PLANNING FOR MEDICAID ELIGIBILITY
INTRODUCTION
 | Medicaid is a program jointly administered by the federal and state governments that provides a range of health care services for the aged (defined as those age 65 and older), disabled, or blind, including paying for an unlimited number of days of nursing facility services and at-home care. At the federal level Medicaid is administered by the Centers for Medicare & Medicaid Services (CMS), formerly known as the Health Care Financing Agency (HCFA), of the Department of Health and Human Services (HHS). |
| MEDICAID PROGRAM IN PENNSYLVANIA. This article will focus specifically on the Medicaid program as it is administered in Pennsylvania. Like other states, Pennsylvania is allowed some variation in how it interprets and administers the Medicaid program, so that Pennsylvania's rules and regulations differ in certain respects from those of other states. In Pennsylvania, Medicaid is administered by the Department of Public Welfare ("DPW"). |
WHO IS ELIGIBLE TO RECEIVE MEDICAID?
| A broad range of individuals are covered under federally mandated Medicaid rules. For purposes of Medicaid planning, the relevant classes are those persons who are U.S. citizens, residents of the state providing benefits, and who are either "categorically needy" or "medically needy." |
INCOME LIMITS ON ELIGIBILITY
| Medicaid is a needs-based program that limits
eligibility to those persons who meet federally prescribed income and resource
tests. In practice, however, for Pennsylvania residents there is not a
separate income test used to assess Medicaid eligibility.
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EXAMPLE: The nursing facility's monthly charge is $5,500 and the resident’s total monthly countable income is $2,000. Even if the resident is fully eligible for Medicaid, the state will only pay the balance of $3,500, not the entire monthly charge.
| What is "Countable Income"? |
In other words, how much of the individual's gross income must be applied to the monthly nursing home charge? In calculating gross income, Pennsylvania will include all income currently paid to the individual. In addition the individual will be required to take all steps necessary to receive any retirement, annuity, and disability benefits to which he or she is entitled, and to assign to DPW his or her rights to receive medical support and third-party medical payments.
| Allowable Deductions |
Several deductions are allowed from an individual's gross income in determining countable income:
● Personal needs allowance (currently $45 per month)
● Income needs of the individual's spouse or family, if they are living in the community
● Home maintenance allowance, if it is likely that the individual will return to his or her home
● Medicare Part B and the Medigap Insurance Premium
Once an institutionalized individual is eligible for Medicaid, all of his or her countable income must first be applied to pay for the costs of care.
RESOURCE LIMITS ON ELIGIBILITY
| Countable Resources |
Medicaid eligibility will be primarily based on the individual's "countable resources," which includes all the real and personal property that the individual owns or controls or which is legally available to him or her. For the "categorically needy" the countable resource limit is generally $2,000; however, if the applicant’s income does not exceed 300% of the Federal Benefit rate (effective January 1, 2012 the gross income cap is $2,094 per month), the protected amount is increased to $8,000. For the "medically needy" the resource limit is $2,400.
| "Deeming" Between Spouses |
In the case of a married couple who are living together, the income and resources of one spouse will be "deemed" available to the other spouse in determining a spouse's eligibility. When one spouse is institutionalized, however, the at-home spouse (referred to as the "community spouse") will be entitled to keep or acquire a certain amount of income and resources (discussed below).
After eligibility has been determined, there is no deeming of income between the community spouse and the institutionalized spouse.
Also, resources of the community spouse are not deemed available to the institutionalized spouse beginning with the month following the month of initial eligibility determination.
No other relative's income or resources will be "deemed" to the applicant. For example, an adult child's income or resources will not be looked at in considering a parent's eligibility.
EXEMPT ASSETS FOR ELIGIBILITY PURPOSES
| Because the resource limit is based on non-exempt "countable resources," it is essential to distinguish between countable resources and exempt assets. The following categories of real property and personal property are currently exempt in Pennsylvania: |
| pRINcipal residenCE. The equity value of an applicant's principal residence is fully exempt if his or her spouse or a dependent or disabled child resides there. For a single applicant, the equity value of the principal residence is exempt if he or she intends to return there, but the exemption is capped at $525,000 for 2012. |
● If the unmarried applicant's house is valued at more than $525,000, the excess equity value could be eliminated by the applicant borrowing money from a bank or other lender which would then place a mortgage lien on the home. A reverse mortgage or home equity loan could also be used for this purpose.
● However, the wisdom of assuming such debt is questionable, especially if the only reason for doing so would be Medicaid eligibility.
| Revocable burial funds, up to $1,500. |
| Irrevocable burial funds, defined as funds deposited with a financial institution or a funeral director under a written agreement which provides that the funds cannot be withdrawn before the death of the named beneficiary. |
There is no dollar limit fixed by statute or regulation on the amount of the irrevocable burial fund exemption. Generally, however, the fund cannot be more than 125% of the average local burial costs.
Currently in Allegheny County, a fund of up to $11,250 is being permitted.
| One motor vehicle |
| Term life insurance, or any insurance policy without cash surrender value. |
| Cash-value life insurance policies owned by the individual up to a maximum face value of $1,500 for each insured person (if the face value exceeds $1,500, the cash surrender value of the policies in excess of $1,000 will be a countable resource.) |
| ENTRANCE FEE PAID TO CONTINUING CARE COMMUNITY. An entrance fee paid to a Continuing Care Community or Life Care Community will be exempt unless the contract under which it was paid contains the following three provisions: |
● The resident has the ability to use the entrance fee, or the contract provides that the entrance fee may be used, to pay for care if other resources or income of the resident are insufficient;
● The resident is eligible for a refund of any remaining entrance fee when he or she dies or terminates the contract and leaves the community; and
● The entrance fee does not confer an ownership interest in the continuing care retirement community or life care community.
◊ Continuing Care Retirement Communities or Life Care Communities are not required to have admissions contracts that contain these provisions, so it appears that the new law's application will be on a "fact and circumstances" basis.
◊ For a Medicaid applicant who has been residing in such an institution and paid an entrance fee, the contracts and other relevant documents will have to be reviewed to determine if they meet the three conditions stated above. If they do, then the entrance fee will be treated as a countable resource that will have to be spent down before Medicaid eligibility will be achieved.
| Assets used in a trade or business, if the business is essential to the individual's self-support, and other non-business property that is also essential for self-support. |
| Household goods and personal effects, including jewelry. |
| Community Spouse Resource Allowance for a married individual whose spouse is living at home. (See discussion below) |
| Community spouse's pension funds (including IRA and Keogh plan). |
TREATMENT OF JOINTLY OWNED ASSETS AS "AVAILABLE RESOURCE"
| Assets owned jointly by the applicant and others are treated as either countable or excluded resources, depending first on whether the co-owner applicant has a legal right to sever the joint ownership without obtaining the consent of the other co-owner(s) and, second, if such consent is needed, whether the other co-owner(s) in fact give or withhold such consent. |
