By Jill Roamer, JD
According to the U.S. Department of Health and Human Services, there is an almost 70 percent chance that your client will need some type of long-term care by the time they are sixty-five. That care might be provided as in-home help or at an assisted living or nursing home facility. As an elder law attorney, it is important that you discuss with your client the type of care they would prefer and create a plan to pay for it.
What Government Benefits Cover Long-Term Care?
There are three government benefits that cover the costs of long-term care:
- Medicare will only cover up to one hundred days of long-term care in certain situations. Any care needed beyond the one hundred days is not covered by Medicare. To qualify for the one hundred days of coverage, all of the following must be true: (a) the patient has Medicare Part A and has days left in their benefit period, (b) the patient has a qualifying hospital stay of at least three consecutive days, (c) the patient’s doctor has ordered care in a skilled nursing facility, (d) care is needed on a daily basis and can only be given in a nursing home setting, (e) the care needed is related to the patient’s qualifying hospital stay, (f) the services the patient needs are reasonable and necessary for their condition, and (g) the facility is Medicare-certified.
- Veterans can qualify for long-term care benefits through the U.S. Department of Veterans Affairs (VA) as long as the Veteran is signed up for VA healthcare and the VA has concluded that the Veteran needs long-term care services.
- Medicaid programs offer long-term care benefits for eligible individuals, as discussed below.
Since Medicare is very limited in its long-term care offering and many clients are not Veterans, the majority of clients rely on Medicaid benefits if care is needed. Some clients will have long-term care insurance policies, but they are expensive and hard to qualify for.
How Can a Client Qualify for Long-Term Care Medicaid?
Medicaid is a joint federal-state program. The federal government provides a good deal of funding for a state’s Medicaid program, and the federal government has certain laws that the state must abide by in order to receive those funds. However, states interpret those rules differently and have their own additional rules regarding eligibility. Thus, eligibility for long-term care Medicaid differs by state.
In most states, a Medicaid applicant cannot have over $2,000 in assets and qualify for long-term care Medicaid benefits. This amount is called the individual resource allowance. If both spouses need care, the amount is higher. While most states are at or near the $2,000 mark, the individual resource allowances for California and New York are much higher. In January 2024, California intends to implement a plan to eliminate its asset test altogether.
Because the government does not want the community spouse (the spouse who does not need long-term care and remains in the community) to become destitute in order for the applicant spouse to receive care, the community spouse can keep a certain amount of assets. This amount is called the community spouse resource allowance (CSRA), and it increases each year. For 2023, the federal government set the CSRA range from $29,724.00 to $148,620.00. Each state can implement its own value for the CSRA as long as it does not fall below the low-end threshold. Some states follow the range, some states set the limit at the upper number, and some states have their own unique number (Hello, Illinois and South Carolina!).
Each state has delineated certain assets as exempt, such as an automobile, a prepaid burial contract, household items, and a home (as long as the equity is under a certain threshold and the applicant intends to return to the home if their care were to improve). Exempt assets are not included in the individual resource allowance or CSRA calculations.
In addition to asset restrictions, there are income limits for long-term care Medicaid eligibility. Some states are income-cap states. In those states, if the applicant’s income exceeds the stated income cap ($2,742 per month for most states), they are not eligible for benefits unless they use a qualified income trust, also known as a Miller trust. This type of trust is authorized by 42 U.S.C. § 1396p(d)(4)(B). The income amount that exceeds the cap is put into the trust each month and goes to the nursing home as a cost of care.
In non-income-cap states, the applicant does not qualify for benefits if their income exceeds the applicable limit; qualified income trusts are not allowed. For many states, the income limit is three times the Social Security benefit rate. Other states implement their own income rules. The general rule is that an applicant’s income must be less than the private cost of care.
Income that can be legally attributed to the applicant spouse counts for their eligibility requirements. This means that income solely belonging to the community spouse is not countable. In addition, federal law allows the community spouse to keep a portion of the applicant spouse’s income if the former has income below a certain threshold. This is called the minimum monthly maintenance needs allowance.
All states have a look-back period for their long-term care Medicaid programs. This period is sixty months in all states except California, where the look-back period is thirty months. If the applicant has made a transfer for less than fair market value during the look-back period, a penalty period will be assessed during which the applicant will not be eligible for benefits. The penalty period divisor is usually the same figure as the average private pay rate for a nursing home room in each state.
Why Should Clients Be Proactive in Planning for Care?
If a client is proactive and plans in advance for the possibility of needing long-term care, then they have the ability to make transfers outside the look-back period and avoid the assessment of a penalty period. If a client waits and does not plan until care is needed, their situation is called a crisis planning case, and their planning options are more limited. The general rule of thumb is that virtually all assets can be protected in a proactive planning case; by contrast, only about half of all assets can be protected in a crisis planning case.
The main planning strategy in a proactive planning case is to fund the assets into a Medicaid asset protection trust (more on that below). Planning strategies for a crisis planning case include the use of promissory notes or annuities, making an exempt transfer of assets, purchasing income-producing property, paying off existing debt, utilizing a caregiver agreement, and many more. These crisis planning strategies are state-specific, and practitioners should check with local attorneys to see which ones are available in their area.
What Is a Medicaid Asset Protection Trust?
A Medicaid asset protection trust (MAPT) is an irrevocable trust designed such that the assets it holds are not counted for eligibility purposes. Your client can fund a MAPT, wait out the look-back period, and then have peace of mind knowing that if they need care down the road, they will not lose their life savings paying for that care. A MAPT can also be used in a crisis planning case, but the transfer to the MAPT would be penalized because it would be within the look-back period. So the client could transfer a portion of their assets to the MAPT for protection and use the remaining excess assets to pay for their care through the penalty period.
A MAPT can also retain many tax benefits, such as . . .
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