Overview of Medicaid
and Medicaid Planning

Overview of Medicaid

Medicaid is a federal program which is administered by each of the States. Therefore, there are differing laws and regulations pertaining to qualifying for each program in each state.

In Florida, eligibility for Medicaid coverage is determined by the asset and income levels of both the “well-spouse (i.e., non-sick)” and the applicant spouse. If either the Medicaid applicant or the applicant’s spouse has income or asset levels that disqualify them from receiving Medicaid benefits, then there are a multitude of planning strategies that can be done to qualify you for Medicaid benefits without spending down your assets or spending all of your savings on the nursing home. This firm provides advice and representation in assisting individuals in the application process in qualifying for Medicaid benefits to cover long term care. We utilize different legal documents such as variety of trusts and legitimate planning methods to qualify for public benefits, while simultaneously protecting and preserving your assets. There is also a Medicaid Waiver program that permits Medicaid payment for long term care outside of the traditional nursing home setting, with which we can assist.

Requirements for Medicaid Qualification

  • Applicant must be a citizen or resident alien of the United States and a resident of Florida.
  • Must be determined to be disabled or blind by Social Security Administration (SSA) or the Florida Department of Elder Affairs CARES Unit (if an individual qualifies for just $1 of Supplemental Security Income (SSI) benefits, they automatically qualify for Medicaid in Florida).
  • Applicant must require skilled, intermediate, or custodial care for ICP Medicaid and the HCBS programs.
  • Must have a social security number or apply for one.
  • Must file/apply for any other available benefits for which they may be eligible (i.e., pensions, retirement, disability, VA benefits).

Income Requirements:

For 2017, the Medicaid applicant cannot have more than $2,205.00 per month as income. For an institutionalized spouse at the same facility, the cap is $4,410.00 for the couple. If the applicant’s income exceeds this amount, an irrevocable Qualified Income Trust must be executed and funded in the month of application. This is an on-going requirement.

medicaid-planning-venice-florida-overviewThere is NO income cap on the well spouse’s income. The amount that can be reduced from the sick spouse’s income for the benefit of the well spouse is called the Minimum Monthly Maintenance Income Allowance (MMMIA) plus excess shelter costs (i.e., mortgage payments, HOA dues, taxes, HO insurance). As of July 1, 2016, the Centers for Medicare and Medicaid Services changed the MMMIA to $2003.00. If the well-spouse’s monthly income is lower than this amount, then income from the applicant spouse can be diverted to the well-spouse. However, in no case can the well-spouse’s monthly income exceed $3,023.00/month. Certain dependents may also be entitled to an income diversion from the applicant spouse.

All gross monthly income is generally counted, including:

  1. Social Security;
  2. VA Benefits;
  3. Pensions;
  4. Interest;
  5. Income from mortgages;
  6. Contributions;

Asset Requirements:

For 2017, the Medicaid applicant cannot have more than $2,000.00 in “countable assets.” The cap is $3,000.00 for a couple.

For 2017, the well spouse is permitted to retain up to $120,200.00 in “countable assets”. This is called the Community Spouse Resource Allowance (CSRA).

There are three types of assets as defined in Medicaid: countable, non-countable, and non-countable by exception.

Countable Assets: Here are some examples of assets deemed countable by Florida’s Medicaid program:

  1. Real property, other than homestead (principal residence);
  2. Bank accounts, CD’s, Money Market Funds;
  3. Stocks and bonds;
  4. Trusts;

Non-Countable Assets: Here are the major examples of non-countable assets in Florida’s Medicaid program:

  1. Principal residence of Medicaid applicant, who has a subjective intent to return, that is less than $560,000.00 in equity;
  2. Principal residence (with no limit on equity) if Medicaid applicant’s spouse or the Medicaid applicant’s dependent reside there;
  3. One vehicle of value, regardless of use or age;
  4. Additional vehicles which are seven (7) years or older and not considered luxury or collectible antique or customized with exceptions for use by person with a physical disability;
  5. Amount of $2,500.00 designated for burial funds for both the applicant and the spouse, or irrevocable pre-paid burial contracts that may have higher value than $2,500.00;
  6. Burial spaces or plots for immediate family;
  7. Life estate interests;
  8. Life insurance policies with cash values of no more than $2,500.00;
  9. Household goods and personal property of reasonable value.

Non-Countable Assets by Exception: Here are the major examples of non-countable assets by exception. For example, although sometimes an asset that might normally be countable is treated as income instead. Or, an asset may be deemed unavailable.

  1. Real or personal property that is producing rental income consistent with its fair market value (asset will not be counted, but the income it throws off will be counted as income);
  2. Property may be temporarily excluded if there is a good faith effort to sell the property at fair market value;
  3. Retirement funds of the applicant and the community spouse if they are receiving regular payments. The payments will be considered income;
  4. DRA compliant promissory notes, mortgages and loans. The payments will be considered income;

Transfer of Assets:

The transfer of assets is carefully scrutinized by the Medicaid caseworkers reviewing the application. There are four types of asset transfers: Transfers for fair market value (FMV), Transfers which are permissible or exempt from Medicaid look-back and penalty rules, Uncompensated transfers that occur during the look-back period and subject the applicant to a penalty where he/she is ineligible to receive Medicaid benefits, and Uncompensated transfers that even though they occur to during the look-back period, they do not subject the applicant to a penalty.

Transfers for FMV: Here are the major examples of transfers for FMV. No penalty will be incurred because the asset was transferred for FMV:

  1. Purchase of services pursuant to a lifetime care contract;
  2. Purchase of burial arrangements;
  3. Purchase of one vehicle for any value;
  4. Payment for repairs/remodeling to the primary residence;
  5. Purchase of a new home (special consideration should be given if there is no community spouse);
  6. Purchase of income producing property;
  7. Purchase of a life estate in another’s residence pursuant to Deficit Reduction Act (DRA) rules;
  8. Purchases for entertainment and travel (increased scrutiny);
  9. Payments of all valid and documented debts, including amounts owed to family members for loans;
  10. Payments for guardian’s and attorney’s fees;
  11. Purchase of DRA compliant annuity;
  12. Loan compliant with DRA requirements;
  13. Purchase of additional therapies, medical equipment, etc.

Permissible/Exempt Transfers: Here are the major examples of exempt transfers:

  1. Interspousal transfers;
  2. Transfers of the primary residence to certain individuals;
  3. Transfers to the applicant’s blind or disabled child (adult or minor) or a trust established for the benefit of the blind or disabled child;
  4. Transfers to first party trusts, pooled trusts or qualified income trusts permitted under 42 USC s 1396.

Lookback and Penalty Period: If uncompensated transfers are made during the look-back period, it will subject the applicant to a penalty period, during which time he or she will be ineligible to receive Medicaid benefits.  It is very important to be candid and disclose uncompensated transfers during the penalty period, because there are stiff penalties to the applicant if uncompensated transfers are discovered by the Department of Children and Families that occurred during the lookback period and were not disclosed.

There is a 5 year lookback period from the date the application is filed for transfers to individuals and trusts.

Penalty period: To calculate the penalty period in Florida, you take the uncompensated transfer sum and divide it by $8662.00. This answer will be the number of months of penalty in which the applicant is ineligible for Medicaid, although he/she may still be eligible for basic Medicaid benefits. For partial months, multiply the fraction times 30 to get the number of days the applicant will be ineligible. The penalty divisor was increased from $8346.00 to $8662.00 effective June 1, 2016.

However, there are ways to contest uncompensated transfers during the lookback period which would otherwise result in a penalty period.  The result will be that the uncompensated transfers will be disregarded by the Department of Children and Families and the applicant will immediately qualify for Medicaid benefits without serving a penalty period.

Medicaid Planning

Most people in their life will reside in a nursing home. This number will only increase over time due to the fact that people are living longer. A corollary of this fact is that people have not planned for their eventual long term care as they did not expect to live that long or need to pay for it.

In Florida, the average cost of a ONE month of nursing home care is between $10,000/month! That’s $120,0000 per year! If you privately pay for this stay, it is very easy to deplete your savings.

So, who pays for this care if I cannot afford to pay for it?

MEDICARE does NOT pay for this type of care. Medicare is a federally mandated insurance program administered by the Center for Medicare and Medicaid that is available to most people who reach age 65 or who have end stage renal disease or ALS (Lou Gehrig’s disease) or who are younger than 65, but disabled. Thus, Medicare is NOT needs based, whereas Medicaid IS needs based, as you will see below. Medicare consists of Parts A-D.

Part A (Hospital Insurance) is usually free for most people and no premium is required because they paid taxes while working (need to have worked 40 or more quarters) (there is a premium if you worked less than 40 quarters). There are some deductibles with this coverage too. Part A is hospital insurance that covers inpatient care, skilled nursing facility, hospice and home health care. IT DOES NOT COVER LONG TERM OR CUSTODIAL CARE. It only has the potential to pay for 100 days in a skilled nursing facility and to receive that benefit, it must follow a three (3) day stay in the hospital and you must satisfy other requirements.  You must be ADMITTED for three days, not just be on OBSERVATION STATUS at the hospital for this Part A benefit to begin.

Part B (Medical Insurance) is paid for by a monthly premium. It covers medically necessary services like doctors’ services, outpatient care, durable medical equipment, home health services and other medical services like some preventative care. There is a deductible with this coverage.

Part D (Prescription Drug Coverage) is offered to everyone with Medicare. There are two ways to obtain Prescription Drug Coverage through Medicare. Either you receive it through your Medicare Advantage (MA) Plan or you obtain a Medicare Prescription Drug Plan (PDP). There are only certain times of the year that you can enroll in Part D coverage; otherwise, you will be subject to a penalty, unless some special circumstances exist such as moving outside your current plan’s service area. There are monthly premiums, annual deductibles and co-payments with Part D coverage. There is a coverage gap, also known as a “donut hole,” which means there is a temporary limit on what the drug plan will cover for drugs. If you meet certain income and resource limits, you may qualify for Extra Help from Medicare to pay for costs of prescription drug coverage.

Another option to pay for this care is Long Term Care (LTC) Insurance. LTC insurance can provide coverage for nursing home care as well as in-home care. Our firm provides assistance to clients in purchasing LTC Insurance. We have relationships with many trusted insurance agents and financial advisors to whom we can refer or with whom we can work. However, the problem arises when an individual either cannot afford LTC insurance, they have pre-existing conditions that will disqualify them from coverage or they have waited until they are elderly to apply for LTC insurance, in which case the high cost of premiums, the length of the elimination period and possible co-payments make this cost prohibitive.