2007-01-10 / Seniors

Medicaid: Stiffer New Rules For Nursing Home Coverage

Dear Savvy Senior,

What are the rules and eligibility requirements to get Medicaid coverage for nursing home care? My father has early Alzheimer's disease and will eventually need full-time care, but my parents have limited savings and no long-term care insurance. Also, if Dad does get Medicaid assistance, how will that affect Mom financially?

Planning Ahead

Dear Planning:

Getting the government to help pay for nursing home care has recently gotten a lot tougher, so you're smart to be planning now. Here's what you should know.

Strained Program

Medicaid, the federal and state joint program that covers health care for the poor, also pays almost half of the country's long-term care bills. With the costs of nursing home care skyrocketing (now averaging more than $75,000 per year nationwide), the government recently added some tough new rules that help preserve this overburdened program, but make it harder to qualify for assistance.

Note: Be aware that Medicare does not pay for long-term care. It will pay only 20 days of "rehabilitative" nursing home care, which must occur after a hospital stay. After that, it covers another 80 days with the patient paying the first $124 (in 2007) of daily costs. After these 100 days, coverage ends.

Eligibility Requirements

To qualify for Medicaid nursing home coverage, you can't own or earn much. Most states require a single individual to have no more than about $2,000 in cash and investments. Other assets, such as a home, car and burial fund are not counted. After qualifying, all sources of the individual's income, such as pensions and Social Security checks must be turned over to Medicaid to pay for the person's care, except for a small ($30 to $60) personal needs allowance. Married couples are allowed more resources (see spousal protection below).

New Rules

The tougher new Medicaid eligibility rules recently enacted by Congress include:

+ A longer look back: This ensures that middle- and upper-income seniors don't try to qualify for Medicaid by shifting money out of their names and into, say, their children's names. States look at financial records to root out suspicious asset transfers. Under the old rules, the lookback period was three years. Now it's five years for gifts made after February 2006.

+ Home equity limits: Before, a house wasn't regarded as an asset. Now home equity over $500,000 counts (individual states have the option of raising this limit to $750,000). So if your parents own a home valued over the limit, they may not be eligible now for coverage, even if the house is their only asset. Thankfully, individuals who have a spouse, children under age 21 or adult children with disabilities living in the home are exempt from this rule.

+ Harsher gifting penalties: If a state identifies a suspicious transfer from an applicant's estate, the applicant may have to wait to qualify for coverage. The delay is equal to the number of months the individual could have paid for nursing home care with the amount gifted. Under the old rules, the penalty clock started on the date that the money was transferred. Now the clock starts on the day the person applies for Medicaid. The result is a much longer waiting period.

Spousal Protection

If your dad is in a nursing home and your mom still lives at home, her financial resources will be protected up to a point. Under Medicaid rules, the healthy spouse can keep half of a couple's assets up to $101,640 (rules and exact amounts vary by state) and the family home, if he or she lives there. The spouse is also entitled to a monthly income that ranges from $1,650 to $2,541. Any income above that goes toward the cost of the nursing home recipient's care.

Savvy Tips: Medicaid rules vary by state, so contact your state or county department of human services office or your state Medicaid office to get your state's eligibility requirements and details. Call the Eldercare Locator at 800-677- 1116 for the phone numbers of these offices. You may also want to consult with an elder law attorney (see www.naela.com) or a financial adviser who specializes in planning for seniors to get help.

Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit www.savvysenior.org. Jim Miller is a contributor to the "NBC Today Show" and author of The Savvy Senior books.

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