A little-known technique
will allow a married couple to retain up to almost $400,000 in countable
assets and still be eligible for Medicaid! This technique is available
under the federal Medicaid statutes and also approved by the Colorado
Medicaid Department.
This is great news to married couples in Colorado, who can now retain
significantly more of their assets if one of them is faced with a nursing
home stay. With nursing home expenses ranging from $60,000 to $80,000
per year or more, this could make the difference between being impoverished
and being able to maintain the former standard of living.
How does it work?
This technique is available if a couple is married and one of them applies
for Medicaid, and the income of the spouse not in the nursing home is
below a certain amount. Let me give you an example.
Example
John is suffering from Alzheimer’s, and his family has reluctantly placed
him in a nursing home. The monthly cost of the nursing home is $5,000,
which would quickly exhaust his modest life savings. John and his wife,
Rose, are advised to apply for Medicaid, which would cover all of John’s
nursing home expenses. However, after completing the application and waiting
30 days, they are denied coverage based on having an excess of assets.
They are told that they must spend the assets considered to be John’s
(roughly one half of the couple’s "countable" assets) before he will be
eligible for Medicaid.
But what John and his family do not realize is that there are several
methods available that will permit him to become eligible for Medicaid
without his having to "spend down" his hard-earned assets.
Available Assets
First of all, let’s take a look at what John’s asset picture is right
now. John owns a car (worth $10,000), a checking account with his wife,
Rose, (balance of $30,000), a couple of Certificates of Deposit worth
a total of $155,000 (again, joint), and his house (jointly held with Rose,
containing his personal possessions, and worth a total of $110,000). Under
the Federal rules, the car and home are deemed to be non-countable assets.
This leaves the CD and the bank account. Under Colorado law, the first
$99,540 (as of 1/1/06) of their combined available assets can be kept
by Rose, as her "Community Spouse Resource Allowance." However, the balance
of $85,460 must be counted as John’s property--he must spend all but $2,000.
($2,000 is the most he’s allowed to have in his own name and still qualify
for Medicaid). The other $83,460 is called the "spend-down" amount, and
DHS told John and Ruth that until that money is spent, John will not qualify
for Medicaid
What About Income?
But what about the income of John and Rose? John’s sole income is his
Social Security of $500 a month plus the interest on his bank account
and CD. Rose’s only income is Social Security of $350 a month and the
bank interest.
What the DHS Did Not Tell John:
Use of Annuity Calculations
What the DHS technician did not tell John and Rose is that Rose, as the
"community spouse," is entitled under federal law to a minimum of $1,604
per month of income (which may, in certain cases, be increased to a maximum
of $2,488). This federal law was specifically passed to prevent the community
spouse from becoming impoverished as a result of the institutionalized
spouse having to use all of the couple’s income and assets for nursing
home payments before becoming Medicaid eligible.
The federal law permits John to appeal the denial of Medicaid on the grounds
that his wife simply will not have enough income to live on unless some
of the assets deemed to be his are counted as hers. In other words, she’s
entitled to $1,604 per month of income but only is getting $350/month
of Social Security plus the bank interest. The DHS will assign her husband’s
income to her, but that still leaves a shortfall of $754 ($1,604 - 500
- 350 = $754). Under Colorado regulations, Ruth, who is age 75, is able
to price what is called a "single-premium lifetime annuity" that would
pay her the $754/month she is entitled to. She does not actually have
to buy the annuity, but if she did, it would cost her approximately $90,811.
Since she only needed to protect the "spend-down" amount of
$83,460, you can see that she is entitled to keep the entire amount.
In other words, Ruth will be able to protect their entire $185,000 life
savings.
If neither spouse had any Social
Security income, then approximately $193,185 in assets can be protected
with this technique. If Rose were younger, say age 65, then almost $400,000
can be protected this way! Of course, most people can only protect a lower
amount, since they generally have some Social Security or pension income.
Fair Hearing Required
In order to show this to DHS, John or his representative must file an
Appeal for Fair Hearing with the local DHS office. Only by asking for
a Hearing can John hope to qualify for Medicaid based on the above method.
As a practical matter, DHS will not inform Medicaid applicants of the
various techniques available to them for qualifying for Medicaid, just
as the IRS does not make it its business to inform taxpayers how to cut
down on their taxes. This latter job is reserved for accountants, tax
attorneys, and financial planners. Similarly, there are now a growing
number of estate planning attorneys and elder law attorneys who have become
familiar with these techniques.
Parting Words
As you can see, this gets pretty complicated! And yet, this is just one
of many specialized techniques that are available to protect the hard-earned
assets of Medicaid applicants. Many people incorrectly believe that they
must completely impoverish themselves or give away all of their assets
to their children in order to qualify for Medicaid coverage. This is rarely
true. Unfortunately, too often family members wait until a parent or spouse
is about to go into a nursing home before consulting an ElderLaw attorney.
Although there may still be good strategies available, many opportunities
will have been lost. Consider that if a meeting with an ElderLaw attorney
saves even one month of nursing home costs, it will have been well worth
the modest expense.
