What you need to know about Medicaid

Medicaid and Long-Term Care

Medicaid is a joint federal and state program that provides medical assistance to eligible needy persons. The Social Security Act authorizes grants to states for Medicaid to certain individuals whose income and resources are insufficient to meet the cost of necessary medical care. In addition, it provides some assistance for long-term care. Individuals who have exhausted their wealth paying for nursing home care are forced to rely on Medicaid to pay for their coverage. For these people, Medicaid pays for nursing home costs, home health care and prescription drugs. Nearly two-thirds of all nursing home residents rely on Medicaid, making this program an important source of financial assistance for those needing long-term care.

To qualify for Medicaid, applicants must have both income and assets below certain limits, which vary from state to state. Financially, a person’s assets must be at or near poverty level. Many states set the poverty level at $2,000-3,000. While Medicaid requires individuals to exhaust their income and assets, a few items are exempt from this financial free fall. Some of these items include:

the house (while spouse is living), regardless of value
one automobile
household and personal belongings
wedding and engagement rings
life insurance
burial plots and funeral expenses

Each year, approximately half a million people “spend down” their assets in order to qualify for long-term care assistance available under Medicaid. Some actually pay for their care until their assets are used up. However, transfers of property for less than fair market value prior to applying for Medicaid benefits can result in a denial of benefits. States may delay eligibility for Medicaid benefits for a period of time whenever it is determined that a person institutionalized in a medical institution or nursing facility has disposed of resources for less than fair market value within 36 months before application for Medicaid benefits.

The Kennedy-Kassebaum Health Insurance Reform Act, passed into law in August 1996, includes a provision making it a federal crime to dispose of assets to become eligible for Medicaid. This legislation has added a complication to the problem associated with gifting away assets. Section 217 of this Act, which was effective January 1, 1997, provides criminal penalties for a person and affiliated parties to make certain transfers of assets in order to obtain Medicaid nursing home benefits. Section 6 of this Act provides:

“Whoever knowingly and willfully disposes of assets (including by any transfer in trust) in order for an individual to become eligible for medical assistance under a State plan under title XIX of this chapter, if disposing of such assets results in the imposition of a period of ineligibility for such assistance under Section 1917c….shall….be guilty of a federal crime….(H.R. 3101 adding 42 U.S.C. Sec. 1320a7b(a)(6).”

Although Medicaid is a federal program, it is state operated and administered. Individual states have so much flexibility that Medicaid programs vary greatly from state to state. While it is true that Medicaid may e the final safety net, it should also be the last resort. Medicaid is welfare.