Medicaid is the government's program that assists an individual in paying for long-term care, such as a nursing home or assisted living facility, when the individual lacks the resources to pay for his or her care.  The Medicaid rules are often confused with Medicare, which does not pay for long-term care.  The Medicaid regulations drastically changed with the enactment of the Deficit Reduction Act of 2005.

MEDICAID FACTS BEFORE AND AFTER THE

DEFICIT REDUCTION ACT OF 2005

• Coverage for an unmarried individual begins when his or her assets total less than $2,000 or $4,000, depending on the income of the individual.

• The spouse in the nursing facility is referred to as the “institutionalized spouse.”  The “community spouse” is the spouse that remains in the marital residence.

• Medicaid considers the full value of jointly held assets to be available to each individual named as an owner on the account or asset.

• Medicaid considers a transfer to a trust to be a gift.  Exception:  Irrevocable pre-paid funeral trusts are not includable assets and are not subject to a look-back period and gifting penalties.

• Medicaid will look at all of a married couple’s assets, regardless of how titled.  Transferring all of the couple’s assets into the name of the community spouse does not relieve him/her from the duty to pay for the institutionalized spouse’s care.

• Medicaid requires at least one-half (1/2) of a married couple’s includable marital assets to be spent down to a maximum of $109,560 or minimum of $21,912 before the institutionalized spouse will qualify for coverage.

• A transfer is considered a gift if it is for less than fair market value or without consideration. 

• Transfers to children and donees other than spouses are subject to penalties.  The penalized individual must privately pay for his or her care during the penalty period.

• Children are not required to pay for a parent’s care in a nursing home, even during the penalty period resulting from a gift to those children.

• The current penalty divisor amount for New Jersey is $7,282, which represents the average monthly cost for nursing home care as determined by the State of New Jersey.  More realistically, nursing home care may cost between $7,500 to $10,000 per month.

• Life insurance policies with cash values are available assets. 

MEDICAID CHANGES AFTER

THE DEFICIT REDUCTION ACT OF 2006

1.  Imposition of a five year look back period from the date of a Medicaid application applies to all transfers.  There is no longer a distinction between a transfer in trust or an outright transfer to an individual.

2.  The penalty period begins to run from the date when the donor would “otherwise have qualified for benefits,” if not for the gift. 

3.  Gifts over the look back period are cumulative.

4.  Penalty periods are not rounded down to the lower number of months and a fractional penalty period is   applied for gifts less than the applicable divisor amount.

5.  For unmarried individuals, the primary residence is not counted as an asset, as long as the individual continues to live in the home and his or her equity in the home does not exceed $500,000 (or up to $750,000 if allowed by the State).