If you have limited assets and a low income and you need help paying for nursing home or assisted living care, Medicaid might help you pay for your care. Medicaid is a joint federal and state program, and the states have some flexibility in setting the benefits they will offer and the eligibility criteria for those benefits.
Long-Term Care Rules
Nursing home and assisted living services are considered types of long-term care. Long-term care consists of not just medical services, but also personal services, for people who have a disability or illness. For example, a resident in a nursing home might pay for assistance with bathing and dressing in addition to medical treatment. Medicaid rules for long-term care are significantly different in many ways than their rules for other services.
What States Must Pay For
Federal law requires the states to provide certain services to Medicaid recipients. States must pay for nursing facilities for Medicaid recipients, and they must pay for home health care services for recipients who would qualify for nursing home care.
States have the option of using Medicaid funding to provide additional long-term care services like home health aides for those who might not qualify for a nursing home, assisted living facilities, adult foster homes, and in-home services like help with housekeeping and medication management. For information on what your state provides, see our series of articles on state-by-state eligibility for Medicaid long-term care.
Medicaid Need Not Be Accepted
Not all nursing homes, assisted living facilities, and other services accept Medicaid payments. A nursing home or assisted living facility can tell you whether they accept Medicaid patients. A facility that accepts Medicaid will be licensed by the state and subject to periodic inspections to ensure that the facility meets federal standards.
While most people who receive Medicaid for long-term care needs are elderly, you do not need to be elderly to qualify for Medicaid assistance with long-term care expenses. Children and young adults may need nursing home care and can receive Medicaid to pay for it if their state has elected to provide that service and if they meet their state’s eligibility criteria.
Before Medicaid will pay for a nursing home or other facility, it must be proven "medically necessary" for the patient. States have different rules that determine when long-term care is medically necessary, but all states require that your doctor certify that you need to be in a nursing facility for it to be covered by Medicaid.
States have different income and asset guidelines for Medicaid eligibility. While most states use the same asset guidelines set by the federal SSI (Supplemental Security Income) program and an income limit tied to the SSI program, other states have their own income and asset guidelines.
Most states have more flexible income guidelines for Medicaid reimbursement of long-term care. In most states, you can make up to 300% of the SSI income limit and still qualify for nursing-home-only Medicaid. 300% of the SSI limit is $2,130 per month in 2013.
Income guidelines for Medicaid may also vary according to the type of long-term care you are seeking. For example, a state whose Medicaid program covers in-home care services (known as home and community-based (HCB) waiver services) may have a lower monthly income limit for those services than it has for nursing home services. To find out whether you qualify for Medicaid assistance with the long-term care expenses you need, you should contact your local Medicaid office.
Medically Needy Guidelines
Most states also allow those who don't fit under the income and resource guidelines but are "medically needy" to qualify for Medicaid. Medically needy means your income and assets are over the eligibility levels but your medical expenses are so high that they reduce your income or assets to eligible levels. This is called “spending down,” in Medicaid lingo.
For the states who use the SSI standards, SSI has a $2,000 limit on countable assets for one person, and the limit is $3,000 if both members of a married couple are receiving care. But SSI/Medicaid does not count all resources. For example, your home is usually not counted, if you live in it or may return to it (up to a certain amount of equity, $525,000 to $750,000, depending on your state). See our article on SSI eligibility for more information. And again, some states have their own resource rules, so you should check with your state Medicaid agency.
If you have assets that put you over the Medicaid resource limit, you won't be eligible for Medicaid until you have "spent down" your resources below the limit. Many people enter a nursing home or assisted living facility as a “private pay” patient, paying for their care out of their own pocket, and then apply for Medicaid when they have spent down their savings to the point that they meet Medicaid’s eligibility guidelines.
While spending down your assets, you can spend your money on anything, not just on your care, but you cannot give your resources away for less than fair market value (for example, you can't give your vacation house to your children so that you'll qualify for Medicaid). Medicaid will look back five years to see whether you gave away anything for less than fair market value during that time.
If your state Medicaid agency finds that you did transfer something for less than fair market value, then it will impose a penalty on you by making you ineligible for Medicaid for a certain period of time. Medicaid determines the penalty period by dividing the value of the thing you transferred by the average monthly cost of a nursing home in your state. In addition, Medicaid will not begin to apply the penalty period until you have applied for and qualified for Medicaid (except for the transfer).
The result of this harsh rule is that you may move into a nursing home and pay out-of-pocket for it for a period of time, spend down your resources below the $2,000 Medicaid limit, apply for Medicaid, and then be forced to wait out a penalty period, if Medicaid finds that you made a transfer for less than market value in the last five years.
Contribution to Cost of Care
Medicaid requires you to contribute most of your income to your long-term care when you are living in a nursing home or receiving home health care services. You are allowed to keep a small fixed amount of money as a “personal needs allowance” to pay for uncovered medical expenses and, if you live at home, for food, clothing, and housing, or if you live in a nursing home, for small extras like snacks, subscriptions, and personal products. You must pay the remainder toward your long-term care.
The amount of money that you are allowed to keep each month depends on your state’s rules and may also vary depending on your living arrangements: if you live in a nursing home, your personal needs allowance may be lower than if you live in an assisted living facility or adult foster home, and if you live with your spouse and receive home health care services, your personal needs allowance may be lower than if you live alone and receive home health care services.
Some states will allow you to put excess income above the Medicaid limit into a trust in order qualify for Medicaid. At your death, the trust proceeds go first to pay off any long-term care that the state provided. Because long-term care is so expensive, there is usually very little left over for heirs.
Spousal Impoverishment Protection
If only one member of a married couple needs long-term care services, Medicaid will not require the other spouse to give up all assets and income so that the spouse needing care can qualify for it. Every state has its own “spousal protection” rules so that the healthy spouse can continue to live in the community. The rules allow the healthy spouse to keep anywhere from $22,000 to $110,000 in assets, depending on the state. The rules for the amount of income the healthy spouse can keep are more complicated. For more information, see Nolo's article on protecting spousal income from Medicaid.
Future Medicaid Claims Against Your Estate
If you are over 55 and receive long-term care through Medicaid, or if you are permanently institutionalized before you turn 55, your state’s Medicaid program will have a claim against your estate after your death for the amount that the state spent on your care while you were receiving Medicaid. This is called Medicaid estate recovery. However, the state will not try to recover from your estate until after you spouse dies and only if you have not left any minor or disabled children. Some states, including California, can also recover the cost of Medicaid services other than long-term care services -- as long as they were incurred after you turned 55.