If you’ve ever wondered why some people spend their entire life savings on home healthcare and nursing home costs, while others get a free ride, then you’re not alone.
In fact, most middle income families can receive full Government assistance for healthcare costs if they know the rules for qualifying for Medicaid.
What Are The Medicaid Qualifications?
Before we jump into how to qualify let’s take a minute and learn about the 2 primary qualifying categories:
Besides Income and Assets, the other consideration is whether you are single or married. The upper threshold or maximum amount of income and assets you may have and still qualify is drastically different if you are married versus being single.
However, there are still things a single person can do to protect assets and still qualify.
Types of Income
Earned income means wages, net earnings from self-employment, remuneration received for services performed in a sheltered workshop or work activities center, and royalties.
All other income such as:
• annuity income, pensions, other periodic payments such as Social Security benefits (including the premium for Medicare Part B), disability payments, veterans benefits, worker’s compensation, etc.
• Alimony and support payments
• Dividends, interest and certain types of royalties
• Rents (only the net rental income is counted, after deducting all ordinary and necessary expenses, on a cash basis)
• Death benefits (e.g., life insurance payments)
• Prizes and awards
• Gifts and inheritances
“In-kind” income is earned or unearned income in a form other than cash. It is counted at its fair market value. If the applicant is living in the household of a person who provides the applicant with both food and shelter or, if living at home, where the applicant receives food or shelter, there are special rules that count the in-kind income as less than its actual fair market value.
Exclusions from Income
There are three basic exclusions from countable income:
• $20/month of earned or unearned income
• After excluding $65 of earned income, one-half of the remaining earned income in a month
• Any income excluded under other federal laws (e.g., Aid and Attendance payments to veterans)
An unmarried individual in an institution may not have available income of more than three times the then applicable SSI income limit. The 2011 figure is $2,022, which is published by the federal government and updated each January 1 to reflect cost-of-living changes.
The treatment of income of a married couple is vastly more complicated than that of a single individual. That is because of the various attribution rules that permit the income of the nursing home spouse to be shifted to the spouse still residing in the community (i.e., the “Community Spouse”).
As a result of this opportunity, there is much planning that can be done to maximize the income of the Community Spouse and minimize the income of the nursing home spouse.
Asset Medicaid Qualification Rules
What’s Counted, What’s Excluded?
Although there are strict limits as to how much money and other assets a person or married couple may have in order to qualify for Medicaid, not all assets will count against the Medicaid applicant. Certain assets are countable, some are deemed unavailable, and others are specifically excluded by statute.
In determining if one spouse of a married couple can qualify for Medicaid, the state Medicaid agency will consider all assets of both spouses, whether owned separately or jointly, according to the rules below, and then determine if they are countable, unavailable, or excluded. The Community Spouse will then be allowed to “protect” a certain amount of the countable assets.
If a person can spend it or convert it to cash, it is generally countable. Here are the primary examples of “countable” assets:
• Cash, checking and savings accounts
• Stocks, bonds, mutual funds
• Joint bank accounts
• IRA, 401(k), 403(b), TIAA-CREF, and other retirement-type accounts
• Life insurance cash values (if the total face value of all policies—other than term insurance and burial insurance—exceeds $1,500)
• Annuities not yet in pay status
• All autos beyond the first car
• Trucks, tractors, boats, machinery, livestock
• Buildings and land that are not specifically excluded
• Deposits individuals make with continuing care retirement communities (CCRC) or life care communities, if the individual has the ability to use the entrance fee to pay for care, the individual is eligible for a refund of any remaining entrance fee when the individual dies or terminates the continuing care retirement community or life care community contract and leaves the community; and the entrance fee does not confer an ownership interest in the continuing care retirement community or life care community.
Certain types of assets are non-countable, because they are not legally accessible to the applicant or cannot be converted to cash:
• an interest in someone’s estate, prior to distribution
• a lawsuit filed by the applicant, prior to the judgment
• real estate that cannot be sold because of a legal impediment
• jointly owned real property whose sale would cause undue hardship, due to loss of housing, for the other joint owner(s), will not be required to be sold and will therefore be non-countable
• any other property right that cannot be liquidated
Certain assets, while still available and accessible to the applicant, are nonetheless considered “excluded” or “exempt,” i.e., they will not affect their eligibility for Medicaid.
Regardless of whether the Medicaid recipient is single or married, up to $2,000 in cash or other countable assets are exempt and may be retained by the recipient.
General Rule: $500,000 Exclusion. For an unmarried applicant, the principal place of residence (a house or condo) is an excluded asset, so long as their equity interest in the residence does not exceed the state limit (at least $500,000, but this amount can be increased up to $750,000 under federal law, if the state they are in so chooses; most have not done so).