Understanding Medicaid Long Term Care

A Brief Description of Medicaid

Medicaid was established as Title IX of the 1965 Amendment to the Social Security Act while Medicare was established at the same time as Title VIII of the Act. Medicaid is a health insurance program for certain low-income people. These include: certain low-income families with children; aged, (65 and older) blind, or disabled people on Supplemental Security Income; certain low-income pregnant women and children; and people who have very high medical bills.

Medicaid is funded and administered through a state-federal partnership. Although there are broad federal requirements for Medicaid, states have a wide degree of flexibility to design their own programs. States have authority to establish eligibility standards, determine what benefits and services to cover, and set payment rates. All states, however, must cover these basic services: inpatient and outpatient hospital services, laboratory and X-ray services, skilled nursing and home health services, doctor's services, family planning, periodic health checkups, diagnosis and treatment for children.

Funds for Medicaid are provided jointly by the federal government and the states. On average, the federal government provides about 57% of Medicaid funds and the states provide the other 43%. The amount of shared funding varies from state to state depending on the per capita income in each state. States with low per capita income such as Mississippi receive up to 83% of their Medicaid funding from the federal government and the state provides the other 17%. On the other hand, states with high per capita income such as Connecticut share Medicaid funding with the federal government on a 50% to 50% basis.

Long-term care recipients of Medicaid come almost exclusively from the aged, blind and disabled group of eligible beneficiaries but very few of those are actually receiving SSI (Supplemental Security Income). SSI is a welfare payment for certain disabled or handicapped individuals who are unable to work, have no assets and have no extended family financial support. Certain provisions of the enabling Act, as well as congressional amendments since 1965 have allowed the aged, blind and disabled who don't qualify for SSI to receive Medicaid under an alternate set of eligibility rules.

Currently there are about 60 million people or 20% of the US population receiving Medicaid support. Most of these people are receiving various forms of health care services and are younger than age 65. Our interest lies with those Medicaid beneficiaries who need long term care and can receive help from Medicaid to pay those costs. In addition, we focus almost exclusively on aged long term care beneficiaries - those over the age of 65.

Aged long term care Medicaid beneficiaries represent about 7% of the entire Medicaid population or about 4 million beneficiaries. Out of these long term care Medicaid beneficiaries, approximately 1 million are receiving various levels of Medicaid funding support in nursing homes and approximately 3 million are receiving some form of home-based or community-based Medicaid long term care support. Even though elderly long term care beneficiaries only represent about 7% of the Medicaid population they account for about 19% of all Medicaid spending. This is because long term care services are very expensive, particularly those funds used for nursing home care.

Long Term Care Requirement for Medical Eligibility

An individual needing age 65 long term care must go through an evaluation with a state Medicaid assessment specialist in order to determine a need for care. If the individual fails to meet the minimum level of care needed to qualify for that State's Medicaid coverage, then no Medicaid help is forthcoming.

A need for skilled nursing care will automatically qualify a person in any state. It's also likely that a candidate already in a nursing home but not needing skilled care will still qualify. Skilled care must be needed on a frequent basis. Examples of skilled care might include the need for: frequent monitoring of vital signs, wound dressing changes, maintenance of mechanical ventilation equipment, maintenance of a catheter, help with elimination problems, maintenance of IV administrations, careful monitoring of medication usage, managing colostomy problems, careful supervision of severe diabetes, frequent injections, maintaining a feeding tube and many more problems requiring the skill of a nurse or doctor.

Medical eligibility for home and community-based services could be based on different criteria from those for nursing homes; but in some states, a person must qualify for Medicaid based on the nursing home eligibility standards in order to receive Medicaid services at home or in assisted living.

Income and Asset Tests for Medicaid

There is both an income and an asset test to qualify for Medicaid long term care services. In general, these tests are applied for nursing home services but these same tests may also be used to qualify individuals for home or community-based Medicaid services as well. In other states the financial requirements for community-based services may be more stringent than those for nursing homes or they may be less stringent.

The following information was taken from the Kaiser Commission on Medicaid and the Uninsured;

For the elderly and people with disabilities with long-term care needs, income qualifying levels are often tied to the Supplemental Security Income (SSI) program, but income limits can be higher in states that have more liberal rules.

Most states allow the "medically needy" - those with large medical or long-term care bills - to deduct these costs from their gross income to reach the required income level and participate in Medicaid. These criteria are usually quite stringent as most states set their medically needy income level at or below SSI levels. This deduction from income can happen in a direct manner or it can happen indirectly by potential beneficiaries paying in a so-called "co-pay" for their share of the services. This co-pay represents the amount of income above the state income qualification level. This medically needy program is optional for states, however, and 21 states (plus the District of Columbia) do not have medically needy programs.

In those states that do not have medically needy programs, individuals needing nursing home care can be covered under the "300 percent rule". Under this option, individuals with income up to 300% of SSI, can qualify for institutional care. Other states may have more stringent income rules for Medicaid qualification. In states that apply a strict income rule, individuals having more than the state income limit cannot receive Medicaid assistance regardless of their expenses. These 22 states are called "income cap states."

Under the Medicare Catastrophic Coverage Act, income cap states must allow those individuals with incomes above the cap to qualify for Medicaid if they put their excess income in a trust known as a "Qualifying Income Trust." These trusts are also known as "Miller Trusts." States are able to recover funds in the trust after the person's death.

Nursing home residents who qualify as medically needy or through the 300 percent rule must apply the majority of their monthly income toward the cost of care, thereby reducing the amount that the Medicaid program must pay. Medicaid nursing home residents may keep only a small personal needs allowance (between $30-$90 per month) to pay for items that are not covered by Medicaid, such as clothing, books, toiletries, or telephone service. Medicaid also allows for their income to cover the premiums for Medicare supplement policies or Medicare advantage plans.

Medicaid beneficiaries receiving home and community-based services are also required to apply a portion of their income to the cost of care, although states may allow them to retain more of their income to maintain themselves at home than if they were in an institution, where Medicaid covers room and board.

States are required to allow nursing home residents with spouses living in the community to retain a certain amount of income for the support of the community-residing spouse. This set-aside for the healthy spouse at home avoids impoverishing that spouse instead of using all of the household income for nursing home costs.

In most states, an individual needing Medicaid nursing home care must have assets less than $2,000. Typically, a couple needing Medicaid nursing care must have assets less than $3,000. Some states vary on this allowable asset amount but only by maybe $1,000 or $500. When one member of a couple needing care in a nursing home becomes a resident, Medicaid will take a "snapshot" of the couple's combined resources at that point. Resources are anything that can be converted to cash to pay for nursing home care. In some states - called 50% states - the healthy spouse is allowed to keep up to half of these resources not to exceed $137,400 (for the year 2022). In 50% states there is also a minimum amount that the spouse who is at home can keep, disregarding whether it represents half of the assets or not. If the combined resources are less than $27,480 the healthy spouse keeps it all.

In other states - called 100% states - the healthy spouse can keep all of the combined resources up to a maximum of $137,400.

Many states have more lenient rules pertaining to the amount of resources that can be retained by the so-called community spouse and in addition, some states exclude certain types of community spouse assets as counting towards the resource test.

In 50% and 100% states, the balance of the resources belong to the nursing home spouse and must be spent down to below $2,000 (or whatever the minimum resource allowances) before Medicaid will start contributing its share of the cost.

There is no requirement that the nursing home Medicaid recipient must spend his or her share of the resource assets on the nursing home. The money can be spent on anything.

Certain assets are not counted towards the less than $2,000 asset limit. The following assets are exempt.

• Personal possessions, such as clothing, furniture, and jewelry
• One motor vehicle is excluded, regardless of value, as long as it is used for transportation of the applicant or a household member. The value of an additional automobile may be excluded if needed for health or self-support reasons (check your state's rules).
• The applicant's principal residence, provided it is in the same state in which the individual is applying for coverage
• Prepaid funeral plans and a small amount of life insurance
• Assets that are considered "inaccessible" for one reason or another
• Assets that are used as income producing property or property used in trade or business

In some states, if a single Medicaid beneficiary is not residing in the personal residence and there is no anticipation that person can return to his or her home, the State may require that the home be sold to pay for Medicaid costs. In other states, the home can be left vacant in anticipation of the beneficiary returning whether the beneficiary is medically capable or not. The beneficiary must sign an intent to return home document to keep the home from being sold or counting as an asset for the resource test.

Although mandatory for nursing home residents, states are not required to offer the spousal impoverishment protections discussed above to home and community-based service waiver program participants. Consequently, a substantial number of states (19) fail to offer the spouses of waiver participants the full level of income and/or asset protection afforded the spouses of nursing home residents. Thirteen states protect neither the income nor assets of spouses of waiver participants, and an additional 6 states protect the assets but not the incomes of the community spouses of waiver participants.