Medicaid Eligibility and Long-Term Care

Medicare Does Not Usually Cover Extended Long-Term Care

Many Americans are surprised to learn that Medicare generally does not pay for extended long-term care expenses associated with nursing homes or assisted living facilities. As a result, the costs of long-term care can quickly consume a family's life savings. Medicaid is the primary government program that helps pay for long-term care expenses for qualifying individuals who meet certain medical and financial eligibility requirements.

Basic Medicaid Eligibility Requirements

In order to qualify for long-term care Medicaid benefits, an applicant must generally demonstrate both a medical need for skilled nursing or custodial care and limited available financial resources. Because Medicaid is a needs-based program, strict rules govern the amount of income and countable assets an applicant may retain while still qualifying for benefits.

Asset Limits and Spousal Protections

In Maryland, the institutionalized spouse is generally permitted to retain only approximately $2,500 in countable resources while qualifying for long-term care Medicaid benefits. Although Maryland and federal law provide certain protections for the spouse remaining in the community (commonly referred to as the “community spouse”), the community spouse is likewise subject to significant financial limitations. Depending upon the couple's financial circumstances, the community spouse is generally permitted to retain only approximately $32,000 to $162,000 in countable assets while preserving the institutionalized spouse's Medicaid eligibility. Certain assets, however, including a primary residence under some circumstances, may be exempt from these limitations.

The Five-Year Look-Back Period

Medicaid eligibility rules are highly complex and frequently involve a detailed review of an applicant's financial history, including transfers of assets made within the five-year “look-back” period preceding the application. Improper transfers can result in substantial periods of ineligibility for benefits.

Advance Medicaid Planning

Through proper advance planning, however, families can often preserve a significant portion of their assets while still preparing for the possibility of future long-term care needs. Estate planning tools such as Medicaid Asset Protection Trusts, carefully structured gifting strategies, and other elder law planning techniques can help clients protect family assets while remaining in compliance with applicable Medicaid regulations.

Medicaid Crisis Planning

When Crisis Planning Becomes Necessary

Ideally, Medicaid planning should occur years before an individual requires long-term care. Unfortunately, many families do not begin considering Medicaid eligibility issues until a loved one has already entered a nursing home, assisted living facility, or rehabilitation center. This situation is commonly referred to as “crisis planning.”

Planning Options May Still Exist

Even after an individual has entered a long-term care facility, however, important planning opportunities may still exist. Depending upon the family's financial circumstances, marital status, income, and asset structure, it may still be possible to preserve a substantial portion of the family's assets while assisting the client in qualifying for Medicaid benefits as quickly as possible.

Common Crisis Planning Strategies

Crisis planning frequently involves a careful analysis of countable versus exempt assets, permissible transfers, spousal asset allowances, caregiver agreements, promissory notes, spend-down strategies, and other elder law planning techniques. Because Medicaid eligibility rules are highly technical and penalties for improper transfers can be severe, crisis planning should generally be undertaken only with competent legal guidance.

At Scott Estate Law, we routinely assist families facing long-term care emergencies and work closely with clients to develop practical strategies designed to protect family assets while remaining compliant with applicable Medicaid regulations.