How Your Assets Impact Eligibility
Besides income, your assets will be counted toward meeting eligibility requirements. Countable assets include checking and savings account balances, CDs, stocks, and bonds.
In most states, you can retain up to $2,000 as an individual and $3,000 for a married couple outside of your countable assets. However, these amounts may vary depending on the state in which you live.
Your home, your car, personal belongings, or your savings for funeral expenses remain outside of countable assets. If you can prove other assets are not accessible , they too are exempt. A house must be a principal residence and does not count as long as the nursing home resident or their spouse lives there or intends to return there.
Upon becoming eligible for Medicaid, all of the applicant’s income must be used to pay for the nursing home where the applicant resides. However, you may be allowed to keep a monthly “allowance” and a deduction for medical needs, such as private health insurance. The amount of the allowance varies depending on your living arrangements, type of nursing facility, and state rules. If you are married, an allowance may be made for the spouse still living in the home.
Medicare Vs Medicaid Roles In Nursing Home Care
Medicare does cover nursing home careup to a point. If you are sent to a skilled nursing facility for care after a three-day inpatient hospital stay, Medicare will pay the full cost for the first 20 days. For the next 100 days, Medicare covers most of the charges, but patients must pay $185.50 per day unless they have a supplemental insurance policy. For day 101 and beyond, the patient pays all costs.
These rules apply to traditional Medicare. People on Medicare Advantage plans likely have different benefits
Some nursing homes wont accept Medicaid patients outright, but the law forbids them from throwing you out if you become dependent on Medicaid when you are in their care.
Do Life Insurance Policies Affect Medicaid Eligibility
In order to qualify for Medicaid to cover nursing home care, an elders countable assets cannot exceed $2,000 for a single person, or up to $126,420 for married couples in which only one spouse is applying for Medicaid. However, not all assets are considered countable for these purposes. For example, the biggest asset exemptions are an applicants home, car and personal property. Another exemption is life insurance owned by the elder.
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Alternative Life Insurance Options For People On Medicaid
If youâre ineligible for a traditional life insurance policy and you donât have an existing policy, final expense insurance can give you some protection. Guaranteed issue and simplified issue life insurance both offer near-certain approval as long as you can pay the premiums. However, they are expensive and come with age and coverage limits.
How And When Medicaid Can Pay For A Nursing Home
Medicaid was created in 1965 as a social healthcare program to help people with low incomes receive medical attention. Many seniors rely on Medicaid to pay for long-term nursing home care.
Most people pay out of their own pockets for long-term care until they become eligible for Medicaid. Though Medicare is an entitlement program, Medicaid is a form of welfareor at least thats how it began. So to be eligible, you must become impoverished under the programs guidelines, says Laura M. Krohn, a Rhode Island-based elder law attorney.
Let’s look at how the economics work, and how Medicaid can be used to pay for a nursing home.
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How To Spend Down On Life Insurance
If your parents have a life insurance policy, check if their plan will disqualify them from Medicaid. Having a life insurance policy exceeding the exemption amount doesnt mean they are not eligible for Medicaid. It means you need to implement some planning strategy before applying to be able to meet Medicaids asset limit.
If you think stopping premium payment to let the policy lapse is your only option, think again. Here are the different planning techniques you can do to qualify for Medicaid.
Transfer the policy
If your mother does not require long-term care Medicaid, you can transfer your fathers life insurance to her . The cash value on your dads plan would then go to your moms resource allowance. As of this year, most states permit the non-applicant spouse to own assets up to $128,640.
Transferring your fathers insurance policy to a funeral home to pay for a non-cancellable burial plan is another possible option. Burial plans are exempted from Medicaids asset limit.
Transferring your fathers policy to you or your adult siblings is not recommended because it is considered a gift that may violate Medicaids look-back rule.
There are two exceptions to this rule. Medicaids look-back period will not be violated if the whole life insurance policy is transferred to an adult child who is blind or disabled.
Borrow from the Cash Value
Your parents must also monitor the cash value because it increases over time, and they may find they are no longer eligible for Medicaid.
How To Prevent Your Life Insurance Policy From Being Taken By Medicaid
The most advantageous option and advice would be to make sure that your estate is not the beneficiary of your life insurance policy. The Medicaid program will seek to take money from your estate, and this cannot be conducted if you choose to change the beneficiary of your policy. Therefore, instead of listing your estate as a life insurance beneficiary, list any individual or individuals that you wish to receive your life insurance policy proceeds.
Also, there are limitations as to what Medicaid can withdrawal from your estate. States can elect not to take money from an estate, which would usually only happen if the state determines that taking money from the estate would lead to hardship on survivors or it is not considered cost-effective to pursue any benefit reimbursement from the estate. Either way, there are ways to protect your proceeds from being taken by Medicaid, in which you list an individual or multiple individuals to receive your proceeds instead of your estate.
While this article can provide insight into any potential questions asked, it is also advised to meet with an elder law attorney before deciding to make any decisions about Medicaid or your life insurance policy. Your state may handle Medicaid different from others, which is why it is a must to meet with someone before making any permanent financial decisions.
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Can You Qualify For Medicaid If You Already Have Life Insurance
If you already carry a life insurance policy and are interested in getting health insurance through your state’s Medicaid program, the type of life insurance you have could affect whether you qualify for Medicaid or not. For example, if you apply for Medicaid and your life insurance has a cash value, your life insurance policy’s cash value can easily push your overall assets over the Medicaid asset limit.
This would generally only apply to permanent life insurance policies with cash value term life insurance policies typically don’t have cash value and therefore wouldn’t be considered an asset that affects your Medicaid eligibility. However, some term policies do have cash value, so be sure to check yours. Learn more about the difference between term and permanent life insurance.
Pro tip:
Find out your state’s Medicaid eligibility requirements and how they factor life insurance policies into the asset limit. Most states require you to have under $2,000 in assets to qualify for the program. Life insurance policies with a face value of less than $1,500 usually don’t have to be factored in.
Who Does Merp Affect
This program will affect only long-term care services and supports you receive after the age of 55, and only if you first applied for these services after March 1, 2005. If you applied for these services before March 1, 2005, MERP does not affect you.
If you were on an interest list for services before that date but did not complete an application for services until after March 1, 2005, MERP does affect you.
The following services and programs are affected by MERP:
- Nursing facility care
- Intermediate Care Facility for Individuals with an Intellectual Disability or Related Condition
- The following Medicaid waiver programs:
- Community Attendant Services
- Community Living Assistance and Support Services
- Consolidated Waiver Program
- Deaf-Blind with Multiple Disabilities
- Home and Community-based Services
- Integrated Care Management
- STAR+PLUS
- Texas Home Living
MERP also affects the costs of certain hospital and prescription drug services you receive. Primary Home Care is not affected by MERP.
If you are not sure whether MERP applies to the services you currently receive or will be receiving, you should ask your Health and Human Services case manager.
Medicaid managed care enrollees should contact their health plan service coordinator for further information.
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Can Medicaid Take Life Insurance Proceeds When The Decedent Dies
Now that you have a basic understanding of how your choice of life insurance policy counts against Medicaid eligibility, you might be curious to learn whether or not the program is allowed to legally recover the care costs theyve covered.
While there are different ways Medicaid can attempt to recover costs of care, its not always possible for the program to tap into proceeds because theres often an exemption that protects life insurance benefits.
Medicaid doesnt always try to seek recovery from every benefit recipients estate or heirs. While it doesnt always happen, with dropping budgets and rising expenses, the program has to be replenished somehow. When the state is required to seek recovery is defined in the Omnibus Budget Reconciliation Act of 1993. Here are some scenarios where the state will try and collect from the deceaseds estate:
- Services are provided to recipient in a nursing home
- Services are provided in an intermediate care facility for the mentally handicapped
- Home and community-based services in a hospital are provided to recipient whos 55 or older
- Prescriptions costs of recipient whos 55 or older
Can Nursing Homes Take Your Life Insurance From Your Beneficiary
Nursing home care is often one of the largest expenses people experience towards the end of their lives. With costs exceeding $7,000 a month, many people struggle to afford the costs, especially on a long-term basis. Life insurance is one way that people can choose to help their family members cover end-of-life expenses, but you may be wondering, can a nursing home take your life insurance policy payout from your beneficiary if you have outstanding costs? The short answer is no, if you specify a beneficiary, the nursing home cannot take that money. We’re here to break down how life insurance can benefit you and your loved ones after your death and answer any of these outstanding questions.
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Medicaid And Life Insurance
Not all life insurance policies count as assets in Medicaids eyes. The rules state that if the total face value of all life insurance policies an applicant owns is less than or equal to $1,500, then these policies are considered exempt. However, if this total face value exceeds $1,500, then the total cash surrender value of the policy/policies will count toward the $2,000 asset limit.
For example, if your parent owns a $1,500 permanent life insurance policy with a cash value of $800, then it is considered an exempt or non-countable asset. However, if the policy were to have a face value of $1,600 and a cash value of $800, then the surrender value would count toward the $2,000 of assets that Medicaid allows. In this scenario, as long as your parent only had $1,200 or less in other countable assets, they would still pass the asset test for long-term care Medicaid.
But what if an elder owns a term policy with a face value of $100,000? Its completely exempt since, by definition, a term policy has no cash value. Of course, the elder must continue paying the premiums for any kind of life insurance policy to keep it in force. If they do qualify for Medicaid-covered skilled nursing care, then its highly unlikely theyll be able to afford to keep up these payments.
Life Insurance And Being Medicaid Eligible
With life insurance and Medicaid, there are two primary issues that come to mind, which are assets and income. These two issues pertain to the following factors:
- Life Insurance as an Asset and Qualifying for Medicaid Life insurance qualifying as an asset is entirely dependent on what kind of life insurance that you own. Whether it is a term life insurance policy or a whole life insurance policy can provide two different outcomes. A term life insurance has absolutely no cash value, which will not count as an asset. A whole life insurance policy has a cash value and can count as an asset. If your overall cash value puts assets above the Medicaid resource limit, then that could potentially make you ineligible for Medicaid.
- Life Insurance Proceeds and Medicaid Benefits Receiving life insurance proceeds in the past could have potentially made you ineligible for Medicaid benefits only if the proceeds took you over the income limit. Although there are many types of non-taxable income that did count toward Medicaid/CHIP eligibility before MAGI , MAGI does not count most non-taxable income, which also includes life insurance proceeds. With that being said, it is hard to determine exactly what the future will hold in terms of assets, income, and Medicare eligibility. This is mainly due to the debatable topic of the Affordable Care Act, which leaves the rules of life insurance and Medicaid in an awkward state.
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Common Questions About Medicaid Eligibility
When it comes time to pay for a nursing home or long-term care, many seniors apply for Medicaid to help cover the cost. But determining whether or not you meet the income and asset eligibility guidelines can be confusing. We asked Dilane Lofton, Medicaid Specialist for Providence Life Services, to answer some common questions about Medicaid applications.
Ways You Can Obtain Life Insurance And Keep Your Medicaid Benefits
Medicaid and life insurance. These together arent like peas and carrots. More like oil and water!
You may have heard different information about Medicaid eligibility and life insurance. Frankly, a lot of the stuff you read on the internet is inaccurate.
In this article, we dispel the inaccuracies and tell you what you need to know about how Medicaid works with life insurance. More specifically, we describe how Medicaid/SSI recipients obtain life insurance the right way. We also give you 3 suggestions on life insurance for people on Medicaid.
The quick answer to everything: it really depends on your situation. However, we have helped many Medicaid recipients obtain life insurance, and I am sure we can help you out, too.
Its important to stress that we are not lawyers and recommend you consult a lawyer in your state for any specific information regarding the laws in your state. Here is what we will discuss. We start with a discussion about Medicaid and then lead into how Medicaid eligibility affects life insurance ownership.
Lets start off and discuss Medicaid. Skip ahead if you already have a solid understanding of Medicaid.
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How Much Life Insurance Can I Have On Medicaid
If you have a term life policy, there’s essentially no limit to the amount of life insurance you can have while on Medicaid. Thats because a term policy pays a death benefit to beneficiaries after the insured passes away but has no actual monetary value to the policyholder. However, because Medicaid eligibility is determined by your income and owned assets, life insurance policies that have a cash value are taken into consideration when you apply for this government benefit.
Medicaid eligibility guidelines are complex and may vary year to year and from state to state. Specific requirements may also depend on your age and care needs, although most plans require applicants to have less than $2,000 in assets. However, in many states, whole life policies with a face value of up to $1,500 are considered exempt from Medicaid’s asset limit. In some states, such as Florida and North Carolina, the amount may be even higher.
That means that if your policys death benefit exceeds this state-governed amount, the cash value of your policy is counted toward your Medicaid asset limit. Depending on your state of residence, you may also be eligible for a partial exemption for your life insurance if the policys value exceeds the specified limit.
Guaranteed Issue Life Insurance
Aguaranteed issue life insurance policy offers coverage based on three variables:
Gender
The state you reside in
Itâs optimal for people whose medical or financial history makes them ineligible for a traditional life policy. While applications are generally guaranteed acceptance, the caveat is that youâll get less coverage for your money than with term life insurance and policies are only for those age 50 to 80.
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Are There Other Recovery Restrictions
While payment for the benefits above can lead to recovery efforts, there are other restrictions that protect enrollees and their family members. Currently, states arent allowed to target assets or trust balances when the following is true:
- Enrollee is survived by a spouse
- Enrollee has living children under the age of 21
- Enrollee has living children who are disabled
- Recovery would make the family suffer an undue hardship
How Does The State Define Undue Hardship
The state may consider it a hardship when:
- The estate property was a family business, farm, or ranch for at least 12 months before the person on Medicaid dies, and is the main source of income for the heirs.
- The heirs would need financial help from the government if the state filed a MERP claim to get money back.
- The heirs could stop getting financial help from the government if the state did not file a MERP claim.
- The person who died received services because he or she was a crime victim.
- There are other circumstances that may create a hardship.
One type of hardship applies just to the home. If the value of the homestead is under $100,000, and if one or more of the heirs have family income under a certain amount, the state may not ask for money back. In 2019, this income limit for one person is $37,470. For a family of two, it is $50,730. These figures are adjusted each year.
The state will not grant a hardship request unless the person’s heirs ask for it and provide the requested proof of the hardship.
If the estate has debts, such as funeral costs, legal costs, or a home mortgage, those costs are paid before a MERP claim is paid.
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