of a married applicant is permitted to keep one-half of the couple's combined assets as of the snapshot date up to a cap of $115,920 (in 2013). The minimum is currently $23,184. So, for example, if a couple owns $100,000 in countable assets on the date the applicant enters the hospital, he or she will be eligible for Medicaid once their assets have been reduced to a combined figure of $117,920-$2,000 for the applicant and $115,920 for the at-home spouse. If the couple owned $300,000 in countable assets, the ill spouse would be eligible for Medicaid once their combined assets totaled almost $117,920 ($2,000 for the applicant and $115,920 for the at-home spouse). The federal law has permitted the states to elect this option since it implemented the current system in 1989.After this calculation is made, the institutionalized spouse becomes eligible for Medicaid when the combined assets for both husband and wife equal the community spouse resource allowance plus the $2,000 the institutionalized spouse is allowed to keep. Thus in example B above, the institutionalized spouse will be eligible for Medicaid when the couple's joint assets are spent down to $117,920. The law provides a 90-day grace period after a determination of eligibility for any transfers between spouses needed to accomplish the necessary distribution.
Spousal Income AwardThe institutionalized spouse's income goes to the nursing home each month, less certain deductions. These include $72.80 for personal needs, the cost of any private health insurance, and an income allowance for the at-home spouse, if necessary, to meet his or her monthly needs. The at-home spouse's monthly needs allowance is calculated separately for each client and, as of 2013, equals a minimum of $1,938.75 and a maximum of $2,898 (revised annually to reflect the change in the federal poverty level) plus an excess shelter allowance. For example, if the at-home spouse has a monthly needs allowance of $1,900 and his or her income is only $500, the spouse at home would be allowed to keep $1,400 of the institutionalized spouse's income to meet his or her needs.
Transfer Penalties -The Basic RuleIn order to discourage the transferring of property for the purpose of achieving Medicaid eligibility, the law imposes a period of ineligibility for any transfer of a countable asset or principal place of residence for less than fair market value. The period of ineligibility is the number of months calculated by dividing the value of what was transferred by the average monthly cost of private-pay nursing homes in the state. For example, if your client transfers property with a market value of $70,000 to his or her child, in a state with an average monthly cost of $7,000, he or she will be ineligible for Medicaid for 10 months ($70,000 divided by $7,000=10). (a) No Cap. There is no limit on the period of ineligibility imposed as the result of a large transfer. For instance, the transfer of a house worth $450,000 will cause 64 months of ineligibility, which works out to more than five years. (b) 60-Month Look-Back Period. There is a 60-month look-back period with respect to transfers to trusts and all transfers occurring on or after February 8, 2006. (d) Transfer Penalty Beginning Date. For transfers that took place before February 8, 2006, the penalty period for a transfer of assets began on the first day of the month in which the asset was transferred. This was all changed by the DRA with respect to transfers made on or after February 8, 2006. For such transfers, the penalty period does not begin until the applicant for Medicaid has (1) moved to a nursing home, and (2) spent down all of his assets below the limit for countable assets. In addition, the nursing home resident must apply for Medicaid in order to establish that these facts exist, even though he knows that the application will be rejected due to the transfer. (e) Exceptions. There are significant exceptions to the transfer rules. No ineligibility period is imposed for assets transferred to: The spouse of the Medicaid applicant; Either directly or into trust for the sole benefit of a child who is blind or permanently and totally disabled; (d)(4)(a) trusts. Transfers may be made without penalty by a parent, grandparent, legal guardian or court, into trusts solely for the benefit of disabled individuals under age 65; Non-defined disabled beneficiary trusts. The law does not require that transfers into trust for the sole benefit of a disabled beneficiary be made only into one of the previously described trusts. Any trust for a disabled beneficiary under age 65 will do the trick; and Pooled trusts for disabled beneficiaries managed by nonprofit associations. A question with all of these exceptions is what is meant by "solely for the benefit of?" Does this mean that there can be no remaindermen to the trust, that it must be payable at the disabled beneficiary's death to his or her estate? Or is it sufficient to simply include instructions that payments made to the beneficiary or on his or her behalf must be made without consideration of the interests of the remaindermen? Other exceptions apply to transfers of the home. In addition to the exceptions described above, the home may also be freely transferred to: children under age 21; a sibling of the applicant who already has an equity interest in the home and was residing there for at least one year before the applicant's institutionalization; or a child of the applicant who was residing in the home for at least two years immediately before the date of institutionalization and who provided care to the applicant which permitted him or her to reside at home during that period rather than in the nursing home. (f) Curing the transfer. Transfers may be reversed by the recipient returning the property to the applicant for Medicaid. The rule allows a partial cure.
Liens and Estate RecoveryStates must seek recovery of all Medicaid payments from the estates of those who received coverage after age 55. States may go beyond probate property to joint property, life estates, trusts and any other property in which the Medicaid recipient had "any legal title or interest at the time of death (to the extent of such interest)." Not all states have such broad estate recovery laws and limit claims to the recipient's probate estate. Nationally, the total cost of long-term care (both in nursing homes and at home) was approximately $90.9 billion in 1995. About 71 percent of this amount was spent on institutional services. Of that amount, 43 percent was paid privately, 47 percent was paid by Medicaid, 7 percent by Medicare, 2 percent from other public sources, and 1 percent by private insurance.