Articles

Medicaid Law Overview

The following is a short overview of the rules and regulations for Medicaid coverage of expenses of long term care in a nursing home.  This outline is prepared primarily for Tennessee residents, but much of what is included is based on federal law. 

1. Medical Requirements.    In general, the applicant must be certified by a doctor (in a document called the Pre-Admission Evaluation, or “PAE”) as needing institutionalized care.  The PAE must be done within 90 days prior to the application for Medicaid.  If the elder is not certified as needing nursing home care, the application will not be approved.  The applicant must require in-patient nursing care and be unable to perform at least one of the activities of daily living (ADL) or have a serious cognitive disability. Serious dementia, including Alzheimer’s disease, is generally considered a condition serious enough to warrant certification for nursing home care.
   
2. Income Cap Limitations.  In about 20 states, including Tennessee and Mississippi, a Medicaid applicant who has more than 300% of the federal SSI benefit amount ($2,022/month in 2009) is not eligible to receive any Medicaid benefits, but there is an approved approach to overcome this problem.  Federal law allows the nursing home applicant to place his regular income into a “qualified income trust” (“QIT,” also called a “Miller trust”).  The Medicaid recipient’s nursing home and other expenses are paid from the QIT, with the balance remaining in the QIT after the Medicaid recipient dies being paid over to the state. There is no limitation on the amount of income a nursing home Medicaid recipient’s spouse may receive in his or her own name (the “name on the check rule”). This does present some planning opportunities for Medicaid qualification where the ill person is married.
   
3.  Asset Limitations.  There are strict limitations on assets the Medicaid recipient may own.  In general, Medicaid rules allow an institutionalized individual to have a maximum of $2,000 in available assets (for Tennessee; maximum is $4,000 in Mississippi).  (If the institutionalized person is married, see next paragraph.) Some assets may be considered exempt or “not available.”  Examples of these exempt or non-available assets are the family home, household furniture, one car, and certain other assets.
4. Spousal Resource Allocation by DHS (not applicable if patient is unmarried).  Medicaid rules allow some planning options in to protect assets for the well spouse’s own needs when the other spouse needs to be in a nursing home for an extended period. Up to $109,560 can be protected for couples beginning in 2009, and with proper planning significant amounts of assets and income can be protected for the well spouse’s use.
5. Spousal Income Allowance  (not applicable if patient is unmarried).  For married couples, Medicaid rules in some situations allow a virtually unlimited amount of income to be protected for the well spouse’s needs.  If the well spouse does not have sufficient income in his or her own name, Medicaid rules allow the well spouse to be allocated some or all of the institutionalized spouse’s income. If the combined income of the institutionalized spouse and the well spouse is limited, Medicaid rules protect at least $1,750 per month of spousal assets for the well spouse’s use.  Medicaid eligibility planning with an experienced elder law attorney may allow larger amounts, up to $2,739 per month, to be reallocated from the institutionalized spouse to the well spouse under certain circumstances. Medicaid planning through a Medicaid “fair hearing” appeal may allow even more income to be protected under certain circumstances.
6. Medicaid Eligibility Planning.  Medicaid eligibility planning can help make an elder or disabled person eligible for nursing home Medicaid more quickly than would otherwise be possible, thereby potentially saving significant assets that would otherwise be depleted on medical and nursing home expenses. If the elder or disabled person is married, there can be a very significant savings of assets and income for the benefit of the well spouse, which might also be protected to pass on to the couple’s children, when the well spouse passes away.  One way that assets may be protected is through “spend-down” to qualify for Medicaid. There are spend-down opportunities that are not penalized by Medicaid regulations that can be utilized by proper planning with the help of an elder law attorney.
7. Changes to Federal Law Prohibits Most Gifts.  The Deficit Reduction Act of 2005 (“DRA 2005”) on which went into effect on February 8, 2006, greatly limited gifting of assets as a Medicaid planning tool. Gifts by a Medicaid applicant or his spouse can make both spouses ineligible for Medicaid. Tennessee has announced that the DRA 2005 penalties apply to all gift transfers made on or after February 8, 2006.
8. Gifts Made after February 8, 2006:   DRA 2005 creates severe penalties for any gifts made by the Medicaid applicant or his spouse after passage of DRA 2005, except those made to the spouse and to a very limited class of exempt recipients. These new penalties cause the applicant to be ineligible for Medicaid unless an exemption is available, until a penalty period expires, which can last for years.  The penalty period for a gift made after February 8, 2006, does not begin until the nursing home Medicaid applicant has spent down to $2,000 and is otherwise eligible for Medicaid. The look-back period for gifts made after February 8, 2006, is 60 months. The penalty will apply if the nursing home resident applies for Medicaid any time within 60 months after the date of the gift occurring after this date. The length of the new penalty is the amount of the total of all gifts within that 60 month period divided by the average daily cost of nursing home care for the state (currently $3,874 per month, in Tennessee). The DRA makes no such exceptions to the kinds of gifts that create this penalty, and even gifts to churches could cause the applicant to be ineligible for Medicaid unless the states establish “hardship” exceptions.
   
   If disqualifying gifts have been made, the family should contact an elder law attorney experienced in Medicaid eligibility planning for help.
9. Estate Recovery.  The states each have “estate recovery” programs to recover amounts the state paid for Medicaid benefits paid to the nursing home or for home and community-based Medicaid.  The state may seek recovery from all assets in the “probate estate” of any person over 55 years of age for whom long term care Medicaid benefits were paid by the state. The family home is often the only asset that was exempt during the recipient’s lifetime, and it will be subject to estate recovery subject to certain limitations. It is now common for the Medicaid agency to contact surviving relatives and demand repayment of Medicaid benefits paid for the benefit of the deceased family member. Unfortunately, sometimes the Medicaid authorities over-step their bounds and make claims that may not actually be the responsibility of the surviving family members. The family should consider contacting an elder law attorney who is experienced in Medicaid estate recovery issues before responding to demands from the Medicaid authorities.

Prepared by:
William King Self, Jr.
Certified Elder Law Attorney
Apperson, Crump and Maxwell, PLC
6000 Poplar Avenue, Suite 400
Memphis, TN 38119
(901) 756-6300
www.elderlawmemphis.com