Medicaid Eligibility Case Studies
Case 1: Married Patient
Mrs. M (age 88) had been taking care of her husband (age 84) in their home (the house that they had purchased 50 years ago) for a number of years, but his mental deterioration (senile dementia) had finally progressed to the point where she had to place him in a memory care facility (at just under $8,000 per month). Several months later Mrs. M contacted us. When asked what her plan was, she said she had planned to “pay the bill until I ran out of money, and then go to Medicaid.”
A Resource Assessment by Medicaid showed that the couple had combined countable assets (their home was exempt) of approximately $160,000. Each of them had a modest Social Security income, but no pension. Under the “split and spend down” rules of Medicaid, Mrs. M would have had to reduce their countable assets by about $80,000 before he could qualify for assistance. The only thing the Medicaid worker could tell her about the spend down was that she had to spend it on her or her husband – it couldn’t be given away.
Keep in mind that Mr. & Mrs. M, due to their inadequate Social Security incomes, had been dipping into their savings principal for years. Mrs. M was now faced with the loss of income (both while Mr. M was in the nursing home and upon his death), as well as the prospect of the loss of half their life savings. And, since no one could say how long she might live, and what problems, physical or financial, she might encounter, Mrs. M was faced with a real question: “Who’s going to last longer, me or my money?”
Fortunately, we were able to protect Mrs. M’s savings, and still satisfy the Medicaid’s spend down requirements. By creating, (using the $80,000 spend down), a special type of Medicaid-compliant income stream for Mrs. M (she is currently receiving a monthly check of a little over $440 – for six years) she will recover that $30,000, with interest, over that six years. At the same time, Mr. M was immediately qualified for assistance. Mrs. M was able, in effect, to keep the savings (for her own support) that she and her husband had spent a lifetime accumulating for their old age, and still get the help they desperately needed. Had they not followed our recommendations, they would have qualified eventually, but only after half their savings was gone – forever!
Unfortunately, even though Congress inserted these rules into the Medicaid law to allow this protection for the community spouse (like Mrs. M), without the appropriate help, the overwhelming majority of Medicaid applicants would end up losing half, or more, of their life’s savings. In most cases, this loss is absolutely unnecessary and completely avoidable.
Case 2: Single Patient
Mrs. K, an 85-year-old widow, had suffered a stroke, which left her permanently confined to a wheelchair. She had spent about six weeks in a nursing home for rehabilitation, but was in a condition where she could transfer to an assisted living facility. The cost, however, was $7,000 per month. Her daughter, who lived out-of-state, had been in contact with the local Medicaid office to check on her mother’s eligibility for Medicaid assistance.
She was told that her mother qualified under the income test (Mrs. K had $1,360 per month Social Security), but would be ineligible under the resource test (she had approximately $100,000 in the bank). She would have to reduce her resources down to less than $2,000 before qualifying. The Medicaid worker also made a point of warning the daughter that Mom’s money “had to be spent down on her care.” It was at this point that her daughter contacted us.
In spite of the comment from the Medicaid worker, we immediately implemented a plan of gifting and temporary support. Mrs. K transferred all but $2,000 of her savings to her daughter, who, in turn, covered Mom’s shortfall at the assisted living facility. In less than five months Mrs. K was qualified for Medicaid and her daughter had nearly $70,000 in her own account, fully protected from Medicaid.
Case 3: Married Patient
Mr. and Mrs. Jones, both in their upper 70’s, had been married over 50 years. Mr. Jones had been afflicted with the symptoms of Alzheimer’s for a number of years. She had always taken care of him in their apartment, but for the last year or so she had found it necessary to regularly bring in paid help to assist or provide respite care. They had been together for over 50 years, and, though she knew that his condition would only worsen over time, she had vowed not to put him into a care facility until it was absolutely necessary.
The major problem, as she saw it, was financial. Their combined monthly income was approximately $3,900. Between rent for their apartment, utilities and insurance, his prescriptions, caregivers, etc., etc., there just wasn’t enough income. Each month they had to dip further into their life’s savings ($84,000) – and she knew it was only going to get worse.
Mrs. Jones had looked at several assisted living facilities, and was convinced that such an environment would be the best situation for her husband, at least for the time being. The problem was that the cost ($7,500) was really beyond their means. She had already been to Medicaid, where she learned that assisted living was an option under Medicaid, but was told she would have to “spend down” about $120,000 of their savings before they could get help.
The answer for Mr. and Mrs. Jones was to use the alternative spend down method allowed by Medicaid, and convert the $120,000 spend down requirement into an income stream (a little over $1000 per month) for Mrs. Jones. He immediately qualified for benefits, while Mrs. Jones will recover the $120,000 over a period of ten years.
The Bottom Line: The total monthly cost for room & board, care, prescriptions and medical for Mr. Jones was $800. However, just as important, they were also able to preserve the value of their life’s savings, and they will be able to stay together for the foreseeable future.
Case 4: Married Patient
Mr. and Mrs. Smith owned their own home, where Mrs. Smith took care of her husband, whose health had been deteriorating for years. He needed assistance for many of the activities of daily living. It was becoming increasingly difficult for Mrs. Smith to physically handle the job of caring for her husband alone. As their incomes were not that great, she felt that she needed to do as much as she possibly could on her own, thereby avoiding the cost of paid care, even to the detriment of her own health. She knew, however, that at some point she would have to go to Medicaid for assistance.
She had previously placed the title of their home, car and bank accounts into her name only, assuming that when she went to Medicaid they would not be counted, since he was the one applying. She was shocked to learn that Medicaid counted “combined countable resources,” regardless of which spouse owned them. She also learned that creating a living trust, or putting her money into a joint account with her son, would not have helped either.
In determining Medicaid eligibility, the State would consider their home and car as exempt. However, their $60,000 of savings and investments would be considered a resource, and would most likely result in a “spend down” requirement of approximately $24,000. However, the actual spend down rules do not require that the resources be “spent,” only that the couple reduce their “countable resources” by that amount.
This was accomplished, easily and quickly, by using the $24,000 to purchase a Medicaid-approved income stream for Mrs. Smith, thus allowing her to recover the asset over a period of time, resulting in no financial loss to the couple. Since Mr. Smith would be receiving care at home, there would be no requirement for Mr. Smith to contribute to his case. Mr. Smith would be entitled to keep all her own income, including the income stream from the spend down.
The Bottom Line: Mr. Smith is able to receive all the care that he needs, including prescriptions, at no cost to the couple, while retaining all of their income. In addition, over a period of a few years (depends on a number of factors) Mrs. Smith will recover the full value of the “spend down,” resulting in absolutely no loss of family savings.