What is Medicaid?
Medicaid is a federal government program for those who require assistance with certain medical costs including (though not limited to) payments for long-term nursing home care. While a federal program with federal regulations, Medicaid is run by each state, which means that eligibility requirements and benefits can vary from state to state. Medicaid is different than Medicare (which provides health insurance to seniors, including short rehabilitative stays at nursing homes) because Medicaid is “needs based”, which means you must qualify financially to receive the benefits.
What is a Medicaid Spend Down?
In order to qualify for the payment of long-term Medicaid benefits you must meet certain financial thresholds for your assets – these vary by state, and are significantly lower if you are single, but would not exceed $150,620 in 2023, which means that you (and possibly your spouse) cannot have more than this amount in assets in order to qualify for Medicaid. However, there are some assets that are not counted against this asset limit: equity in your primary residence (up to a certain limit); one reasonable vehicle; reasonable personal property like clothing, furniture, and jewelry; and some pre-paid burial and funeral expenses.
A Medicaid spend down is a process by which Medicaid applicants spend down their assets on non-countable assets or qualifying expenses in order to meet the financial thresholds applicable to Medicaid.
Spending Down on Assets
Because the applicant’s total assets must be below a specific threshold, one technique to reduce the applicant’s assets is to spend money on the assets that are not counted against the threshold. For example, if a married applicant owns a house and has $200,000 in the bank (approximately $50,000 above the financial threshold), then the applicant and their spouse could decide to spend $50,000 of that money on improvements to their primary residence – because the primary residence is a non-countable asset, the costs of the home improvements reduce the couple’s available assets below the applicable threshold and allow the applicant to qualify for Medicaid.
Other examples would be for the applicant and their spouse to purchase a new car, or to spend money towards qualifying pre-paid burial and funeral expenses – spending their money on these non-countable assets helps them reduce their assets in a way that will not create any penalties under the Medicaid regulations.
Once the applicant (and their spouse) has spent down as much as possible on non-countable assets, they may still exceed the applicable financial threshold. In that case, they may need to privately pay for the applicant’s care at a nursing home facility until those costs (along with any other expenses) bring their total assets under the applicable threshold. At that time, the applicant may qualify for Medicaid.
Disqualifying Transfers
It’s important to remember that a Medicaid spend down has to be done on qualifying non-countable assets or qualifying expenses – simply gifting assets away (whether to family members, or to trusts, or even to charities) is not allowed, and can create severe penalty periods during the five-year “lookback” period that Medicaid imposes on its applicants. These penalties can result in the application’s denial, so it’s crucial to investigate what your state requires, as each state’s rules and qualifications can vary within the regulations. Legacy Counsellors, P.C. is a full-service law firm with a large staff dedicated to helping with your estate planning needs, including planning for Medicaid, whether in advance or for an immediate need. We are licensed to practice in Massachusetts and Connecticut, and have offices in Easthampton, Northampton, Amherst, Ludlow, Sturbridge, and Bloomfield, Connecticut.
If you would like to discuss Medicaid eligibility, please contact us at (413) 527-0517 or find us at www.legacycounsellors.com or www.facebook.com/LegacyCounsellors.