WSJ Article – Medicaid

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Nursing-Home Medicaid
May 18, 2008

Medicaid is commonly called the government health-care program for the poor, but it pays for more than two-thirds of long-term nursing-home stays. That means many middle-income Americans with savings will come to rely on the program.

Ultimately, the joint federal/state program will cover nursing-home care for nearly everyone who needs it but can’t afford to pay on their own, Medicaid experts say. Getting to that point can be tricky, however, and it helps to understand the rules.

One reason for the complexity: States have broad latitude to establish their own eligibility criteria, within federal guidelines. Most requirements vary at least a little from state to state.

All Medicaid beneficiaries must fit into one of several qualifying categories — you’re over 65, blind or disabled, for example. You must also pass financial hurdles that take into account both your income and your assets, as well as those of your spouse if you are married.

One group automatically passes the income test in most states: People eligible to receive Supplemental Security Income from the Social Security Administration. In 2008, that means individuals earning $7,644 a year or less, and couples earning no more than $11,472, including Social Security.

More Generous Caps

Some states are more generous, and provide Medicaid nursing-home benefits to individuals making up to $22,932 a year (or three times the SSI threshold). One such state is New Jersey.

You may still qualify for Medicaid nursing-home benefits even if you earn more than your state’s income limit, however. That’s because states generally must provide benefits to the “medically needy” — essentially, those who qualify except for the income test, and whose medical costs outstrip their income.

“So long as your income is insufficient to cover the full cost of your care in a nursing facility, you will be allowed to qualify for Medicaid somehow,” says Gene Coffey, a staff attorney with the National Senior Citizens Law Center.

Asset Tests, Too

Medicaid also has asset limits: If your net worth is too high — excluding certain property — you may have to “spend down” some or much of your assets before you qualify for Medicaid.

The government’s reasoning: This is money you could spend on nursing-home care before you need Medicaid’s help.

Generally, an individual may not have more than $2,000 in assets to qualify for Medicaid. But some property is excluded, including your car, your primary residence (within certain limits) and a burial fund or policy of up to about $5,000.

For couples, the calculation is more complicated. Federal law says a “community spouse” — one who doesn’t need nursing-home care — may keep at least half the couple’s combined property. But states may let them keep more.

Be forewarned: When calculating your assets, Medicaid pretends you still have some amounts you spent or gave away in the previous five years. That’s part of an effort to prevent those with the money to pay for their own nursing-home care from hiding assets by passing them to relatives.

If that leaves you ineligible for Medicaid, but you would otherwise qualify, you may have to wait a certain number of months before you receive Medicaid benefits, based on how much you gave away.

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