When a client asks me if they can qualify for Medicaid in New York, I ask about their assets, income, living situation, and health. Some clients they may be able to qualify rather easily. Others may need to engage in some planning in order to qualify for Medicaid. Yet others automatically assume that they can not qualify for Medicaid and unnecessarily spend much of their own money on their medical care.
This article explains the requirements necessary for qualifying for Medicaid and offers some basic Medicaid planning options. Subsequent articles will deal with Medicaid planning options in more detail.
What is Medicaid?
Medicaid is a joint program with New York State and the federal government for New Yorkers who can not afford to pay for medical care, home care, or nursing home care. There are two main types of Medicaid benefits, generally classified as Community Medicaid and Institutional Medicaid. Community Medicaid covers things such as doctors’ visits, medications, hospital inpatient and outpatient services, and care through home health agencies . Institutional Medicaid covers nursing home care. In order for a person to qualify for Medicaid, they have to be a resident of New York and meet certain financial guidelines.
Medicaid’s Financial Guidelines
Medicaid has different financial requirements based on an individual’s living situation, familial status, and health. All Medicaid recipients have to meet a certain income requirement, described below. Additionally, disabled individuals and those over 65 have to meet a resource requirement.
Here is a sampling of the financial requirements:
- Non-disabled adults aged 21-64 without children under 21 in the household may earn up to $735 a month for one person and $918 for a family of two.
- Parents, 19 and 20 year olds, disabled or blind 21-64 year olds, persons 65 and over can have a higher income level than the previous category. A single person can make up to $792 in income, while a family of two can make up to $1159. A family of three can make up to $1333 and still qualify.
- For non-disabled individuals under 65, there is no limit to the amount of assets they can own; Medicaid simply looks at their income. For individuals 65 and over, as well as disabled or blind people of any age, there is an additional resource test which needs to be met. For example, a single person in the latter category can have up to $14,250 in resources and still qualify for Medicaid. A family of two can have up to $20,850.
Resources include cash, savings, life insurance, stocks, bonds, IRAs, and other property, liquid and non-liquid. One car per household, regardless of value, will be excluded from the resource limit. A second car will be excluded from the resource limit if there is a medical need for it. In all scenarios, the more people in the household, the higher the income and resource levels will be.
What if my income exceeds Medicaid thresholds?
If someone is under 21, age 65 or older, certified blind or certified disabled, pregnant, or a parent of a child under age 21, they may be eligible for the Medicaid Excess Income program, better known as the Spenddown program.
A client who falls into this classification, but who still has income over Medicaid’s allowance amount, is said to have “excess income.” If the client’s medical bills for that month exceed his “excess income”, Medicaid will pay their medical bills beyond the excess.
Additionally, special needs and pooled income trusts can be utilized by disabled Medicaid recipients who would otherwise have to give their excess income to Medicaid. For example, if an individual receives Social Security, SSI, pension, or other income which exceeds $792 a month, he can place the excess income into a pooled income trust which would allow him to qualify for Medicaid while allowing the trust to use the remaining income to pay the individual’s bills such as rent. These options will be discussed in further detail in subsequent articles.
What if my resources exceed Medicaid thresholds?
There are certain exemptions which allow a person in need of Medicaid to keep certain assets. The most important is the homestead exemption. An individual’s homestead is an exempt resource if it is “essential and appropriate to the needs of the household” and has equity up to $786,000. If the equity in the home is greater than this amount, a home equity loan or a reverse mortgage can be used to reduce the equity in the homestead.
Additionally, the equity cap may be waived in the case of hardship. It is important to note that the equity cap does not apply if the spouse or the intended Medicaid beneficiary’s child who is under 21 or is blind or disabled, resides in the home.
The homestead is only exempt if the owner intends to return and no spouse, child under 21, or a child who is certified blind or certified disabled, or a dependent relative is living in the home. If the Medicaid beneficiary resides in a nursing home, the house is exempt as long as he has a subjective intent to return to the home.
If the homestead exemption does not assist the intended Medicaid beneficiary in qualifying, there are other options. For example, to qualify for community Medicaid, one can give away his “excess” assets in one month and qualify for Medicaid the next month. Depending on his situation, one can give away his assets to his loved ones, including adult children, or place them into an irrevocable income only Medicaid trust, which will be discussed in future articles.
Qualifying for institutional Medicaid is not as simple because Medicaid applies a 5 year look-back to all transfers made for less than their full value. This means that if you gift away your assets, even by using the annual $13,000 gift tax exclusion, Medicaid will count them as part of your resources for five years.
Certain exceptions to this five year look-back apply, including transfers of the homestead to a:
- child who is blind, disabled or under the age of 21
- sibling who has an equity interest in the home and who resided in the home for at least one year before the person was institutionalized; or
- child who resided in the home for at least two years before the person was institutionalized and provided care to maintain the person at home.
The best advice an attorney can give a client who is interested in qualifying for institutional Medicaid is to plan at least 5 years in advance of needing it.
To learn more, check out Nolo.com's section on Health Care: Insurance, Medicare, Disability & More.
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