MEDICAID AND NURSING HOME BENEFITS

    Medicaid is a governmental program that provides health insurance coverage for low-income children, seniors, and people with disabilities. As the baby boomers age, Medicaid's other role, as a source of nursing home benefits, is getting more attention. Each of the states operates its own Medicaid program, subject to some overriding rules set up by Congress and the federal Centers for Medicare and Medicaid Services. The following is an overview of some of those rules. Be aware that the specific requirements can vary from state to state, and must be checked before making decisions.

    Asset Rules An individual may have no more than $2,000 in "countable" assets to be eligible for Medicaid nursing home benefits. Assets that are not counted in this calculation include personal possessions, one motor vehicle (valued up to $4,500 for an unmarried recipient and of any value for the resident's spouse), a principal residence in the same state where benefits are sought, prepaid funeral plans and a small amount of life insurance, and assets deemed to be inaccessible. To promote the independence of the nursing home resident's healthy spouse, usually referred to as the "community" spouse, that spouse may keep one-half of the couple's countable assets, up to a maximum of $92,760 in 2004. The least that a state may allow the community spouse to retain in 2004 is $18,552. The couple's assets are totaled as of a "snapshot date," which is when a spouse enters a long-term facility in which he or she then stays for at least 30 days.

    Transfer Penalty To avoid giving benefits to those who present a false picture of poverty, there is a transfer penalty that is imposed when people transfer assets without receiving fair value in return. The Government divides the amount so transferred by the average monthly cost of a nursing home in the state in question. The person is then ineligible for Medicaid during the resulting number of months. Several provisions limit the impact of the transfer penalty. First, Medicaid officials can consider only transfers made during the 36-month "look-back period" preceding the application for Medicaid (or 60 months for transfers made to certain trusts). As a result, it is prudent not to apply for benefits in the three years after a large transfer. Second, the transfer of assets to particular categories of individuals, such as spouses and blind or disabled children, will not bring about a penalty. Finally, a penalty can be completely wiped away, or "cured," if the transferred asset is returned, or the penalty may be reduced to the extent that the asset is partially returned.

    Treatment of Income The starting point for dealing with income under Medicaid is that nursing home residents pay all of it, less certain deductions, to the nursing home. The types of deductions are as follows: a $60 per month allowance (subject to some variations among the states) for the resident's personal needs; a deduction for any uncovered medical costs, including premiums for medical insurance; for married applicants, an allowance for the spouse at home if he or she needs income support; and a deduction for any dependent children living at home. Income attributable solely to the community spouse is off-limits. It is not taken into account in determining eligibility and the community spouse will not have to use his or her income to support the spouse receiving Medicaid benefits in a nursing home.