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PLANNING FOR
MEDICAID ELIGIBILITY
INTRODUCTION
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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).
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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?
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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
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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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The only relevant issue on income
limits is whether the individual's "countable income" (defined below) will be
less than the applicable nursing facility charges. If the individual's countable
income exceeds the facility's charge, no Medicaid benefits will be payable, even
if the individual is otherwise eligible, since Medicaid will only pay for the
difference between the two. |
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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.
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WHAT IS "COUNTABLE INCOME"?
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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.
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ALLOWABLE DEDUCTIONS
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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
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Countable Resources.
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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 applicant’s income does not exceed 300% of the
Federal Benefit rate, the protected amount is increased to $8,000. (Effective
January 1, 2009 the income cap is $2,022 per month.) For the "medically
needy" the resource limit is $2,400.
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"Deeming" Between Spouses
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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 are never
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:
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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 $500,000. |
Beginning in 2011 this amount will be indexed for
inflation.
If the unmarried applicant's house is valued at more than
$500,000, the excess equity value could be
eliminated by the applicant borrowing money from a bank or other lender who would
then place a mortgage lien on the home. A reverse mortgage or home equity
loan could be used for this purpose. However, the wisdom of assuming such
debt, especially if the only reason for doing so is Medicaid eligibility, is
questionable.
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Revocable burial funds, up to $1,500. |
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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.
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One motor vehicle. |
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Term life insurance, or any insurance
policy without cash surrender value. |
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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.) |
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ENTRANCE FEE PAID TO CONTINUING CARE COMMUNITY.
Under new federal law, an entrance fee paid to a Continuing Care Community or Life Care Community will
be exempt unless the contract under which it was paid meets contains the three following provisions: |
1. 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;
2. 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
3. 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.
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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. |
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Household goods and personal effects,
including jewelry. |
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Community Spouse Resource Allowance
for a
married individual whose spouse is living at home. (See discussion below) |
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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.
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