To be eligible for Medicaid, you must meet the requirements for an eligibility group that your state covers under its Medicaid program. We can define an "eligibility group" as people who have certain common characteristics, such as being an older adult or a person with a disability, and who meet certain common requirements, such as having income and assets below certain levels. There are many different eligibility groups in the Medicaid program, and each one has its own set of requirements. States are required to cover some groups, but have the option to cover or not cover others.
Regardless of the specific eligibility group, though, you must meet two types of requirements to qualify for Medicaid.
- General requirements
- Financial requirements
Once you qualify for Medicaid, you will have to meet additional functional requirements to qualify for long-term care services.
- General Medicaid Requirements
There are many pathways to being eligible for Medicaid. For example, most states provide Medicaid to anyone who is receiving benefits under the Supplemental Security Income (SSI) program. A number of states provide Medicaid to older adults or persons with a disability with an income that is below 100 percent of the federal poverty level ($931 a month for an individual in 2012).
For the most part, to be eligible for Medicaid you must be one of the following:
- Be age 65 or older
- Have a permanent disability as that term is defined by the Social Security Administration
- Be blind
- Be a pregnant woman
- Be a child, or the parent or caretaker of a child
In addition you must meet certain other requirements, such as:
- Be a U.S. citizen or meet certain immigration rules
- Be a resident of the state where you apply
- Have a Social Security number
- Financial Requirements
There are two particular pathways, or groups, that you should be aware of because they are the ones most commonly used to make people eligible for Medicaid long-term care services. These groups are the special income level group, and the medically needy.
To be eligible for Medicaid, you must have limited income and assets.
The amount of income you can have varies by state, and also varies depending on which eligibility groups each state covers. When the state determines your financial eligibility for Medicaid, the state will count some of your income, but not all of it. Your income includes these sources:
- Regular benefit payments such as Social Security retirement or disability payments
- Veterans benefits
- Interest from bank accounts and certificates of deposit
- Dividends from stocks and bonds
However, Medicaid generally does not count such things as:
- Nutritional assistance such as food stamps
- Housing assistance provided by the federal government
- Home energy assistance
- Some of your earnings if you have earned income from work you do
Medicaid will count payments to which you are entitled even if you don’t receive all of the payment. For example, if you have earnings from which income taxes are withheld, Medicaid will count the entire amount of your earnings, including the amount that is withheld for taxes. If you and your spouse receive joint payments, such as rental income, the state allocates half to you and half to your spouse.
Special Income Level Group
The special income level group is an optional group for states, meaning that states can choose to cover or not cover this group. Over 40 states have chosen to cover this group, though, so it is widely available as a pathway to receiving long-term care services under Medicaid. This is an important group for you to know about because it is aimed specifically at people who need long-term care services.
To be eligible under this group a person must meet the general eligibility requirements, such as being aged, blind or a person with a disability. The person must also be in an institution such as a nursing home for at least 30 consecutive days.
The amount of income a person can have is quite high, up to $2,130 a month in 2013. That is three times higher than the amount of income a person can have ($710 a month in 2013) and be eligible for Medicaid because he or she is receiving SSI benefits. The amount of countable assets a person can have is similar to other pathways, about $2,000 for an individual.
Once a state has determined that someone is eligible under the special income level group, eligibility starts at the beginning of the 30 days the person must be in an institution. That means that Medicaid can pay for all of the care you receive from the beginning of your stay in the nursing home.
Although the special income level group is aimed at people who are in institutions such as nursing homes, states can use the same rules to make people eligible for home and community-based services. This means that people with higher incomes can get long-term care services while still living in their own homes.
Because the amount of income you can have under the special income level group is higher than other pathways to Medicaid eligibility, you may be required to pay for part of your long-term care services out of your own income. See the section titled “Share of Cost” for more information about this.
Like the special income level group, coverage of the medically needy is an option for states. Thirty-three states choose to cover the medically needy, which is not as many as cover the special income level group. But, this is still an important group for you to know about because in states which cover the medically needy, people with high incomes and high medical expenses can still be eligible for Medicaid long-term care services.
As with other pathways to eligibility to be eligible as medically needy a person must meet the general eligibility requirements, such as being aged, blind or a person with a disability.
People who are eligible as medically needy have too much income to qualify for Medicaid through any other pathway. But, they can still qualify for Medicaid as medically needy by “spending down” the income that is above their state’s income limit.
Spending Down to Become Eligible as Medically Needy
A person spends down his or her excess income to the state’s medically needy limit by incurring medical expenses, such as doctor visits, prescription drugs, or anything else the state considers to be medical or remedial care. It is important to understand that the person does not actually have to pay an expense for it to count as an incurred expense. The person only has to incur the obligation to pay the expense.
The medical expenses the person has incurred are then subtracted from his or her income. If the remaining income does not exceed the state’s income limit, the person is eligible as medically needy.
The medically needy income limit varies considerably from state to state. In most of the states that cover the medically needy, the income limit for an individual is less than $500 a month.
As an example of how this works, Mr. George has income of $1,000, which is too high to qualify for Medicaid in his state unless he can qualify as medically needy. His state has a medically needy income limit of $400 a month. That means Mr. George has a spenddown liability, or spenddown amount, of $600, which is the difference between his income and the state’s income limit.
But, Mr. George also has incurred medical expenses of $600. The state will subtract that $600 in medical bills from his $1,000 in income, leaving him with $400 in countable income for the month. Since his countable income is no higher than the state’s income limit of $400, Mr. George can be eligible for Medicaid as medically needy.
For a person with high income, the spenddown liability can be considerable. But, a person receiving long-term care services, particularly as an inpatient in a nursing home, can incur enough expenses very quickly because nursing home care is very expensive.
It is important to understand that even though Mr. George is now eligible for Medicaid, the program will only pay for the medical care he receives after he has met his spenddown liability. In our example, Mr. George’s spenddown liability is $600. Medicaid cannot pay that $600 on behalf of Mr. George. However, Medicaid will pay for medical care beyond that $600.
Income-Only or Miller Trusts
In states that do not have an Medically Needy Program, Medicaid applicants often use a trust to effectively lower their countable income below the state limit. Income-only trusts, often called Miller trusts, are trusts that can be established by or for a person of any age, regardless of whether the person is a person with a disability. The trust can be funded only with the person’s income, such as Social Security benefits, pensions, etc. It cannot be funded with assets such as money from a bank account or the sale of stocks or bonds. And, like a special needs trust or pooled trust, a Miller trust must contain a clause that says that upon the death of the person for whom the trust is established, any funds remaining in the trust must be paid to the state Medicaid program, up to the amount the program paid for services on behalf of the person.
Not all states recognize Miller trusts. If your state covers nursing home care for the medically needy, the state will not recognize a Miller trust. However, the other two trusts we described are recognized in all states.
- Financial Requirements - Assets
When the state determines your financial eligibility for Medicaid some of your assets are counted, while others are excluded. During the Medicaid application process, you will have to provide documentation of what assets you have. While Medicaid's assessment of your income is relatively straightforward, the assessment of your assets can be fairly complex, depending on how much and what kind of assets you have.
Assets that are usually counted for eligibility include:
- Checking and savings accounts
- Stocks and bonds
- Certificates of deposit
- Real property other than your primary residence
- Additional motor vehicles if you have more than one.
Assets that do not get counted for eligibility include the following:
- Your primary residence
- Personal property and household belongings
- One motor vehicle
- Life insurance with a face value under $1,500
- Up to $1,500 in funds set aside for burial
- Certain burial arrangements such as pre-need burial agreements
- Assets held in specific kinds of trusts. See "Trusts" for more information about how a trust can affect your eligibility for Medicaid.
Limits on Home Equity
When determining eligibility for Medicaid your home, regardless of its value, is exempt from being counted as a resource as long as it is your principal place of residence. But, your home can affect whether Medicaid will pay for your long-term care services, including nursing home care and home and community-based waiver services.
If your equity interest in the home exceeds a certain level, Medicaid cannot pay for your long-term care. The equity value of your home is the fair market value (that is, what you could sell it for on the open market) minus any debts secured by the home, such as a mortgage or a home equity loan. For example, if your home has a fair market value of $300,000 and an outstanding mortgage of $100,000, the equity value is $200,000.
But your equity interest, which is what is important, depends on whether you own the home by yourself or with someone else. In our example, if you own the home by yourself, your equity interest is the entire equity value of $200,000. If you own your home jointly with your spouse or someone else, though, your equity interest is only half of the home's equity value, or $100,000.
In 2013, the minimum home equity limit is $536,000. In other words, your must have more than $536,000 in equity interest in your home before Medicaid must deny payment for your long-term care services. However, states have the option of using a higher limit, which can be as high as $802,000 in 2013. Most states have chosen to use the lower limit but some states, especially in parts of the country where housing is expensive, use the higher amount. These limits are adjusted each year to account for inflation.
There are some exceptions to this rule. If your spouse or your child who is under 21 or blind or a person with a disability lives in the home, this rule does not apply. Also, the state can choose not to apply this rule if it determines that applying the rule would be an undue hardship.
Other Important Considerations:
- Unless specifically excluded any other real property, such as a vacation home, that you and your spouse own is counted as an asset in the Medicaid eligibility determination
- The full value of an asset that you own jointly with someone else may be counted as belonging entirely to you when the state determines your Medicaid eligibility. For example, a jointly owned checking or savings account would be considered to be entirely your asset since either you or the other owner can withdraw all of the funds in the account.
- The amount of countable assets you can have and still qualify for Medicaid varies from state to state. In most states you can retain about $2,000 in countable assets, and married couples who are still living in the same household can retain about $3,000 in countable assets. This may not sound like much, but remember that many assets are not counted at all when determining your eligibility.
- If one spouse lives in an institution and the other lives in the community, the community spouse is allowed to keep more of the couple's assets without disqualifying the spouse in the institution from Medicaid coverage. In addition, the community spouse may be able to have some of the institutionalized spouse's income set aside for his or her use. See "Considerations for Married People" for more information about how income and assets can be protected for a community spouse.
GOOD TO KNOW
More about eligibility requirements and how to apply can be found on the Medicaid.gov website.
- Considerations for Married People
As we mentioned in the section on assets the asset limit in most states is about $2,000 for an individual, and $3,000 for a couple when both spouses are living together. But, if one spouse is in an institution such as a nursing home and the other spouse is still living on the community, different rules apply. These rules are commonly known as the spousal impoverishment rules.
The spousal impoverishment rules are designed to keep the spouse living in the community from becoming impoverished when the other spouse enters a nursing home. Without the spousal impoverishment rules, the state would consider a couple's jointly owned assets to belong entirely to the institutionalized spouse when the state determines that spouse's eligibility for Medicaid. And, most of the couple's income might have to be used to help pay for the cost of the institutionalized spouse's nursing home care, leaving little or nothing for the spouse in the community to live on.
Under the spousal impoverishment rules, though, the community spouse is allowed to keep a portion of the couple's assets. That portion is usually one-half of the couple's combined assets, up to a maximum of $115,920 in 2013. In about half of the states, if the couple has less than that in total assets the community spouse can keep all of the couple's assets.
In addition to assets, the spousal impoverishment rules provide that at least some of the institutionalized spouse's income can be protected for the community spouse to use. This helps ensure that the community spouse will have income to pay for living expenses. In 2013, the maximum amount of the institutionalized spouse's income that can be protected for the community spouse is $2,898 a month. However, in deciding how much income to protect, the state will take into consideration any other income the community spouse has.
- Share of Cost
Depending on how much income they have, people in nursing homes and even some receiving home and community-based services may have to pay part of the cost of the care they receive themselves. This is known as share of cost, or by the more complicated name of post-eligibility treatment of income. To keep this as simple as possible we will use the term "share of cost".
There are two reasons why you may be required to pay for part of the cost of your care.
One is that when you are in a nursing home, almost everything you need is provided for you. In addition to medical care you receive food and shelter, and if you are eligible for Medicaid the program pays for that through its reimbursement to the nursing home. In other words, you have very little in the way of living expenses because Medicaid is paying for everything in the nursing home.
The second reason is that in most states a person with high income can still be eligible for Medicaid if the person is in a nursing home. As we explain in the section on the special income level group, the income limit for that group can be as high as $2,130 a month in 2013. If you are living in the community you must spend much of your income on things like shelter, food, and utilities. But, if you are in a nursing home, you do not have to pay for these things because the nursing home provides them and they are paid for by Medicaid. This means that if you are in a nursing home and have high income, you may have "extra" income that you are not using for anything.
Medicaid deals with this extra income by requiring you to help pay for part of the cost of your care in the nursing home. The state determines how much extra income you have by starting with your total income and then deducting certain items and expenses. Some things that are deducted are a small allowance for personal needs, an amount to take care of the needs of a spouse or children who may still be living at home, and an allowance to maintain your home if you have one. Whatever is left after all of the deductions is considered to be extra income, and that is your share of cost, or the amount you are expected to pay for your care. If nothing is left after all of the deductions, you do not have any share of cost.
The state takes your share of cost into account when it pays the nursing home. It does this by subtracting your share of cost from the nursing home payment. For example, if your share of cost is $300, the state reduces its payment to the nursing home by that amount. The nursing home will then ask you or your family for payment of your $300 share of cost.
Share of cost can also apply if you have high income and receive home and community-based services. But, instead of a small allowance for personal needs, you would have a much larger maintenance needs allowance. That is because a person receiving home and community-based services has the same expenses as anyone else living in the community. A number of states do not require people receiving home and community-based services to pay any share of cost. Instead, they allow those people to keep all of their income to pay for their living expenses in the community.
- Functional Requirements
A medical specialist (nurse/social worker) in your state must evaluate your needs and decide if you need long-term care services. Usually, the specialist will make the decision based in part on whether you need assistance performing certain activities of daily living (ADL), such as:
- Using the toilet
- Transferring to or from a bed or chair
- Caring for incontinence
GOOD TO KNOW
If you do not meet Medicaid's functional eligibility criteria, Medicaid will not cover long-term care services, regardless of financial eligibility. But, if you meet the general and financial requirements for eligibility, Medicaid will still cover other services such as doctor visits and prescription drugs.