Sandra Reed’s Life Care Planning: Medicaid — What is it and who qualifies for its benefits?

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your

life planning questions.

What Is Medicaid?

Medicaid is a program that pays for long-term nursing home care. Medicare, which provides participants benefits for hospitalization through Part A, doctor’s services through Part B and medications through Part D, does not provide for long-term nursing home care.

Medicaid is primarily federally funded, but is administered by the states. Each state sets rules for the administration of Medicaid benefits.  However, the federal government sets qualification requirements that apply to all states.

To qualify for Medicaid in Texas, an individual must: (1) be a U.S. citizen or an alien lawfully living in the United State and a Texas resident; (2) be over 65, disabled or blind; (3) have a medical necessity for 24-hour care as certified by a doctor or a facility; (4) have a monthly gross income level from all sources that does not exceed $2,130; and (5) have countable resources which total $2,000 or less.  The income level for qualification varies from year to year because they are tied to the poverty level as established by the federal government.

Although the income amount is limited to qualify for Medicaid, the applicant must have some source of income to qualify.  A person who has no income must apply for Supplemental Security Income (SSI) instead.

Identify Whether Family Members Can Qualify Before Medicaid Is Needed

With medical costs as high as they are, everyone is a potential Medicaid applicant. In many instances, it will be necessary to consult with an attorney knowledgeable in elder law for proper assessment. It is essential to identify early, before the crisis of placing a family member in a nursing home, if your family might qualify for Medicaid. This extra time gives everyone in the family the time to adjust to the idea and allows for creative and appropriate spending down of assets to the qualifying amount, if necessary.

Even people who have purchased long-term care insurance need to perform this analysis because the benefits of this type often run out after a number of years.  If the policy lasts five years or more, then additional assets other than those non-countable resources can often be preserved through careful planning.

The application for Medicaid for single persons is easier than for married individuals, but there is greater flexibility in managing assets and income to reach the goal of qualification.

What Is Income?

Income is any money coming in from any source, including Social Security, pensions, rental income, royalty payments, line-of-credit reverse mortgages and dividends.  Annuities count as income if payments cannot be stopped or changed. The gross monthly income is counted, but the principal of the annuity is not counted as income.

The income limit is based upon gross, not net income. This means counting Social Security monthly benefits before deductions for Medicare and Medicare Part D. Income from other sources is counted before any deductions except for rental income.  With rental income the applicant may deduct the expenses and taxes from the gross figure.

Special rules regarding income apply for a married couple. The spouse who stays at home can keep all the income in his or her name. This is referred to as the “name on the check rule.”  If the at-home spouse’s monthly gross income is under $2,898, he or she can keep as much of the incapacitated spouse’s income needed to reach that figure. Any additional income must be paid to the long-term care facility.

What Assets Are Countable?

Not all assets count toward the resource limit of $2,000. The home of the applicant up to $500,000 in value is not counted. One vehicle of any value is not countable. Neither are a prepaid burial policy and a life insurance policy with a face value under $1,500.

However, bank accounts – savings and checking, CDs, IRAs, stocks and bonds, annuities, mineral rights, additional vehicles other than the one exempt, life insurance policies with face value of more than $1,500 and other investments — are all counted as resources toward the $2,000 limit.

The funds deposited from a reverse mortgage paid as a lump sum will be a countable asset. However, a line-of-credit reverse mortgage can usually be stopped because this type of reverse mortgage is like an unused loan or credit card. Older reverse mortgages in Texas may be a problem because the line-of-credit option has not always been available.

Annuities count as an asset if payments cannot be stopped or changed. In this instance, the dollar amount of the annuity on the eligibility date is counted but the income from the annuity is not counted as income on the Medicaid application.

Analysis of the assets excluded from countable assets makes it clear that many people who think they would never be eligible for Medicaid benefits actually may qualify. Families mistakenly believe they must sell the family home to pay for long-term care. This is a mistake.  t deprives an able-bodied spouse from continuing to live comfortably in the home and/or erases the one asset that could be passed on.

What If Applicant Has More Income or Resources Than Allowed?

If an applicant’s income and/or resources are greater than those allowed for qualification for Medicaid, solutions exist. These solutions may not be perfect but most people can qualify with planning through the help of an experienced attorney.  Next week’s column will discuss some of the solutions.

Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm, whose principal office is located in Fort Worth.  She lives and practices in Somervell County.  If you have questions or concerns, please contact her by email at or by phone at 254-797-0211.



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