Medicaid Planning

Medical science has worked wonders over the last several decades.  Americans are living longer and healthier lives.  Still, many people fear that one day they may wind up in a nursing home, which can then be a financial burden.  This is where Medicaid planning becomes important.

Why Plan for Medicaid?

The cost of quality nursing home care is expensive, ranging from $4,000 to $12,000 per month, depending on the level of care and location of the nursing home.  Various statistics tell us the average time spent in a nursing home is 30 months.  To gain access to many of these higher-quality nursing facilities, individuals often pay for the cost of nursing home care out of their private savings, until nearly all their money has been exhausted.

The disadvantage of this strategy is that it's expensive, disappointing, and sometimes even unnecessary.  With proper planning, individuals can live quality lives and still pass on a portion of their estate to their spouse or children.  That's just one reason why creating a Medicaid plan is so important.

Medicare and Medicaid

Under Medicare Part A, hospital insurance, individuals are covered for up to 100 days of skilled nursing care per illness event.  Unfortunately, Medicare insurance has a pretty restrictive definition of skilled care, and more often than not nursing home care is not covered under Medicare Part A.

Medicaid is really the only viable long-term option many individuals have to pay for nursing home or other forms of institutional care.  But unlike Medicare, which is offered to everyone over the age of 65, Medicaid is a financial needs-based program.  To qualify for benefits under that program, you need to pass an asset test, and possibly an income test as well.

Medicaid Eligibility Test

To be eligible for Medicaid, you must first pass a three-part test.  The test is further broken down into sections: medical necessity, age / disability, and a financial segment.  Eligibility depends on meeting the requirement of all three sections.

Medical Need

To pass the Medicaid's medical need test, the individual must have some kind of "medical" restriction that limits their ability to meet the demands of daily living without the help of a nursing home.  This can include situations such as:

• The need for round-the-clock skilled nursing care in a nursing or healthcare facility.
• Personal care needed on a daily basis.
• Individuals in need of continuous observation.
• Medical needs that are complex enough to warrant the planning of a registered nurse.
• The medical care needed is not normally offered in a hospital.

Age / Disability Test

This second test is fairly straightforward.  To be eligible for Medicaid, the individual must either be over the age of 65 or have a disability.  So if someone is only 60 years old, but has a qualifying disability, then they would be eligible for Medicaid.

Financial Income / Assets

This final Medicaid eligibility test is where things get a bit more complicated.  Up to this point, the only tests you had to pass were based on the person's physical or mental condition.  This last test looks at the household income, or assets of the individual, to determine Medicaid eligibility.

The exact financial test the individual must pass will vary from state to state.  Generally, the states are divided along two lines.  Some states require the individual to pass an asset level test, while others require an income level test in addition to the asset test.

• Assets Test - this test generally takes into consideration whether the individual is married or single.  For example, in the state of Florida a single person can have no more that $2,000 in assets, while a married individual can have nearly $85,000 in assets.
• Income Test - this test looks at the income level of the individual to determine Medicaid eligibility.  In the state of Florida, the income cap is around $1,550 per month.

Problems with Medicaid Qualifying Tests

The income test highlights a problem with the eligibility criteria that's applied to this plan.  If your monthly income level is over the threshold or cap, then you are not eligible for Medicaid insurance coverage.  Unfortunately, the cap might be lower than the monthly expense of nursing care.  An individual might make too much money to qualify for Medicaid benefits, but not enough money to pay for a quality nursing home.  When this happens the person is said to fall into the Medicaid Gap.

If you're interested, you can find more information about the specific qualifying Medicaid tests used in your state by visiting the Centers for Medicare and Medicaid website. 

Need for Medicaid Planning

We hope this information gives you a better idea of why it is important to develop a plan for Medicaid, and what it takes to qualify for benefits under this program.  It's stressful enough to deal with the fact that a loved one may have fallen victim to an illness or disease that requires the care of a nursing home.  Planning can help alleviate the need to make tough decisions.

Making plans for the future, including the prospects of leveraging the Medicaid system, is a decision that many of us will face.  Fortunately, you still have options.  In the next article in this series, we will be talking through some of the specific Medicaid Planning Strategies that you might want to pursue.

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