Medicaid Planning
What Is Medicaid?
Medicaid is a joint federal-state program, meaning the State of Oregon has its own rules and administers the programs, but it must do so in compliance with Federal laws. The Federal government pays for about half the State's Medicaid costs; the State pays the rest.
Medicaid was created to assist medically needy individuals with limited income and assets to obtain increased access to health care services, including long-term care services.
Long-term care services include:
Because each individual’s situation is unique and Medicaid rules are numerous and specific, it is difficult to give general rules for "Medicaid planning." Individuals or couples who are not in immediate need of long-term care may have the luxury of distributing or protecting their assets in advance of a possible need for long-term care. This way, when they do need long-term care, they may qualify quickly for Medicaid benefits. Evers Law Office can advise and plan for the possible need for Medicaid as part of the whole estate plan of an individual or couple.
However, even those who are in “crisis” due to the unexpected illness or incapacity of a loved one may still benefit from Medicaid planning. One objective of Medicaid planning is to make sure the community spouse has enough resources to maintain his or her standard of living, while reducing the couple’s non-exempt resources in order to qualify for Medicaid sooner rather than later. Our attorneys can likewise help in cases of immediate need.
Why Can Medicaid Planning Help You?
The Oregon Department of Human Services (DHS) estimates that the average private pay rate for long-term care services in 2012 is $7663/month. Medicaid is the largest source of payment for long-term care services in Oregon and covers the full range of long-term care services.
Many individuals pay privately for long-term care services, but the high costs of care may quickly deplete savings. Besides no longer having resources to pay for the long-term care of an ill spouse, without planning, the spouse who does not need long-term care is also left impoverished.
Long-term care insurance is also available. The cost of long-term care insurance premiums is prohibitive to many couples and individuals, so one must weigh the risks of needing long-term care against the benefits of having it covered by insurance. Additionally, long-term care insurance policies vary greatly and one must carefully consider options in selecting an appropriate policy.
Note that Medicare and most other health insurance do not generally cover long-term care.
How Do You Plan and Qualify for Medicaid?
In order to be eligible for Medicaid assistance with long-term care an individual must have: a qualifying health need, a qualifying income need, and a qualifying resource (assets) need.
Health Need
In evaluating an applicant’s eligibility, Medicaid caseworkers look at the applicant’s ability to complete various activities of daily living (ADL’s). ADL’s are those personal functional activities that are essential for the individual’s health and safety, including eating, dressing and grooming, bathing or personal hygiene, mobility, toileting, and cognition and behavior.
During the application process, the caseworker will meet with the applicant and ask a series of personal questions to evaluate the level of assistance needed. If the applicant is not a good historian, it is critical to have a caseworker interview an advocate who has accurate knowledge about the applicant’s ability to function independently because the determination of eligibility may depend on the answers given.
Medicaid evaluates applicants on a scale of 1 to 18, with 1 being the highest level of need (needing full assistance with all activities of daily living) and 18 the lowest level of need (needing a structured environment, but little or no assistance). Priority level is assigned based on the applicant’s ability to survive without assistance, or “service needs.” Medicaid currently allows services to those applicants with demonstrated need in service priority levels 1 through 13 (who also meet income and resource tests); applicants with service priority levels 14 to 18 will not currently qualify for Medicaid regardless of income or assets.
Income Need
What is income? An applicant’s monthly income includes earned and unearned income, e.g. wages, interest earned, dividends, Social Security payments, pensions, some Veteran’s benefits, worker’s compensation, annuity payments, and other regularly occurring payments.
Income falls into four different categories: available, unavailable, countable, and excluded. Available sources of income are countable for the income determination, while unavailable and excluded sources of income do not count. Unavailable income includes, for example, if the income source is received by the applicant but intended and used for the care of someone not in the applicant’s financial group. If the applicant is in a long-term care facility, Medicaid only counts his/her income, not the income of the spouse who does not require care services, also called the “community spouse.” You do not simply divide a couple’s household income in two.
For applicants in long-term care situations, Oregon Medicaid rules require that the applicant’s monthly gross income be no more than 300% of the full SSI income standard. In 2012, that amount is $2094 per month. (This income limitation generally changes every January 1.)
In many cases, an individual may have income that is above this “income cap,” but has long-term care expenses that are much higher than the monthly income and not enough resources or assets to make up the difference. In this situation, the State allows for the creation of an “income cap trust.” Basically, a Trust account is set up and the Medicaid applicant’s income goes entirely to that account. Since the applicant is no longer receiving any income, he or she is deemed to be under the income limit for qualification purposes. A Trustee will pay for expenses out of the trust including a small personal allowance and costs of long-term care (the “patient liability”).
The Trust must be drafted and administered in accordance with the Medicaid rules, and any money that remains in the trust at the time of the individual’s death will be used to pay the State back for the cost of the individual’s long-term care (up to the amount that the State spent). Other planning strategies may also be available. The attorneys at Evers Law Office can help you determine the best course of action and to ensure that no actions would disqualify the individual from receiving Medicaid.
As noted above, when the recipient of Medicaid is in a long-term care facility and is married, the community spouse has no obligation to contribute income for the institutionalized spouse’s care. However, the community spouse but does have the right to support if his or her own income is below a certain amount, called the monthly maintenance needs allowance. If the community spouse’s income is less than this amount, he or she may shift income and/or resources from institutionalized spouse to community spouse. In 2012, the community spouse may have a minimum of $1839/month. If he or she has “shelter costs” over a certain amount (rent or home mortgage payment, plus property taxes and insurance for the couple’s principal residence), or in “exceptional circumstances,” the monthly maintenance needs allowance can be increased.
Resource Need
What are resources? Resources are what most people generally refer to as “assets”: bank accounts, investment account value, retirement account value, home equity, vehicles, personal property, principal outstanding on a contract, etc. (The Medicaid rules actually use the term “assets” to include sources of income and resources.)
If a source of income is counted as income, it is not also included as a resource in the same month: it is either income or a resource, but not both. Note, however, income not spent in the month received will convert to a resource on the first day of the following month and could affect the applicant’s ability to continue to qualify for Medicaid if the resource limit is exceeded.
The value of a resource is determined by its “equity value,” which is the fair market value of the resource minus encumbrances.
There are numerous resources that are not counted for Medicaid eligibility, including: personal belongings; one vehicle, if used for transportation of the applicant or household; and equity value in your home (under certain circumstances).
The resource limit for an individual Medicaid applicant in 2012 is $2000.
Unlike income, in determining eligibility, the resources of both the Medicaid applicant and his or her spouse are counted. But, the policies behind providing long-term care services through Medicaid seek to avoid impoverishing the community spouse. The rules of Medicaid allow a couple’s resources to be split and for the “community spouse” to keep some.
The couple’s resources are counted as of the “snapshot date” – when one spouse enters continuous care or when the couple asks DHS to do a resource assessment. In 2012, the community spouse can keep one half of the couple’s countable resources up to $113,640 but no less than $22,728. After that snapshot date, the community spouse’s portion of the resources is not counted against the Medicaid applicant’s resource limit. After the institutionalized spouse becomes eligible for Medicaid, the community spouse can accumulate more resources without affecting the eligibility of his or her spouse.
There are numerous planning opportunities to bring the resource level of a Medicaid applicant to a qualifying level, or “spending down.” Often the spend down begins with purchasing or maximizing exempt resources. This may include, for example:
Transfer Penalties
Transfers of income or resources for less than the fair market value may make the Medicaid applicant and the applicant’s spouse ineligible to receive Medicaid for a period of time. There is a complex set of rules that governs what are ineligible transfers and some transfers are exempt from the above rule. Transfers that will not result in a period of ineligibility include:
If an individual or couple does transfer assets for less than fair market value, the period of ineligibility is equal to the time during which the uncompensated value of the transferred asset could have been used to pay for care at the average private pay rate in the State of Oregon ($7663/month in 2012). For example, if the couple transferred assets worth $76,630, the period of ineligibility for Medicaid would be 10 months, because $76,630 could have paid for 10 months of long-term care.
The period of ineligibility for a transferred asset begins on either the date the asset was transferred or the date the person applied for Medicaid, whichever date occurs later. The State is allowed to ask an applicant about any transfer of assets during the 60-month period prior to applying for Medicaid, called the “look-back period.”
What Happens After You Have Qualified for Medicaid?
Patient Liability
After becoming eligible for Medicaid, the applicant’s income will be used to pay for his or her care, and Medicaid will cover the difference in cost. The amount that the State determines the Medicaid recipient must pay is called the “patient liability.” Note that the community spouse’s monthly income, regardless of the amount, will not increase the patient’s liability.
The Medicaid recipient may keep a portion of his or her income to cover certain costs, including:
Estate Recovery
Federal law requires that each State establish an estate recovery program, to recoup some of the costs of the Medicaid program. The State of Oregon has priority status to recover payments from the estate after an individual who was receiving Medicaid assistance for long-term care dies. The State may make a “claim” against an estate and can recover funds through real and personal property, even assets that do not pass through probate. The State cannot recover from an estate if the individual has a spouse that is still living, but will seek to recover any property that is passed to the surviving spouse after he or she dies.
Medicaid is a joint federal-state program, meaning the State of Oregon has its own rules and administers the programs, but it must do so in compliance with Federal laws. The Federal government pays for about half the State's Medicaid costs; the State pays the rest.
Medicaid was created to assist medically needy individuals with limited income and assets to obtain increased access to health care services, including long-term care services.
Long-term care services include:
- Nursing home care: Provides different levels of nursing care, from intensive nursing and rehabilitative care for people with unstable medical conditions to routine care for people with chronic medical conditions.
- Adult foster care (AFC): Provides care to five or fewer residents in a home setting.
- Residential care facility (RCF): Provides service to six or more residents and has staff on duty around the clock. Meals and housekeeping services are provided, but personal care and supervision varies
- In-home services: Provides assistance as needed to allow the individual to remain in his own home. Range of services includes short visits to meet a particular need, up to live-in help.
Because each individual’s situation is unique and Medicaid rules are numerous and specific, it is difficult to give general rules for "Medicaid planning." Individuals or couples who are not in immediate need of long-term care may have the luxury of distributing or protecting their assets in advance of a possible need for long-term care. This way, when they do need long-term care, they may qualify quickly for Medicaid benefits. Evers Law Office can advise and plan for the possible need for Medicaid as part of the whole estate plan of an individual or couple.
However, even those who are in “crisis” due to the unexpected illness or incapacity of a loved one may still benefit from Medicaid planning. One objective of Medicaid planning is to make sure the community spouse has enough resources to maintain his or her standard of living, while reducing the couple’s non-exempt resources in order to qualify for Medicaid sooner rather than later. Our attorneys can likewise help in cases of immediate need.
Why Can Medicaid Planning Help You?
The Oregon Department of Human Services (DHS) estimates that the average private pay rate for long-term care services in 2012 is $7663/month. Medicaid is the largest source of payment for long-term care services in Oregon and covers the full range of long-term care services.
Many individuals pay privately for long-term care services, but the high costs of care may quickly deplete savings. Besides no longer having resources to pay for the long-term care of an ill spouse, without planning, the spouse who does not need long-term care is also left impoverished.
Long-term care insurance is also available. The cost of long-term care insurance premiums is prohibitive to many couples and individuals, so one must weigh the risks of needing long-term care against the benefits of having it covered by insurance. Additionally, long-term care insurance policies vary greatly and one must carefully consider options in selecting an appropriate policy.
Note that Medicare and most other health insurance do not generally cover long-term care.
How Do You Plan and Qualify for Medicaid?
In order to be eligible for Medicaid assistance with long-term care an individual must have: a qualifying health need, a qualifying income need, and a qualifying resource (assets) need.
Health Need
In evaluating an applicant’s eligibility, Medicaid caseworkers look at the applicant’s ability to complete various activities of daily living (ADL’s). ADL’s are those personal functional activities that are essential for the individual’s health and safety, including eating, dressing and grooming, bathing or personal hygiene, mobility, toileting, and cognition and behavior.
During the application process, the caseworker will meet with the applicant and ask a series of personal questions to evaluate the level of assistance needed. If the applicant is not a good historian, it is critical to have a caseworker interview an advocate who has accurate knowledge about the applicant’s ability to function independently because the determination of eligibility may depend on the answers given.
Medicaid evaluates applicants on a scale of 1 to 18, with 1 being the highest level of need (needing full assistance with all activities of daily living) and 18 the lowest level of need (needing a structured environment, but little or no assistance). Priority level is assigned based on the applicant’s ability to survive without assistance, or “service needs.” Medicaid currently allows services to those applicants with demonstrated need in service priority levels 1 through 13 (who also meet income and resource tests); applicants with service priority levels 14 to 18 will not currently qualify for Medicaid regardless of income or assets.
Income Need
What is income? An applicant’s monthly income includes earned and unearned income, e.g. wages, interest earned, dividends, Social Security payments, pensions, some Veteran’s benefits, worker’s compensation, annuity payments, and other regularly occurring payments.
Income falls into four different categories: available, unavailable, countable, and excluded. Available sources of income are countable for the income determination, while unavailable and excluded sources of income do not count. Unavailable income includes, for example, if the income source is received by the applicant but intended and used for the care of someone not in the applicant’s financial group. If the applicant is in a long-term care facility, Medicaid only counts his/her income, not the income of the spouse who does not require care services, also called the “community spouse.” You do not simply divide a couple’s household income in two.
For applicants in long-term care situations, Oregon Medicaid rules require that the applicant’s monthly gross income be no more than 300% of the full SSI income standard. In 2012, that amount is $2094 per month. (This income limitation generally changes every January 1.)
In many cases, an individual may have income that is above this “income cap,” but has long-term care expenses that are much higher than the monthly income and not enough resources or assets to make up the difference. In this situation, the State allows for the creation of an “income cap trust.” Basically, a Trust account is set up and the Medicaid applicant’s income goes entirely to that account. Since the applicant is no longer receiving any income, he or she is deemed to be under the income limit for qualification purposes. A Trustee will pay for expenses out of the trust including a small personal allowance and costs of long-term care (the “patient liability”).
The Trust must be drafted and administered in accordance with the Medicaid rules, and any money that remains in the trust at the time of the individual’s death will be used to pay the State back for the cost of the individual’s long-term care (up to the amount that the State spent). Other planning strategies may also be available. The attorneys at Evers Law Office can help you determine the best course of action and to ensure that no actions would disqualify the individual from receiving Medicaid.
As noted above, when the recipient of Medicaid is in a long-term care facility and is married, the community spouse has no obligation to contribute income for the institutionalized spouse’s care. However, the community spouse but does have the right to support if his or her own income is below a certain amount, called the monthly maintenance needs allowance. If the community spouse’s income is less than this amount, he or she may shift income and/or resources from institutionalized spouse to community spouse. In 2012, the community spouse may have a minimum of $1839/month. If he or she has “shelter costs” over a certain amount (rent or home mortgage payment, plus property taxes and insurance for the couple’s principal residence), or in “exceptional circumstances,” the monthly maintenance needs allowance can be increased.
Resource Need
What are resources? Resources are what most people generally refer to as “assets”: bank accounts, investment account value, retirement account value, home equity, vehicles, personal property, principal outstanding on a contract, etc. (The Medicaid rules actually use the term “assets” to include sources of income and resources.)
If a source of income is counted as income, it is not also included as a resource in the same month: it is either income or a resource, but not both. Note, however, income not spent in the month received will convert to a resource on the first day of the following month and could affect the applicant’s ability to continue to qualify for Medicaid if the resource limit is exceeded.
The value of a resource is determined by its “equity value,” which is the fair market value of the resource minus encumbrances.
There are numerous resources that are not counted for Medicaid eligibility, including: personal belongings; one vehicle, if used for transportation of the applicant or household; and equity value in your home (under certain circumstances).
The resource limit for an individual Medicaid applicant in 2012 is $2000.
Unlike income, in determining eligibility, the resources of both the Medicaid applicant and his or her spouse are counted. But, the policies behind providing long-term care services through Medicaid seek to avoid impoverishing the community spouse. The rules of Medicaid allow a couple’s resources to be split and for the “community spouse” to keep some.
The couple’s resources are counted as of the “snapshot date” – when one spouse enters continuous care or when the couple asks DHS to do a resource assessment. In 2012, the community spouse can keep one half of the couple’s countable resources up to $113,640 but no less than $22,728. After that snapshot date, the community spouse’s portion of the resources is not counted against the Medicaid applicant’s resource limit. After the institutionalized spouse becomes eligible for Medicaid, the community spouse can accumulate more resources without affecting the eligibility of his or her spouse.
There are numerous planning opportunities to bring the resource level of a Medicaid applicant to a qualifying level, or “spending down.” Often the spend down begins with purchasing or maximizing exempt resources. This may include, for example:
- Purchasing a residence (exempt resource)
- Repairing the existing residence
- Purchasing a car (with long-term warranty)
- Purchasing personal property (appliances, clothing, home entertainment)
- Purchasing medical equipment
- Purchasing burial goods, and
- Travel expenses
Transfer Penalties
Transfers of income or resources for less than the fair market value may make the Medicaid applicant and the applicant’s spouse ineligible to receive Medicaid for a period of time. There is a complex set of rules that governs what are ineligible transfers and some transfers are exempt from the above rule. Transfers that will not result in a period of ineligibility include:
- Transfers to a spouse or to a blind or disabled child.
- Transfer of the home to a caregiving son or daughter, or a sibling with an equity interest (certain conditions must exist).
- Transfers that were made exclusively for reasons other than qualifying for Medicaid. Note: There is a rebuttable presumption that transfers were made in order to be eligible.
If an individual or couple does transfer assets for less than fair market value, the period of ineligibility is equal to the time during which the uncompensated value of the transferred asset could have been used to pay for care at the average private pay rate in the State of Oregon ($7663/month in 2012). For example, if the couple transferred assets worth $76,630, the period of ineligibility for Medicaid would be 10 months, because $76,630 could have paid for 10 months of long-term care.
The period of ineligibility for a transferred asset begins on either the date the asset was transferred or the date the person applied for Medicaid, whichever date occurs later. The State is allowed to ask an applicant about any transfer of assets during the 60-month period prior to applying for Medicaid, called the “look-back period.”
What Happens After You Have Qualified for Medicaid?
Patient Liability
After becoming eligible for Medicaid, the applicant’s income will be used to pay for his or her care, and Medicaid will cover the difference in cost. The amount that the State determines the Medicaid recipient must pay is called the “patient liability.” Note that the community spouse’s monthly income, regardless of the amount, will not increase the patient’s liability.
The Medicaid recipient may keep a portion of his or her income to cover certain costs, including:
- Personal needs allowance of $30/month.
- Room and board costs if living in an adult foster care home or at home.
- Medical costs not covered by Medicaid (health insurance premiums, hearing aids, glasses, etc.)
- Money given to the community spouse to cover his or her monthly expenses, if needed.
- Home maintenance costs, if the individual is planning to return home within 6 months.
Estate Recovery
Federal law requires that each State establish an estate recovery program, to recoup some of the costs of the Medicaid program. The State of Oregon has priority status to recover payments from the estate after an individual who was receiving Medicaid assistance for long-term care dies. The State may make a “claim” against an estate and can recover funds through real and personal property, even assets that do not pass through probate. The State cannot recover from an estate if the individual has a spouse that is still living, but will seek to recover any property that is passed to the surviving spouse after he or she dies.