Medicaid is a joint federal/state government administered health insurance program for people with financial need.
Most people who have worked for a significant period of time are going to qualify for Medicare when they are senior citizens. The majority of them have some resources. Because of this they wouldn’t qualify for Medicaid.
Therefore, you may assume that Medicaid is really not relevant to most senior citizens.
In fact, Medicaid becomes quite relevant to many because of the fact that Medicare will not pay for long-term care.
Most senior citizens will eventually need living assistance, and it is very expensive. Medicaid will pay for long-term care if you can qualify. In the end, most senior citizens who are residing in nursing homes are enrolled in the Medicaid program.
Medicaid Eligibility Requirements
Because Medicaid is in fact a need-based program, you must have limited resources to qualify. This can lead to the belief that you must impoverish yourself to qualify for Medicaid.
If you plan ahead effectively, you can potentially keep resources in the family while still being able to obtain Medicaid eligibility. This can be accomplished through a process called spending down.
Spending down involves divesting yourself of resources in advance of applying for Medicaid. You could potentially do this at your own pace as you stay within your comfort zone.
The big thing about spending down that you have to take into consideration is the fact that there is a five year look-back period. If you give away assets to others within five years of applying for the program, you are penalized. The penalty delays your eligibility.
To provide a brief and simple example to explain the nature of the penalty, let’s assume that the average annual cost of nursing home care in the state of Oklahoma was $75,000.
If you gave away $75,000 within five years of applying for Medicaid, your eligibility would be delayed for one year, because this is the average annual cost of nursing home care that we are using for the purposes of this example. If you gave away $150,000, your eligibility would be delayed for two years.
Another thing to consider about Medicaid eligibility is the fact that your spouse can retain ownership of his or her portion of community property up to a certain limit if you are married. In addition to this, the value of your home (up to $543,000 of equity) does not count when Medicaid is evaluating your eligibility.
It should be noted that there is no equity limit if your spouse is remaining in the home.
The Bottom Line
You do have to bring the value of your assets down if you want to qualify for Medicaid. However, it is possible to do so in an intelligent and measured fashion so that you never really experience a lifestyle that could be described as poverty-stricken.
Parman & Easterday