607 N. Broadway
Hastings, MI 49058
Helping You Understand Medicaid
Medicaid is a health-care program jointly controlled and funded by federal and state government. Each state operates its own Medicaid program. In Michigan, Medicaid is administered by the Department of Health and Human Services (DHS).
The Medicaid program helps pay for nursing home care. This is a contrast to Medicare, which provides access to quality hospital care. Medicare does not cover long-term nursing home care, so those whose medical conditions require long term care may miss the government's "safety-net" unless they can qualify for Medicaid.
Consider the following:
- 0ver 6,000 people turn 65 every day, and 40% of these people will spend time in a nursing home.
- A 3-year stay in a nursing home will cost between $120,000 and $200,000.
- 66% of all single people will be "broke" after 13 weeks in a nursing home.
Individuals with very few assets ($20,000 or less) will usually not have difficulty becoming eligible for Medicaid. Individuals with substantial assets ($750,000 or more) will usually be able to pay for an extended nursing home stay without Medicaid and without dipping into their assets.
Unfortunately, individuals with modest assets are at risk of losing their life savings to pay for nursing home care before federal and state assistance will kick in. These individuals will benefit most from long-term care planning.
EXAMPLE: Husband enters a nursing home lives at home and needs $14,000 per year to live on. If the couple receives $17,000 a year in Social Security income, then $510,000 of Investment assets, earning 8% would be required to provide the remaining income needed to pay for nursing home care.
A Medicaid applicant must pass through four eligibility "screens" in order to qualify for Medicaid benefits:
Screen 1: An applicant must first fit into one of the Medicaid eligible categories. The most common category is “those over 65 years of age," but also includes those who are disabled, blind or receiving SSI; and
Screen 2: The applicant must be a resident of the State of Michigan. To be a resident of Michigan the applicant's homestead must be in the State; and
Screen 3: The applicant's income must be below the monthly private pay cost of the nursing home where the applicant resides or is going to reside. If the applicant receives Medicaid it will pay for the difference between the applicant's income and the cost of the nursing home care; and
Screen 4: An individual applicant cannot own more than $2,000 of countable assets, and a couple may not have more than $3,000. Some assets are not countable (see Non-Countable Assets) and if an applicant has a spouse in the community, the spouse may keep a portion of the couple's countable assets (the lesser of $117,240 or ½ of the couple's countable assets).
Some assets are not counted in determining an applicant's eligibility for Medicaid. The most important are:
The Homestead. A homestead is where a person lives or intends to return in the future. The homestead is exempt for Medicaid eligibility purposes as long as its equity value is less than $500,000.
Vehicle. One vehicle, regardless of value, is excluded.
Household and Personal Goods. Regardless of value, household and personal goods are excluded. Examples are furniture, dishes, TVs, household tools and equipment, jewelry, clothing, etc.
Funeral Related Assets. Irrevocable funeral contracts, burial space, and burial funds are excludable.
An applicant who is facing an upcoming nursing home stay may be tempted to transfer resources to relatives in order to qualify for Medicaid. Unfortunately, divestment of assets and income may result in a period of ineligibility for Medicaid coverage of nursing home care and criminal penalties. The “look-back period” for divestments is the 60 months preceding the Medicaid application.
A divestment is the "transfer of an asset for less than fair market value for the purpose of qualifying for or remaining eligible for Medicaid." The penalty for divestment is a period of ineligibility for Medicaid equal to the amount of time the transferred resources could have covered nursing home care. The penalty period starts with the first day of the month in which the client enters a nursing home and applies for Medicaid.
EXAMPLE: On Jan. 1, Mother transfers $40,000 to daughter. On May 1, Mother enters a nursing home and applies for Medicaid. Because a divestment occurred within the 60 months preceding May 1, Mother will be penalized for 6.3 months ($40,000 transfer / $6,363 per month cost of care = 6.5 month penalty). The 6.3 month penalty will begin on May 1. As such, Mother will be ineligible to receive Medicaid benefits until early November, and the family will most likely need to cover the cost.
Knowing the Medicaid rules is only the first step. Contact us for an in-depth consultation that will take into consideration your unique situation. An individualized “Long Term Care Plan” will be developed to optimize your nursing home patient’s estate. We look forward to putting our expertise to work for you.