November 2006Client Alert

Is Medicaid an Option for Long Term Care?

Paying for nursing home care is one of the greatest concerns of many elderly parents and their children. Many people believe that governmental benefits will be available to assist them in paying for long term care. The most common source of governmental assistance used to pay for long term care is the Medicaid program, which is also known as Title XIX. However, in many cases, the Medicaid program may not be an acceptable solution for paying for long term care. Because of the strict eligibility requirements, Medicaid is not automatically available to everyone. In addition, Medicaid only pays for certain types of long term care.

In order to qualify for Medicaid, an individual must meet both a resource and an income requirement. Although the Medicaid program is federally funded, it is administered at the state level, and, therefore, the rules may differ from state to state. This article will focus on the Medicaid statutes applicable in Wisconsin.

Resource Limitation

Under federal and Wisconsin statutes, if a Medicaid applicant is single, the applicant's resource allowance is limited to $2,000. If the applicant is married and both spouses are applying for Medicaid, each spouse has a $2,000 resource allowance. If, however, only one spouse is applying for Medicaid, the spouse who remains at home (the "community spouse") is entitled to retain a "community spouse resource allowance" or "CSRA". In 2006, the CSRA is equal to one-half of the spouses' countable resources, with a floor of $50,000 and a ceiling of $101,640.

Eligibility is precluded if countable assets exceed this limitation. A resource is defined as the applicant's "homestead and all other personal and real property in which the recipient has a legal interest."

Certain resources are not counted in determining Medicaid eligibility. These resources are called "exempt resources". The following assets are examples of exempt resources:

Home Property

The home of the applicant is exempt if it is the primary residence of the applicant and if the applicant evidences an intent to return to the home. A home is also exempt if a spouse or minor or disabled child resides in the home. The homestead exemption includes the residence and residential lot as well as all outbuildings and contiguous acreage. Prior to the Deficit Reduction Act (DRA), which was signed into law on February 8, 2006, there was no limit on the value of the homestead. However, under the DRA, the amount of the homestead exemption is capped at $500,000. Each state is allowed to increase the exemption amount up to $750,000. It is unknown whether Wisconsin will adopt a higher value.

Household Goods and Personal Effects

Under federal rules, household goods and personal effects with a value of up to $2,000 are exempt; wedding rings and personal medical equipment are excluded regardless of value. Under the Wisconsin Administrative Code, household goods and personal effects of "reasonable value" are exempt.

Motor Vehicles

Generally, one motor vehicle is exempt. For an applicant who is single, the exemption amount is limited to $4,500 unless the vehicle is necessary for certain purposes, such as employment or medical treatment.

Life Insurance

One or more life insurance policies with a total face value of $1,500 or less are exempt resources, regardless of the cash surrender value. If the face value of the policy(ies) exceeds $1,500, the entire cash value counts toward the resource limit.

Burial Arrangements

In general, prepaid burial arrangements, funds set aside in irrevocable accounts to pay for burial arrangements, or life insurance purchased to pay for burial arrangements are exempt.

Nonhome Real Property

Generally, nonhome real property is exempt only if it is listed for sale with a realtor, is held as joint tenancy and the joint tenant refuses to sell, or if the applicant's ownership interest is limited to a life estate.

Income Limitation

In general, in order to qualify under the income test, monthly income must be less than monthly medical expenses. For Medicaid eligibility purposes, the "name on the check" rule applies. This means that income received in the husband's name is his income and income received in the wife's name is her income.

Once an applicant is eligible for Medicaid benefits, all of his or her income will be applied to the cost of care except (i) a $45 personal needs allowance; (ii) the monthly cost of supplemental health insurance; and (iii) certain medical expenses not covered by Medicaid, such as dental.

This article presents a brief overview of Medicaid eligibility. Determining eligibility under the Medicaid rules and regulations is a complex process. If an individual does not meet the eligibility requirements, there may be some steps that can be taken to achieve eligibility. However, changes in Medicaid law under the DRA have made planning more difficult. Therefore, a review of your particular situation is advised.

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