Understanding Medicaid & LTCi
Many people have heard that the government run program “Medicaid” will provide the funds necessary for Long Term Care. You may even know someone that has used Medicaid for this reason. It is important to understand that everyone will have different needs and have different options when funding their Long Term Care expenses. Last year alone the Colorado Medicaid program paid out over $9 Billion, 41% of which was spent on Long Term Care. (see pie chart below) In order to see if relying on federal and state dollars is right for you, you need to know how Medicaid works.
Eligibility & Qualifications
Medicaid is a state and federal run program with different qualification rules in each state, in Colorado, in order to qualify for Medicaid benefits there are 2 different mechanisms. One is your income, and the other is your assets. Both mechanisms read that the neither the Medicaid recipient or spouse, cannot have more than $554,000 in home equity. This means that folks with over $554,000 in home equity must take out a loan against the house for the difference before applying for Medicaid. Here is a look at the two different mechanisms qualifying Colorado residents for Medicaid.
Assets
If you are married, your assets (or resources) will be combined between husband and wife. In Colorado for the year 2015 the at Home Spouse (spouse not needing care: also known as the “Community Spouse”) is allowed to keep up to $119,250 in countable assets. This is called the Community Spouse Resource Allowance or CSRA. The person actually receiving the Medicaid benefits gets to keep a maximum of $2,000 in assets. As a couple they can keep $121,250 in assets, along with their home, 1 car, furnishing within home and very little other insurances or items.
If you are single, you must spend all your assets down to $2,000. You are allowed to keep your home and car, ($4,500 max valued vehicle) however at your death, the state will put a lien on your home and recover any amount of money that was paid towards your care from the sale of your home. This is called estate recovery.
You may have heard of a strategy called “Transferring of Assets” Many people will try to transfer their assets to a family member or an irrevocable trust to avoid spending down their assets for care, and immediately qualify for Medicaid. Unfortunately Medicaid will look back to see if any assets have been transferred in the last 5 years (changed from 3 years by the Deficit Reduction Act, in February, 2006) from the date you are applying for Medicaid, not the date of transfer. Any assets that have been transferred during this time will create a penalty period under Federal Law, delaying you from using Medicaid. This strategy will often result in hurting the family’s situation as opposed to helping it.
Income
In the year of 2015, the individual qualifying for Medicaid must have a gross monthly income of no more than $2,110 per month, because CO is an income capped state. (Not all states use this criteria.) Each spouse’s income is looked at separately when applying for Medicaid. If your income should be higher than $2,110/month, you would have to create a Medicaid trust (aka Miller trust), which means any excess income above qualification amount Medicaid will retain.
While using the Medicaid benefits for nursing home stay you will be allowed a small personal allowance of $77 per month.
Limitations
OK, so you’ve jumped through all the hoops and find out that you will qualify for Medicaid, you will still need to find a Medicaid Qualified facility with a Medicaid bed available. Generally speaking the more well-kempt, nicer facilities will have private-pay rooms much more available than Medicaid rooms. When looking at the waiting lists for many of the bigger, nicer facilities in Colorado, the Medicaid waiting list could be up to three times larger than the private-pay waiting list. Just like with Long Term Care Insurance, you must show a lack of ability to perform 2 of your 6 Activity of Daily Living abilities (eating, dressing, bathing, transferring, toileting, and continence) in order to receive funds for care.
Medicaid will also have limitations regarding community based care or home health care. Under HCBS (Home and Community Based Services), the Medicaid recipient must receive care from a known provider (no family or friends), many of which will not be accepted by the Medicaid program.
Overall the Medicaid funding will not leave you and your family many options as to when and where you will be able to receive care. We have seen many changes with the Medicaid program over the very recent years, many of which due to its inability to continue to pay for the extreme cost of Long Term Care. It is important to keep in mind that Medicaid was designed as a Welfare program, and should be avoided in almost all circumstances when possible. For questions regarding Medicaid and Long Term Care, email us directly and our experts will answer your question! See our Medicare page for more information on how Medicare will affect our Long Term Care planning.