Disability Trusts and Medicaid Qualification

Medicaid is like the Big Dig—a big, dark hole in the ground—a federal program administered by the state. It covers care in a nursing home for those who qualify. It also provides, among other things, health insurance to the poor of all ages and people with disabilities. In the absence of any other public program covering long-term care, Medicaid is the default nursing home insurance of the middle class. As for home care, Medicaid offers very little.

While Congress and the federal government set out the rules under which Medicaid operates, each state is granted the authority to enforce the rules as it interprets them. In Massachusetts, Medicaid applications are filed in Revere, Taunton, Tewksbury and Springfield; and each processing center interprets the state regulations differently as they wish! A Medicaid application could be approved in 30 days or three years. We find however, about four months to be the norm. You can imagine the anxiety this places on the family whose loved one is in a nursing home.

So How Much Can You Keep Anyway?

In order to be eligible for Medicaid benefits a nursing home resident must have no more than $2,000 in “countable” assets.  In addition, the spouse of a nursing home resident—called the “community spouse” or the “well spouse”—can retain a little bit over $100,000 (this figure and all others are valid through 2008). This figure is adjusted upward each year for inflation.

All assets are counted against these limits unless the assets fall within the short list of “noncountable” assets. These include:

1) Personal possessions, such as clothing, furniture, and jewelry.

2) One motor vehicle worth no more than approximately $4,500 for unmarried recipients and of any value for the healthy (community) spouse. But please, don’t go out and buy a brand new BMW.

3) The applicant’s principal residence if married (if single, one of the following must reside in the home)

• A child under 21
• A child of any age who is either blind
or disabled
• A brother or sister who owns part of the home and who has lived there for at least one year.
• A child of any age who has resided in the house for at least two years prior to the applicant’s admission to the nursing home and can prove to the satisfaction of the Medicaid officials that he/she has provided enough care to enable the applicant to reside in the home rather the nursing home (this is called the caretaker child exception).

4) Prepaid funeral plans and a small amount of life insurance.

5) Business property which is essential for self support. So imagine in the bizarre world of Medicaid planning, a 6-unit apartment building worth two million dollars, which generates $50,000 in taxable income, is considered exempt. But the beach house at the Cape, worth $400,000 and generating $3,000 of summer rental income, is not exempt. You can hardly claim that $3,000 rental income is “essential” for self support. Does this mean if you have too much money you could go out and buy a 6-unit apartment and qualify for Medicaid? Maybe. It depends on where you file the application. And consider this: What if you own a three-decker? And you don’t charge a lot
for rent…

6) The healthy spouse’s income. (This is covered in more detail in the section Treatment of Income.)