The short answer to this questions is yes, Medicaid will pay for long-term care services. Medicaid covered at least 6 in 10 people in nursing homes in 2014. While they will pay for it, it is not the best option for everyone, and everyone will not qualify, due to aspects such as asset limits, the look-back period, and estate recovery.

Many people would be able to avoid using Medicaid and save some of their assets for their family if they planned ahead before they needed care. We want to help you do this.

What are asset limits?

Medicaid is a state run program that has to follow some federal guidelines. One guideline is that, in order to be eligible for Medicaid benefits, a nursing home resident may have no more than $2,000 in “countable” assets. This number can vary from state to state, but it is usually around $2,000.  All assets are counted against these limits unless the assets fall within the short list of “noncountable” assets. These usually include the following:

• Personal possessions, such as clothing, furniture, and jewelry
• A Car
• A house
• Prepaid funeral plans and a small amount of life insurance
• Assets that are considered “inaccessible” for one reason or another

If you are married, these rules change a bit. A spouse may keep, at most, one half of the couples joint assets, but only up to $123,600 in 2018. The least amount a spouse is able to keep is $24,720.  These numbers can change every year. Some states are more generous and allow the spouse to keep up to the higher limit of $123,600, even if this is more than half the couples assets.

What is the look-back period?

Another eligibility requirement of Medicaid is that you can not have recently transferred assets. The government doesn’t want you to go to a nursing home one day and then give everything to your children the next day so that you can qualify for Medicaid. If they catch you doing this, they will impose a penalty on you.  

This penalty is a period of time in which the person who transferred the assets will not be eligible for Medicaid. There is a formula for determining what this penalty will be: amount transferred/average cost of a nursing home in your state = how many months your penalty will be. For example, if you transfer $60,000, and the average monthly cost of a nursing home in your state is $3,000, you will not be able to receive Medicaid for 20 months.

The period in which the government looks for these assets transfers is called the “look-back period”. This period last 60 months, or 5 years. They can look at everything from charity donations, wedding gifts, birthday gifts,etc. Once again, states’ individual rules can vary a little. The government sees it as you had the money to pay for these months before you gave the money away, so they are not going to pay. In some states, nursing homes can legally seek money from the resident’s children, though this is rarely enforced.

The transfer penalty can be reversed, or cured, if the assets are returned in their entirety. The penalty is reduced if assets are are returned partly, though some states do not allow partial returns.

Transferring assets to certain people will not invoke the transfer penalty even if it is during the look-back period. These people include:

• A Spouse
• A blind or disabled child
• A trust for the benefit of a blind or disabled child or for the sole benefit of a disabled individual under age 65

You can also transfer your home to certain people without receiving the penalty. These people include:

• A spouse
• A child who is under age 21 or who is blind or disabled
• Into a trust for the sole benefit of a disabled individual under age 65
• A sibling, under certain circumstances
• A “caretaker child,” under certain circumstances

What is estate recovery?

If you do end up receiving Medicaid and it pays for long-term care, federal law requires that states have to recover the amount Medicaid spent on you from your estate after you die. The state is allowed to decide if they want to recover only the cost of long-term care services or the costs of all the services they have ever paid for.  While what exactly is in an estate can vary, it usually includes real estate and personal property you own when you die. Some estates are exempt from this, such as if the spouse is still alive. Your heirs are also allowed to seek a hardship waiver from estate recovery.

Veterans benefits for long-term care

One option people with lower income might have as an alternative to Medicaid is Veterans Aid & Attendance. This is a benefit given to veterans and spouses of veterans that ultimately helps pay for long-term care services. The VA’s goal with this program is to help veterans in financial need, especially those facing a long-term care crisis. You must meet certain requirements and have under a certain amount of assets, but it is higher than Medicare.

How do I apply for Medicaid for long-term care coverage?

To apply for Medicaid, you will have to fill out an application and provide documents that will verify that you meet certain requirements. If you pass both of these, you will have to go through a functional eligibility assessments so that they will pay for long-term care services. This is just an assessment to see if you actually need these services. The state might also ask for other documents, such as a current tax bill, a real estate appraisal, and copies of your mortgage.

All states have local Medicaid eligibility offices where you can file applications. Your can also apply by phone by calling your local Medicaid office. In most states, you can apply online, or find an application online that you can mail to the local office.