Understanding Life Insurance Impact On Medicaid Eligibility
Understanding the different life insurance policies is critical to determine if your parents life insurance policies are within Medicaid limits.
Term Life Insurance a temporary plan that only pays a death benefit if the insured dies during the policys timeframe. You can choose coverage terms, but the typical periods are multiples of 5five, 10, 15 to 30 years.
If the insured outlives this period, the beneficiaries will not receive a death benefit because it will expire .
Term life insurance doesnt accumulate cash value.
Permanent Life Insurance also called cash-value life insurance, does not expire and will last a lifetime. The insured is covered until death as long as the insurance policy is in force.
Aside from the death benefit payout, permanent life insurance accumulates cash value. Permanent life insurance, such as whole life insurance, universal, and variable life insurance, accumulates cash value over time.
Term Life Insurance vs. Permanent Life Insurance
A term life insurance policy has no investment component and does not accumulate cash value. It is not a countable asset and will not affect Medicaid eligibility.
Permanent life insurance accumulates cash value and may be considered a countable asset for Medicaid eligibility. Permanent life insurance policies can affect Medicaid eligibility.
Face value is the death benefit the company would pay the beneficiaries should the insured die, assuming the policy is still in force.
Face Value vs. Cash Value
Pay For Caregiver Services
Many states permit Medicaid applicants to pay for caregiver services, especially when those services will enable the applicant to stay at home rather than in a more costly nursing home. This might also be applicable even if the caregiver is an immediate family member. It should be noted, however, prepayment for these services is not permitted.
Can You Own Property And Get Medicaid
Yes, you can own some kinds of property and they will not count to your asset threshold for Medicaid eligibility. In general, your primary home residence is exempt from the Medicaid asset threshold provided that you own less than $906,000 in equity interest from the home. In other words, if you are single and own less than $906,000 of your home, then the house does not count to your asset threshold. Also, if you are married, then your principal home will not count to your asset threshold, no matter your home equity interest. If you have a primary residence but are not currently living there, the house can be considered exempt if you plan to return there and live there.
Keep in mind that asset exemptions for your house only count for one house that is your primary residence. If you own any other property such as a vacation home, rental properties, etc., then these cannot be exempted from your asset threshold limit. This also includes any kind of non-residential property such as commercial properties, storage units, etc.
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What Expenses Qualify For Medicaid Spend Down
Typically, people meet the limits for their spend down using medical bills, including but not limited to:
- Doctorâs visits
- Health insurance
- Medical equipment
The rule of thumb is simple: if an expense would be covered by Medicaid, it will probably count towards your Medicaid spend down. This means that dental, podiatric, and chiropractic services all count toward your Medicaid spend down.
Along with these, there are some expenses that you may not immediately think of as being medical expenses. Transportation to healthcare services and modifications to your home designed to help you keep living in it safely are both considered essential. This means they are covered.
Other Asset Sheltering Strategies:
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Past Unpaid Medical Bills
Past unpaid medical bills may be used to meet your excess income amount even if they are old, as long as they are still viable, meaning that the medical provider is still able to bring a legal action to collect them. These bills may be applied to meet your excess income indefinitely into the future.
- Example: You have a hospital bill from four years ago and received a collection notice from the hospital this year. The bill is for $2,000. Your excess income is $200. You may submit this bill to meet your excess income for six consecutive months. After the six months is over, if the provider is still trying to collect on the bill, you can continue to use the balance of the bill for four more consecutive months.
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What If I Need Help Gathering And Submitting My Bills Or If It Is Difficult For Me To Travel To The Medicaid/dss Office Every Month
People with disabilities who find it difficult to go into a DSS/Medicaid office have a right to fax in bills as a reasonable accommodation for a disability. In some districts, including New York City, anyone can fax in their bills. Ask your caseworker for a fax number and fax cover sheet, or for another procedure to accommodate your disability. The fax number in New York City is 917-639-0645. If you fax bills, you must include your name, case and CIN number, the amount of your excess income, and say which month you want coverage. If you need help with producing your bills because of a disability, you can contact your local department of social services to see what reasonable accommodations can be made.
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How Medicaid Spend Down Works The Short Version
The Medicaid spend down process boils down to disposing of resources to become asset eligible for nursing home benefits. You have two choices when it comes to spending down: re-actively spend excess assets or design a step-by-step, planned approach.
Reactive spending is like performing surgery with a meat clever. Its wasteful, more painful and unnecessary. A more systematic method allows you to take full advantage of Medicaid rules to protect and preserve more assets for future use.
How To Spenddown For Medicaid
In Florida, one must have less than $2,000 in total countable assets. What Medicaid considers non-countable assets is further discussed in the linked article. But, anything in a bank or brokerage , unless in a qualified retirement plan, willbe considered countable.
If you have more than $2,000 in countable assets at the end of any calendar month, you will not be eligible for most Medicaid programs for that entire month and will need to spenddown those assets.
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What Types Of Bills Am I Allowed To Submit
- Bills you submit must include your name, the date, description and cost of service, and if paid, the date paid.
- You may submit bills from both Medicaid and non-Medicaid providers.
- You can submit bills for services that Medicaid does not cover, such as services from a chiropractor or receipts for pharmacy items such as vitamins and ointments. While a bill for a non-Medicaid-covered service will help you meet your monthly spenddown, Medicaid will not cover the bill.
- You can submit bills from a Certified Home Health Agency . CHHA providers may also submit bills directly to your LDSS for you.
- Medical expenses that are paid on your behalf by public programs can be used to cover your spenddown. These costs can be submitted to your LDSS directly by the public program.
What Is The Maximum Income For A Single Person To Get Medicaid In Ny
According to the New York State Department of Health, as of 2021, the maximum income limit to get Medicaid in NY is $17,775 for a single individual under 65 and $24,040 for a family of two. Medicaid income limits increase for up to families of 10, after which the income threshold is raised by $6,266 per additional person. Asset limits are $15,900 for individuals and $23,400 for married couples, for both regular Medicaid and Medicaid waivers.
For seniors over the age of 65, blind, or has some other disability, the annual income limit for 1 person is $10,600 while the limit for 2 seniors is $15,600. For the purposes of Medicaid, âincomeâ is defined as any source of money, including wages, alimony, pensions, SSDI, SSI, annuity payments, gifts, IRA disbursements, etc .
âAssetsâ are defined by Medicaid law to include any resource or good that has an immediate cash value, such as cash, stocks, bonds, savings, checking accounts, and houses. However, there are several types of assets that are considered exempt from the state asset limit for Medicaid eligibility. For example, NY exempts the following assets from counting towards your total assets:
â IRA
â Burial funds up to $1,500
â Personal belongings
â One vehicle
â Primary home or residence
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Medicaid Spend Down Overview
It is common that a senior in need of Medicaid LTC benefits can only qualify by first spending down their finances in order to meet Medicaids financial criteria. More often it is the assets an applicant must spend down, rather than income, but there are strategies in either situation. Complicated, complex, and confusing rules come into play for spend down strategies, but if one takes the time, an approval of benefits is likely.
Spending down assets is more complicated than spending down income however spending down assets is a one-time process while spending down income is a monthly activity.
Applicants must spend-down their countable assets that are over the Medicaid limit. These include investments and money in ones bank account , but fortunately ones house and vehicle are generally considered exempt, meaning they dont count toward the Medicaid asset limit. For a single applicant, the asset limit is commonly around $2,000 , and if one calculates the value of countable assets and it comes out to $50,000, then $48,000 would need to be spent down according to Medicaid rules before an application for benefits could be approved.
Medicaid Acceptable Ways To Spend Down Income
Someone who earns above the monthly income limit can still be approved for Medicaid benefits if they spend down correctly. The option to spend down income to become Medicaid-qualified is often called the medically needy pathway . In states with this option, the amount of income that puts an applicant above the Medicaid limit may be spent on medical costs like prescriptions, past-due bills, health insurance premiums, and doctors appointments, and then the applicant becomes eligible. To put it basically, in states where spending down of income is allowed, an applicants excess income must go toward healthcare in order to become eligible.
In states where that medically needy pathway for spending down income is not available, someone with income above the limit may still become eligible through Qualified Income Trusts or Miller Trusts. These are accounts into which the applicant deposits their excess income, and then a third-party trustee controls that money and may only release it to be spent in specific ways, including paying for medical and/or long-term-care expenses.
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What Is Nursing Home Spend Down
A nursing home spend down is a financial strategy used when your income is too high to qualify for Medicaid. To be accepted into the program, some of your income must be spent down to get it low enough to qualify for Medicaid.
To qualify for a Medicaid spend down in Texas, your monthly income limit must be less than the amount allowed at the time you apply. If you are over 65 and make more money but spend the excess on medical bills, you may still be eligible if you can prove that the extra funds went toward medical care health care costs such as . . .
- Medical bills, past and current
- Transportation services for medical care
- Home improvements to help with medical care, like a chair-lift
- Medical expenses, such as eyeglasses or a hearing aid
- Medicines from a pharmacy.
You could also spend money on accrued debt, such as a mortgage, a vehicle or credit card balances.
Asset spend down You would also have to spend down all eligible assets needed to be eligible to receive benefits. There are assets that you do have to keep, such as a house or a car, up to certain limits. These are also non-countable assets such as personal belongings, which you can keep.
How To Meet A Spenddown
To meet a spenddown you must tell us about your medical expenses. These can include recurring medical expenses, bills for hospital visits or health insurance premiums. We may need to see proof of these expenses, like receipts for medications or copies of hospital bills. Eligible expenses are subtracted from your total spend-down amount. When your spenddown amount gets to zero, your Medicaid coverage begins.
Here are examples of expenses you should send us to meet a spend-down:
- Medical expenses your insurance does not cover
- Over the counter drugs and medical supplies. For examplevitamins, band-aids and antacids
- Travel costs to see a healthcare provider
- Medical bills you owe before or during the spenddown period
- Medical bills you paid during your spenddown period
Many individuals who apply for Medicaid find that they have too many assets to qualify. Medicaid is a needs-based program, and a successful Medicaid applicant must have insufficient assets to pay for ones own care. Federal law establishes a benchmark for the amount of resources an individual may own to qualify for the program.
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How To Qualify For Medicaid
To be eligible for Medicaid to cover nursing home care, your parents countable assets should not be greater than $2,000 for one person or a maximum of $126,420 for married couples where one of them is trying to obtain Medicaid.
Each state has its asset limit, but these figures are used as a rule of thumb.
There are two categories of assets exempt and not-exempt. Exempt assets dont factor in Medicaid eligibility, while non-exempt assets are subject to the states spend-down requirements.
Exempt Medicaid Assets
Exempt assets allow Medicaid applicant to keep their assets and qualify for Medicaid benefits. The biggest asset exemption is your parents family home and other necessary assets like the vehicle.
Some types of qualified annuities are counted as exempt assets, income-producing IRA, and others. Converting some assets into Medicaid-friendly annuities or trusts requires Medicaid repayment or recovery.
Non-exempt Medicaid Assets
The cash value in a whole life insurance policy does count as an asset. The cash value on your parents permanent life insurance is a non-exempt asset.
Regardless if its a whole life or universal life insurance policy. Like other non-exempt assets, the cash value is subject to the spend-down rule.
Cash value must be spent down to qualify for Medicaid.
Asset Transfer Alert
What If I Dont Have Bills That Are Equal To Or Exceed My Excess Income
If you do not have medical bills but you need medical care, there is another option called the Pay-In Program. You can pay your monthly excess income amount for any month to your local department of social services. You should only do this if you need services in that month. Ask your local department of social services about this option.
If you do not choose the Pay-In option and you do not have any medical bills that are equal to or exceed your excess income, you will not have Medicaid coverage for that month.
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Term Life Insurance Vs Whole And Universal Insurance
A term life policy is in force for a specific period of time, and guarantees a stated payout to your beneficiaries when you pass. Term life insurance has no investment component and no cash value. These policies are not countable assets and do not affect your Medicaid eligibility.
Whole life and universal life insurance are both types of permanent life policies. They are called permanent because the policies remain in force over your lifetime as long as the premiums are paid. As noted above, permanent life policies accumulate cash value over time and that cash value may be considered a countable asset for Medicaid eligibility. Most states do allow you to hold a small whole life policy with a face value of less than $1,500. But larger whole life policies and all universal life policies are countable assets and do affect your Medicaid eligibility.
Because these policies can affect Medicaid eligibility, some people may lapse their universal or whole life policies to prevent the cash surrender value from counting against them. Dont let your policy lapse, cash out through a life settlement which allows you to sell your life insurance policy for a lump sum that can be used as you see fit.
Insurance strategies for spending down
With the help of a financial advisor, you can safely spend down your countable insurance assets. Your advisor might recommend:
Is There Anything I Should Know About My Spenddown During The Covid
Some local districts have put in place policies that allow for an extension of Medicaid coverage when Medicaid recipients meet their spend-down at least once during the public health emergency, or when they demonstrate they tried to submit documents to show they met their spenddown during the public health emergency. Please check with your LDSS for more details.
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