Planning for Medicaid
Medical science has worked wonders over the last several decades. Americans are living longer and healthier lives. Still, many people fear that one day they may wind up in a nursing home, which can then be a financial burden. This is where Medicaid planning becomes important.
Why Plan for Medicaid?
The cost of quality nursing home care is expensive, ranging from $4,000 to $15,000 per month, depending on the level of care and location of the nursing home. Statistics tell us the average time spent in a nursing home is 30 months. To gain access to many of these higher-quality nursing facilities, individuals often pay for the cost of nursing home care out of their private savings, until nearly all their money has been exhausted.
The disadvantage of this strategy is that it's expensive, disappointing, and sometimes even unnecessary. With proper planning, individuals can live quality lives and still pass on a portion of their estate to their spouse or children. That's just one reason why creating a Medicaid plan is so important.
Medicare and Medicaid
Under Medicare Part A, hospital insurance, individuals are covered for up to 100 days of skilled nursing care per illness event. Unfortunately, Medicare insurance has a restrictive definition of skilled care, and more often than not nursing home care is not covered under Medicare Part A.
Medicaid is really the only viable long-term option many individuals have to pay for nursing home or other forms of institutional care. But unlike Medicare, which is offered to everyone over the age of 65, Medicaid is a financial needs-based program.
To qualify for benefits in the past, an individual might have to pass both an income and asset test, but that requirement changed in 2014. The Affordable Care Act of 2010 created a national Medicaid minimum eligibility criteria of 133% of the federal poverty level (FPL) for nearly all Americans under age 65. (Alaska and Hawaii are exceptions.)
Medicaid Eligibility Test
To be eligible for Medicaid, an individual must first pass a three-part test. The test is further broken down into sections: medical necessity, age / disability, and a financial segment. Eligibility depends on meeting the requirements of all three sections.
To pass the Medicaid's medical need test, the individual must have some kind of "medical" restriction that limits their ability to meet the demands of daily living without the help of a nursing home. This can include situations such as:
- The need for round-the-clock skilled nursing care in a nursing or healthcare facility.
- Personal care needed on a daily basis.
- Individuals in need of continuous observation.
- Medical needs that are complex enough to warrant the planning of a registered nurse.
- The medical care needed is not normally offered in a hospital.
Age / Disability Test
This second test is fairly straightforward. To be eligible for Medicaid, the individual must either be over the age of 65 or have a disability. Therefore, if someone is 60 years old, but has a qualifying disability, they would be eligible for Medicaid.
Financial Income / Assets
This final eligibility test is where things get a bit more complicated. Up to this point, the only tests the applicant had to pass were based on the person's physical or mental condition. This last test looks at the household income, or assets of the individual, to determine Medicaid eligibility. The financial test was standardized under ObamaCare.
As of January 1, 2014, eligibility is now based on the family's Modified Adjusted Gross Income (MAGI), family size, and the federal poverty level (FPL). The exact income test the individual or family must pass varies slightly from state to state.
Problems with Medicaid Qualifying Tests
The income test highlights a problem with the eligibility criteria that's applied to this plan. If someone's monthly income level is over the threshold or cap, they are not eligible for Medicaid insurance coverage. Unfortunately, the cap might be lower than the monthly expense of nursing care. An individual might make too much money to qualify for Medicaid benefits, but not enough money to pay for a quality nursing home. When this happens, the person is said to fall into the Medicaid Gap.
Anyone that's interested can find more information about the specific qualifying Medicaid tests used in each state by visiting the Centers for Medicare and Medicaid website.
Need for Medicaid Planning
The above information hopefully provides a better understanding of why it is important to develop a plan for Medicaid, and what it takes to qualify for benefits under this program. It's stressful enough to deal with the fact that a loved one may have fallen victim to an illness or disease that requires the care of a nursing home. Planning can help alleviate the need to make tough decisions.
Making plans for the future, including the prospects of leveraging the Medicaid system, is a decision that many of us will face. Fortunately, we still have options. In the next article in this series, we will be talking through some of the specific Medicaid Planning Strategies that an individual might want to pursue.
About the Author - Planning for Medicaid