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Medicaid Requirements: Frequently Asked Questions

Individuals in need of homecare or nursing-home care should understand that despite on-going changes in the Medicaid eligibility rules, they do not have to spend down their savings to qualify for Medicaid services. Valuable planning options exist. The following questions and answers illustrate some of these options:

Q: My mother suffered a stroke several months ago. She has been managing with four hours of homecare five days a  week that she has been paying for herself. My sisters and I believe her condition has taken a downturn and that she now needs more hours of homecare. We are concerned that increasing her homecare will deplete her savings. Will Medicaid help her?

A. If your mother needs homecare and the costs are so significant that she will be spending down her lifetime savings, she needs to know that she may be made eligible for Medicaid homecare services that will provide her with as much as 24-hours/7-days-a-week services at no cost to her. Such a plan will allow  her to conserve her savings to help pay for expenses other than homecare. Expenses may include luxuries and necessities, such as vacations,  theater  and clothes as well as rent, food, telephone, electric, cable, transportation, etc.

Q: My brother has dementia and needs round- the-dock  homecare.  I believe  he  has between $70,000-$80,000 in savings and stocks. His Social Security and pension income is $2,000 per month. Currently, he is paying $700 a month for 10 hours of homecare aweek and $850 for rent. Heisjustbarelyabletocoverhisotherexpenses. Can we protect his savings and income and still have him qualify for Medicaid homecare?

A. The answer is a very affirmative “Yes” to both parts of your question. Under the Medicaid program, the value of his assets, such as bank savings, stocks, bonds, etc., cannot exceed $14,400. However, the law permits him to reduce his assets down to the required limit and apply for Medicaid homecare for such services. If he gives away (i.e., transfers to an individual or to a trust) in any one month that portion of his savings above $14,400, he will be eligible resource-wise for  free  Medicaid  home-care,  day care, prescription drugs, etc. on the first day of the following month. Note: There is no penalty period for transferring assets to become eligible for non-institutional Medicaid. With regard to your brother’s monthly income: Medicaid limit is $800. In effect, your brother has $1,200 in monthly income that Medicaid characterizes as “excess.” Medicaid will require him to contribute this amount to Medicaid to help cover his homecare expenses. However, if your brother joins a pooled-income trust he will be able to conserve almost all of the $1,200 plus $800 to pay his expenses.

Q: Would you please summarize the Medicaid rules under which it is possible to conserve approximately 50 percent of an individual’s assets should that individual require nursing- home care?

A. Under the Medicaid law in New York State an individual may be eligible for Medicaid nursing-home coverage if his savings do not exceed $14,400  and all his income except for a personal-needs allowance of $50 per month is paid to the facility to defray the cost of his care. If the individual has assets in excess of $14,400 he may transfer (i.e., give away) his assets to an individual  or trust.  For   example: Assume  the  individual  has  $114,400. If, in an attempt to become eligible for Medicaid-nursing-home coverage, he transfers away $100,000, leaving him with $14,400, he will incur a 10-month penalty period during which time Medicaid will not pay for his nursing-home care if he should require that care at any  time  during  the next five years. Medicaid  arrives at  the  penalty  period  by dividing the amount of money transferred  ($100,000)  by the average monthly cost of a nursing home in the county in which he lives. In New York City the average monthly cost is approximately $10,000, resulting in a 10-month  penalty   period  ($100,000 x $10,000 = 10) during which time Medicaid will not pay for the Medicaid applicant’s care in the nursing home. In that case, the person who received the original $100,000 returns 50 percent, that is, $50,000, to the Medicaid applicant.

History now has been rewritten: The Medicaid  applicant  has  only transferred $50,000 and therefore incurred only a five-month penalty. With the $50,000 returned to him, the applicant pays for his nursing-home care for five months. By the sixth month, he has lived through his five-month penalty, he is impoverished, and he is eligible for Medicaid. The process requires the utilization of a promissory note or annuity in conformity with Medicaid law.

Q: Will Medicaid take our home if my wife or I should ever need Medicaid nursing-home care or homecare?

A. In most instances a home, that   is, a house, cooperative or condominium apartment, remains  an  exempt  asset for purposes of determining initial Medicaid eligibility. However, ultimately, Medicaid may impose a lien on the sale proceeds of the property for all it spent on behalf of your wife. If your home is transferred to a non-exempt individual, a penalty period will be incurred during which time your wife will be ineligible for Medicaid nursing-home coverage. Significantly, there is no penalty period if the home is transferred  to a  spouse; to a “caretaker” child who resided there for at least two years before the parent required nursing-home placement and provided care to maintain the parent at  home;  to  a  child  who  is disabled, blind or under age 21; or to a brother or sister who has an equity interest in the home and resided there for at least one year before  the  individual  entered   a nursing home.

Q. If my father transfers $14,000 each to me and my three children this year, will that transfer count if he should need to apply for Medicaid nursing home coverage?

A. The transfer you are proposing is counter-productive for Medicaid but may be a useful  for  a  person wishing to reduce the size of his taxable estate. You are referring to a tax-planning option which permits an individual to make gifts of $14,000 to any number of persons in any one year without   filing a gift-tax return. Such gifts are exempt from gift and estate taxation, but they are not exempt under the Medicaid nursing- home rules. The transfer of $56,000 (4 persons x $14,000) will generate a five- month-plus penalty period during which time your father will not be eligible for Medicaid in a nursing home.

Q. I recently realized that I am eligible for Medicaid, but I already have Medicare. Can I have both at the same time?

A.    Yes. As long as you meet Medicaid’s income and asset limits, you can have both Medicare and at nursing-home care or transportation to the doctor.

-By Martin Petroff, ESQ MARTIN PETROFF is a member of the Executive Committee of the  Elder Law Section of the New York State Bar Association and a director of the Long Term Care Community Coalition of New York State. Former staff attorney for the New York City Department for the Aging (DFTA), Mr. Petroff has spoken widely on radio and television and is editor of the Elder Law Report. Mr. Petroff’s office is located  at  270  Madison  Avenue, NYC, 212-679-5800.

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