New Hampshire Bar Journal
2005 Spring, 6.
Medicaid Eligibility and Spousal Protection for Elderly Nursing Home Residents Planning Techniques and Medicaid Recovery
New Hampshire Bar Journal Volume 46, No. 1, Pg. 6 Spring 2005 Medicaid Eligibility and Spousal Protection for Elderly Nursing Home Residents Planning Techniques and Medicaid Recovery Bar Journal Author - Attorney Ann N. Butenhof(fn1)
Any attorney who does estate planning for elderly clients or advises such clients about transferring assets must be familiar with Medicaid, because it is the only governmental program that pays for long-term custodial nursing home care. With "private pay" nursing home rates averaging in excess of $6,000 per month in New Hampshire, the typical couple can spend their life savings quickly once one of the spouses enters a nursing home. To prevent such rapid impoverishment, an attorney must know how to preserve as much of the clients' assets as possible, while avoiding any action that would disqualify the clients from receiving Medicaid benefits.
Attorneys practicing in the public benefits arena increasingly are faced with the challenge of planning for a client's nursing home care while the state and federal government attempt to restrict Medicaid eligibility and expand asset recovery tools. Although Medicaid planning is as permissible under the Medicaid rules as tax planning is under the Internal Revenue Code, an unjustified stigma often is attached to a couple's efforts to plan for the care of a institutionalized spouse. The crux of the issue is that no one wishes to become ill, slowly lose physical capabilities and mental capacity and end up in an institutional setting for years. Evidently, an inherent conflict exists in our political system which supports the sheltering of assets by the rich through prudent tax planning, while simultaneously requiring taxpaying citizens to use a very modest estate to pay the ever-increasing costs of nursing home care.
Medical Assistance or "Medicaid" is a federal/state health insurance program for low-income people, which was enacted in 1965 through the passage of Title XIX of the Social Security Act.(fn2) The program is administered in New Hampshire by the New Hampshire Department of Health and Human Services (DHHS), under the regulatory supervision of the Center for Medicare and Medicaid Services (CMS), which is part of the U.S. Department of Health and Human Services.(fn3)
The most important sources of law in daily practice are the administrative rules and DHHS' policy manuals. The administrative rules are available from the State Library, the Office of Legislative Services, and are now available on the Internet.(fn4) The financial eligibility policies, which will usually be of chief concern to the estate planner, are now located in the Adult Assistance Manual (A.A.M.). Policies governing payment for particular medical services are contained in the Medical Assistance Manual (M.A.M.). These volumes are available at each of the 12 local district offices of the Division of Human Services as well as over the Internet.(fn5)
This article does not address the eligibility rules for most Medicaid coverage, but focuses solely on Medicaid eligibility for long-term nursing home care.
II. ELIGIBILITY CRITERIA
To be eligible for Medicaid's long-term nursing home coverage, an individual must be both medically and financially eligible. To be medically eligible, the individual must meet the required medical standard of need for a nursing home; and, therefore, must need assistance with a number of activities of daily living. In short, for an individual to qualify for Medicaid long-term nursing home coverage, that individual must medically need to receive that level of care.(fn6)
Financial eligibility looks at both an individual's monthly income as well as his/her resources. Therefore, a practitioner must examine what money the individual receives on a monthly basis, plus that person's savings/assets.
A. Income Eligibility
In New Hampshire, an individual in a nursing home will be income eligible for Medicaid if the individual's income is lower than the Medicaid reimbursement rate for that particular nursing home. The income of the Medicaid applicant's spouse is not counted when determining eligibility. The Medicaid reimbursement rates vary from facility to facility, and year to year. Currently, the average rate is more than $4,300 per month.
This income eligibility rule applies to single and married individuals alike. There are some limited deductions from income that are allowed in determining eligibility, such as court-ordered support payments. General financial obligations, however, such as car payments and mortgages are not permitted as deductions.(fn7)
(For a discussion of the income rules relating to spouses, see Section V below.)
B. Resource (Asset) Limitations on Eligibility
In order to be resource eligible for Medicaid nursing home care coverage, a single person can have no more than $2,500 in "countable resources." This section describes what resources are counted toward the $2,500 limit. (See Section III for a specific discussion of the allocation of resources between spouses.)
An otherwise eligible applicant whose resources exceed this $2,500 limit will lose entitlement for an entire month, and is required to reapply once the resources have been "spent down." There is a limited exception to this harsh rule when the excess resource is the cash surrender value or equity value of one or more life insurance policies. An applicant is given three months to spend down the value of this excess equity value. In the meantime, the applicant is allowed to offset medical expenses, such as a nursing home bill, against the equity value of the life insurance, thereby temporarily qualifying the applicant for Medicaid coverage.
Similarly, an otherwise eligible recipient can lose coverage if the recipient's assets increase in value beyond $2,500. For example, if a person inherits money, his/her assets may increase substantially. Excess resources must be spent down in order to end the disqualification period, and should be done immediately if it is simply a matter of accrued interest. Often a recipient's monthly income (i.e., social security and/or pension payments), or accrued interest, will bring the recipient's account balances to an amount over $2,500 for a period of time. Monthly income is not considered a "resource," however, during the same month in which it is received. Therefore, having account balances over $2,500 due to monthly income deposits will not disqualify a recipient. The only requirement is that the recipient spend the newly deposited income within 30 days in order to avoid exceeding the resource limit. This spend-down usually is not difficult to meet because a recipient's income must be spent towards things such as nursing home care and spousal income allowances.(fn8)
As discussed later in this article, a person's principal residence, as long as it is not in a revocable trust, is not a countable resource when calculating Medicaid eligibility.(fn9) Likewise, an individual's furniture, personal belongings, one motor vehicle, and other household items necessary for daily living are not counted toward the $2,500 limit.
Moreover, there are additional categories of assets the State will not count when determining Medicaid eligibility:
Loans which must be repaid.
Real property, regardless of value, if:(fn10)
Occupied by the applicant as his/her principal residence or if necessary for maintenance of the home;
Not occupied by the applicant but producing income sufficient to meet the expenses of its ownership;
Not occupied by the applicant but necessary as residence for the applicant's spouse or blind, disabled, or minor child;
A residence temporarily unoccupied due to applicant's illness or hospitalization; or
Jointly owned real estate when the co-owner refuses to sell. See the discussion below of "inaccessible resources."
Inaccessible resources - real or personal property whose value is legally unobtainable, such as:
Property in probate;
Irrevocable burial trusts; or
Real or personal property owned jointly by the applicant with one or more other individuals, if the terms of ownership preclude unilateral sale. The applicant must be unable to liquidate either his share or the entire property unilaterally. If property is indivisible for separate sale and the other owners refuse to sell, then it is considered inaccessible.
Lump sum death benefits paid to cover funeral or burial expenses.
Income tax refunds.
Life insurance, if
There is no cash surrender or equity value, and the face value is payable only upon the death of the insured; or
The combined face values of all policies do not exceed $1,500.
(However, if the combined face value exceeds $1,500 and there is a cash surrender or equity value, such equity values are counted toward $2,500 limit.)
Items necessary for everyday living including, but not limited to, furnishings, appliances, jewelry, etc.
One motor vehicle.
Farm machinery, livestock, tools and equipment.
One burial plot per assistance group member.
Please note these special rules: As noted above, funds held in an irrevocable burial trust (i.e., pre-paid, irrevocable contracts with funeral homes) are considered non-countable resources. If burial funds are held in a revocable trust or contract, such funds will not be counted up to a limit of $1,500. Any portion of the equity...