The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in "countable" assets in his or her name. "Countable" assets generally include all belongings except for (1) personal possessions, such as clothing, furniture, and jewelry, (2) one motor vehicle, (3) the applicant's principal residence (if it is in Massachusetts), and (4) assets that are considered inaccessible for one reason or another.
Generally, the home will not be considered a countable asset and, therefore, will not be counted against the asset limits for Medicaid eligibility purposes as long as the nursing home resident intends to return home or his or her spouse or other dependent relatives live there. It does not matter if it does not appear likely that the nursing home resident will ever be able to live there again; the intent to return home by itself preserves the property's character as the person's principal place of residence and thus as a noncountable resource. Generally speaking, nursing home residents do not have to sell their homes in order to qualify for Medicaid. (This is true relative to qualifying for Medicaid but does not mean that the home is protected from being levied upon later. Actions do need to be taken to fully protect a residence.)
The Transfer Penalty
The other major rule of Medicaid eligibility is the penalty for transferring assets. If an applicant (or his or her spouse) transfers assets, he or she will be ineligible for Medicaid for a period of time based on the amount of the transfer. Based on current numbers, the actual number of months of ineligibility is determined by dividing the amount transferred by $ 9,400. For instance, if an applicant made gifts totaling $ 940,000, he or she would be ineligible for Medicaid for 100 months ($ 940,000+$ 9,400= 100). Another way to look at this is that for every $ 9,400 transferred, an applicant will be ineligible for nursing home Medicaid benefits for one month.
The catch with the transfer penalty is that the penalty period does not begin until the person making the transfer (1) moves to a nursing home and (2) spends down his or her countable assets to the Medicaid asset limit. For instance, an individual who transfers assets causing a 10-month penalty period on June 1, 2015, who moves to a nursing home on June l, 2016, and spends down his other savings by June 1, 2017, will be ineligible for Medicaid coverage until April 1, 2018. This is because the 10-month penalty period for the transfer will not begin until June 1, 2017.
Unless there is an independent source to pay, ALL transfers should be considered to cause five years of ineligibility for Medicaid. This is because MassHealth only counts transfers made during the 5-year period prior to applying for Medicaid.
Exceptions to the Transfer Penalty
Transferring assets to certain recipients will not trigger a period of Medical ineligibility. These exempt recipients include:
1. A spouse (or anyone else for the spouse's benefit);
2. A blind or disabled child;
3. A trust for the benefit of a blind or disabled child;
4. A trust for the benefit of a disabled individual under age 65;
5. A trust for the benefit of an applicant under age 65 in certain circumstances;
6. Special rules apply with respect to the transfer of a home. In addition to being able to make the transfers without penalty to one's spouse or blind or disabled child, or into trust for other disabled beneficiaries, the applicant may freely transfer his or her home to:
a.) A child under the age of 21;
b.) A sibling who has lived in the home during the year prior to the applicant's institutionalization and who already holds equity in the home;
c.) A "caretaker child" who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided such care that the applicant did not need to move to a nursing home.
A transfer can be cured fully by the transfer of all of the transferred assets, or partially by return of a portion of the transferred assets. In some instances, the application for benefits may be eligible for a "hardship" waiver.
Stay tuned for future installments in this series where we will look at liens and estate recovery, the treatment of income, spousal protections, and the application.