Maryland’s Medical Assistance (i.e. Medicaid) program is a maze for the uninitiated. Resource and income eligibility rules, asset transfer penalties, lookback periods. . . there is a steep learning curve that can intimidate anyone trying to understand the program. If you, a parent, or relative are in need of long term skilled (i.e., nursing home) care, however, you may not have a choice in the matter. As complicated as the details of planning for and obtaining eligibility can be, the basics of the program can be boiled down and understood by any lay person:
1. Medical Assistance = Medicaid (not Medicare). State governments can create programs to assist their citizens with health care costs. If those programs meet certain federal guidelines, the federal government will contribute funds to run the programs. The broad name for this cost-sharing system is “Medicaid.” Maryland’s specific Medicaid program is called “Medical Assistance.” Medicare is a completely different program–it’s a health insurance system for senior citizens and individuals with disabilities run by the federal government.
2. Medicaid started out as a poverty program, but has since evolved. Medicaid was enacted back in the ‘60s as one of LBJ’s Great Society programs. It was originally supposed to help pay health care costs for only the very needy. Modern-day Medicaid is still largely a poverty program, but one exception is Medicaid’s long-term care benefit. Medicaid will subsidize the cost of health care for an individual who needs long-term skilled nursing care and meets Medicaid’s financial eligibility requirements. Because nursing homes are expensive, many middle- and upper-middle class people in nursing homes drain their resources paying out-of-pocket, and end up relying on Medicaid. Because this is the case, the Medicaid long-term care benefit has become the de facto “payer of last resort” for many people who would not think of themselves as being in poverty.
3. You have to meet Medicaid’s medical standards to qualify. An applicant has to be “medically eligible” to qualify for Medicaid benefits. In Maryland, that means she has to meet one of several tests. One way to qualify is to require “skilled nursing services” (this refers to things like suctioning, IV therapy, certain levels of wound care or tube feeding, ventilator care, or extensive physical therapy). Alternatively, she can qualify by requiring a high level of assistance with “activities of daily living” (or “ADLs”), which are bathing, dressing, toileting, mobility, and eating. If she requires hands-on assistance with two or more ADLs she will usually qualify. Even if she doesn’t need hands-on assistance, she still may qualify if she has cognitive problems that require a high level of supervision.
4. Medicaid has resource and income limits. It’s easy to see how Medicaid can be used as an estate-planning tool: A nursing home patient who does not want to burn through all of her assets paying for care can apply for Medicaid and have the government pay instead. However, since Medicaid is, at its core, a poverty program, any applicant has to meet strict asset and income tests. To qualify in Maryland, an applicant has to have less than $2,500 in assets and her monthly income must be less than her monthly cost of care. There are some caveats: Medicaid does not count certain assets towards that limit–for example, if the applicant owns a residence, its value will often not count towards the asset limit. Additionally, if the applicant is married, the spouse (if not also in a nursing home) can keep a significant chunk of assets–up to about $115,000, depending on how much the couple owned to begin with. Finally, a spouse’s income does not count towards the applicant’s income, so excess assets can sometimes be converted to income (annuitized) in the spouse’s name to help the applicant qualify.
5. Careful planning can allow a person to qualify for Medicaid while protecting his or her assets. A qualified elder law attorney can help an individual in need of long-term care work within Medicaid’s rules to qualify for benefits and protect resources for his or her spouse or family members.
To discourage people from intentionally impoverishing themselves to qualify, Medicaid has gift penalties and a five-year “lookback” period. The lookback works like this: When someone applies for benefits, the caseworker (in Maryland, either the Bureau of Long Term Care Eligibility or the local Department of Social Services is responsible for evaluating Medicaid applications) looks at the applicant’s previous five years’ worth of financial history. This requires the applicant to submit bank statements, tax returns, and detailed documentation of any asset transfers as part of her application. The caseworker reviewing the application tallies up the “gifts”–i.e. assets transferred for less than they were worth–and calculates a “penalty period” based on the value of the assets transferred less any compensation received. The penalty period is a number of months for which Medicaid will not pay for the applicant’s care. This penalty period does not start running until the applicant has already met the medical, asset, and income tests–in other words, the penalty doesn’t kick in until after the applicant is impoverished and medically needs nursing home care.
Though these rules may sound strict, there are still many ways an individual can work within the system, protecthis or her assets, and still qualify for Medicaid. This is true even if the individual is already in a nursing home and paying privately for care. Elder law attorneys can offer guidance on asset management strategies to help avoid or minimize transfer penalties and save resources from being exhausted by long-term care costs.