Let Me Educate You On Medicaid Eligibility

“Knowledge is Power!”

There is a huge amount of ambiguity concerning the necessary financial spend down involved in pursuing financial eligibility for Medicaid.

I’ve met with countless people regarding Medicaid Planning issues at one of our Regency Nursing Centers across New Jersey. Between me and our dedicated social workers, we hear the same theme over and over again, even as the narrative changes slightly.

Mom was living at home. She fell and suffered a fracture. She wound up in the hospital and now she is with us for subacute rehabilitation at one of our Regency Rehab Centers.

Family comes into my office and says, we are thrilled here and would like for Mom to stay on for long term care. She cannot come home.

Does she have Medicaid I ask? Who/what will be her payor source when she transitions away from her Medicare entitlements (Medicare being synonymous with short term care)?

In the ensuing conversation, they inform me that mom has $300,000 in cash, equities and annuities. I therefore explain that Mom has $298,000 in excess of what she needs to have in order to qualify (financially) for Medicaid.

Well, how can we get her to qualify for Medicaid and keep her money at the same time, they ask?

I say, you cannot because your Mom is simply too rich in the eyes of the State. They therefore do not wish to pay for her when she can very well pay for herself.

Medicaid is a health insurance program for individuals who are needy. It is a Federal and State program. Unlike most health insurance programs, Medicaid will cover the costs associated with long term care in FULL. This is significant when a typical month of private pay for long term residency in a 24 hour skilled nursing facility can cost upwards of $10,000 each month.

In order to qualify for Medicaid, a person must have a cumulative worth of $2000 or less in personal assets.

Therefore, many people do not initially qualify for Medicaid and they must first dispose of, or spend down of their money.

Here is where the problem exists. People simply have no idea as to how this money needs to be “spent down.”

They think they can go off to Vegas with Mom’s money until she’s got nothing left and qualifies for Medicaid. This is not so. The State would like to know that she utilized her money for her own care and that only once these funds have been depleted can she qualify.

The State mandates that money be spent down in only 3 ways. They are:

  1. Pre-paid funeral
  2. Elder care lawyer or Medicaid specialist to pursue eligibility on behalf of the individual.
  3. Paying privately in a skilled nursing facility

“What about gifting,” people ask me?

The $13k annual gifting allowance is one of the most misunderstood of all Federal allowances. This figure is derived from the Federal gift tax annual exclusion amount. A person can only gift $13,000 each year without reducing their $5,000,000 lifetime credit against gift tax. So unless the gifting will be in excess of that amount, the annual allocation of $13k is ultimately without benefit.

This is all relevant because Medicaid eligibility is far more nuanced and specific than people think.

(Although the crux of this article is as it relates to financial eligibility. There is also a clinical requirement for a person to achieve Medicaid eligibility. Clinically speaking, eligibility is only secured if the person demonstrates the need for assistance with 3 “AD’L’s,” or Activities of Daily Living, which includes toileting, walking, bathing and clothing.)

 For financial eligibility, the State will conduct a 5 year look back, to determine that there was no misappropriation of funds vis a vis the necessary spend down.

What might be considered the height of benevolence in our lexicon ($13,000 gifting to a family member), is deemed misappropriation in the eyes of the State and Mom will be penalized for it.

How can they possibly penalize your Mom!? Will they put her in time out? Of course not!

The punishment, as it were, is a period of ineligibility for Medicaid benefits. That period of ineligibility is derived from the aggregate amount of money Mrs. Smith (or her family using her monies) inappropriately gave away in the last 5 years and dividing it by the Statewide average cost per month of private pay in a nursing home. Assuming Mrs. Smith misappropriated $70,000 worth of funds and the average private pay room rate in a nursing home is 10k, Mrs. Smith would be ineligible for Medicaid for a period of 7 months.

Of course, you can see how this would pose a significant problem to the resident and family who is now stuck in limbo for 7 months without private pay funds and no other payor source.

The bottom line is this:

In order to properly navigate the vicissitudes of securing Medicaid, you must be able to deal in good faith with a reputable Nursing Home who will be honest, forthright and direct in articulating the proper course of action.

Regency Nursing Centers provides that support.

The Medicaid Program; an In-Depth Analysis

The Medicaid program is one of the least understood of all State and Federal (funded) programs.

At Regency Nursing Centers, we are licensed to provide care for all Medicaid recipients and we invest a great deal of time and effort to educate our seniors and their families on the complex nuances of this program. We empower our families and arm them with the necessary tools to recognize their entitlements under Medicaid and we inform them of their benefits.

There are many articles written on this subject and some of them are more convoluted than helpful. A great tutorial which I’ve found to be very beneficial, is one published by the Kaiser Family Foundation.



Medicaid, the nation’s main public health insurance program for low-income people, covers over 62 million Americans, or 1 in every 5. Medicaid beneficiaries include pregnant women, children and families, individuals with disabilities, and poor Medicare beneficiaries. Without Medicaid, most enrollees would be uninsured or lack coverage for services they need. As a major insurer, Medicaid provides essential funding to safety‐net hospitals and health centers that provide care to underserved communities and many of the uninsured. In addition, Medicaid is the main source of coverage and financing for long-term care, including both nursing home and community-based long-term services and supports. Altogether, Medicaid finances 16% of all personal health spending. The Medicaid program is administered by states within broad federal rules and is financed jointly by states and the federal government. Medicaid’s structure – extensive state flexibility in program design and guaranteed federal matching funds – have enabled the program to evolve, and to respond to economic and demographic changes and emergent needs. Its structure also facilitates state innovation. Under the Affordable Care Act (ACA), Medicaid will expand in 2014 to reach millions more poor Americans – mostly, uninsured adults. The Medicaid expansion is the foundation of the public-private system of coverage the ACA establishes to reach nearly all the uninsured. However, under the Supreme Court decision on the health reform law, each state will decide whether to implement the Medicaid expansion.

Who does Medicaid cover?

To qualify for Medicaid today, an individual must belong to one of the core eligibility groups under federal Medicaid law: pregnant women, children, adults with dependent children, people with disabilities, and seniors. State Medicaid programs must cover people in these groups up to federally defined income thresholds, but many states have expanded Medicaid beyond the minimum requirements, mostly for children. As of January 2013, 19 states covered children up to at least 150% of the federal poverty level (FPL) – $29,295 for a family of three in 2013 – including 11 states with eligibility thresholds between 200% and 300% FPL. All told, Medicaid and the smaller Children’s Health Insurance Program (CHIP) cover 1 in every 3 children. By contrast, adult eligibility for Medicaid is much more limited (Figure 2). In 33 states, the eligibility threshold for working parents is set below 100% FPL; in 16 of these states, parents with earnings equal to 50% FPL have too much to qualify for Medicaid. Historically, non-disabled adults without dependent children (“childless adults”) have been excluded from Medicaid by federal law, and states wishing to cover them have had to use state-only dollars or obtain a federal waiver to do so.

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