| Medicaid, also known as medical assistance is a joint | | | | disabled; |
| federal-state program that provides health insurance | | | | (3) Into a trust for the sole benefit of a disabled |
| coverage to low-income children, seniors and people | | | | individual under age 65 (even if the trust is for the |
| with disabilities. In addition, it covers care in a nursing | | | | benefit of the Medicaid applicant, under certain |
| home for those who qualify. Medicaid is a state | | | | circumstances); |
| administered program and provides more | | | | (4) A sibling who has lived in the home during the year |
| comprehensive coverage than Medicare, particularly | | | | preceding the applicant's institutionalization and who |
| with regard to nursing home care. However, not all | | | | already holds an equity interest in the home; or |
| nursing homes participate in the Medicaid program. | | | | (5) A "caretaker child," who is defined as a child of the |
| There are no limits on the maximum length of a | | | | applicant who lived in the house for at least two years |
| Medicaid recipient’s stay at a facility. | | | | prior to the applicant's institutionalization and who during |
| The Federal government pays roughly one-half of the | | | | that period provided care that allowed the applicant to |
| costs, while the State covers the remainder. In Illinois, | | | | avoid a nursing home stay. |
| the agency that administers Medicaid is the Illinois | | | | Congress has created a very important escape hatch |
| Department of Public Aid (IDPA). In the absence of | | | | from the transfer penalty: the penalty will be "cured" if |
| any other public program covering long-term nursing | | | | the transferred asset is returned in its entirety, or it will |
| home care, Medicaid has become the default nursing | | | | be reduced if the transferred asset is partially returned. |
| home insurance of the middle class. | | | | Is Transferring Assets Against the Law? |
| While Congress and the federal Health Care Financing | | | | You may have heard that transferring assets, or |
| Administration set out the main rules under which | | | | helping someone to transfer assets, to achieve |
| Medicaid operates, each state runs its own program. | | | | Medicaid eligibility is a crime. Is this true? The short |
| As a result, the rules are somewhat different in every | | | | answer is that for a brief period it was, and it's |
| state, although the framework is the same throughout | | | | possible, although unlikely under current law, that it will |
| the country. The following describes some of the basic | | | | be in the future. |
| rules regarding Medicaid in Illinois. | | | | As part of a 1996 Kennedy-Kassebaum health care |
| Resource (Asset) Rules | | | | bill, Congress made it a crime to transfer assets for |
| In order to be eligible for Medicaid benefits in Illinois a | | | | purposes of achieving Medicaid eligibility. Congress |
| nursing home resident may have no more than $2,000 | | | | repealed the law as part of the 1997 Balanced Budget |
| in "countable" assets. While a Medicaid applicant may | | | | bill, but replaced it with a statute that made it a crime |
| be eligible even if these assets exceed the limits, the | | | | to advise or counsel someone for a fee regarding |
| applicant will be required to “spend down” | | | | transferring assets for purposes of obtaining Medicaid. |
| these assets. This means that the cost of care must | | | | This meant that although transferring assets was |
| be paid for by the Medicaid applicant to the extent that | | | | again legal, explaining the law to clients could have |
| the assets exceed the $2,000 limit. | | | | been a criminal act. |
| The spouse of a nursing home resident--called the | | | | In 1998, Attorney General Janet Reno determined that |
| 'community spouse'-- is limited to one half of the | | | | the law was unconstitutional because it violated the |
| couple's joint assets up to $84,120 (in 2000) in | | | | First Amendment protection of free speech, and she |
| "countable" assets (see Medicaid, Protections for the | | | | told Congress that the Justice Department would not |
| Healthy Spouse). The $84,120 figure changes each | | | | enforce the law. Around the same time, a U.S. District |
| year to reflect inflation. In addition, the community | | | | Court judge in New York said that the law could not |
| spouse may keep the first $17,400, even if that is | | | | be enforced for the same reason. Accordingly, the law |
| more than half of the couple's assets. These figures | | | | remains on the books, but it will not be enforced. Since |
| change annually and are found in the Department of | | | | it is possible that these rulings may change, you should |
| Human Services policy manual. Basic Medicaid | | | | contact our office before filing a Medicaid application. |
| information is also available at [ | | | | Treatment of Income |
| All assets are counted against these limits unless the | | | | The basic Medicaid rule for nursing home residents is |
| assets fall within the short list of "non countable" | | | | that they must pay all of their income, minus certain |
| assets. These include: | | | | deductions, to the nursing home. The deductions include |
| (1) Personal possessions, such as clothing, furniture, and | | | | a $30-a-month personal needs allowance, a deduction |
| jewelry with an equity value of no more than $2000. | | | | for any uncovered medical costs (including medical |
| However, wedding rings, engagement rings and items | | | | insurance premiums), and, in the case of a married |
| required because of an individual’s medical or | | | | applicant, an allowance for the spouse who continues |
| physical condition are exempt regardless of value. | | | | to live at home if he or she needs income support. A |
| (2) One motor vehicle if it meets any one of the | | | | deduction may also be allowed for a dependent child |
| following criteria: A) If it is necessary for employment | | | | living at home. A deduction is also allowed for |
| B) If it is necessary for transportation for medical | | | | community spouse maintenance needs. The allowance |
| treatment of a specific or regular medical problem C) If | | | | in 2000 was $2,103 and is adjusted annually. This |
| it is modified for operation by or transportation of a | | | | allows the Medicaid recipient to exempt some of his |
| handicapped person or D) If it is necessary because | | | | her income for the purpose of spouse maintenance. |
| of terrain, remoteness or similar factors to provide | | | | Example: if Mr. X resides in a long term care facility |
| necessary transportation to perform essential daily | | | | such as a nursing home and has monthly income of |
| activities. | | | | $1,600 and his spouse has income of $800 a month |
| A motor vehicle owned by a nursing home resident is | | | | (from pension or social security for example) then the |
| also exempt if transferred to a spouse. In all other | | | | difference between the spouse’s $800/mo. |
| cases the exemption is limited to $4,500. | | | | Income and the $2,103 allowance (in 2000) may be |
| (3) The applicant's principal residence, provided it is in | | | | contributed by Mr. X to his spouse and he may deduct |
| the same state in which the individual is applying for | | | | that amount, up to the total allowance, from his income |
| coverage although some limitations, discussed below, | | | | for asset calculation purposes. Under the facts of the |
| exist. | | | | example, this would allow Mr. X a $503 community |
| (4) In Illinois, up to $1,500 of revocable burial expenses | | | | spouse deduction and $30 personal needs deduction. |
| are exempt and up to $4,120 in irrevocable prepaid | | | | The amount of Mr. X’s income in excess of the |
| expenses are exempt. However, the amount of the | | | | deductions ($1,600-$503-$30= $1,067) must be |
| revocable expense exemption is reduced by the | | | | “spent down” or paid to cover the medical |
| amount of irrevocable expenses. In all cases, | | | | expenses each month. A similar deduction exists for |
| expenses for burial space or plots and other | | | | dependent family members including dependent adult |
| customary items such as a casket or headstone are | | | | children, dependent parents or dependent siblings. |
| completely exempt. | | | | For Medicaid applicants who are married, the income |
| (5) Assets that are considered "inaccessible" for one | | | | of the community spouse is not counted in determining |
| reason or another. These assets often come in the | | | | the Medicaid applicant's eligibility. Only income in the |
| form of specific types of trusts. | | | | applicant's name is counted in determining his or her |
| The Home | | | | eligibility. Thus, even if the community spouse is still |
| Nursing home residents do not have to sell their homes | | | | working and earning $5,000 a month, she will not have |
| in order to qualify for Medicaid. In Illinois, the home will | | | | to contribute to the cost of caring for her spouse in a |
| not be considered a countable asset for Medicaid | | | | nursing home if Medicaid covers him. |
| eligibility purposes as long as the nursing home resident | | | | Protections for the Healthy Spouse |
| intends to return home. The home may also be kept if | | | | The Medicaid law provides special protections for the |
| the Medicaid applicant's spouse, sibling, minor or | | | | spouse of a nursing home resident to make sure she |
| disabled child lives there. However, if the applicant | | | | has the minimum support needed to continue to live in |
| leaves the home with no intention of returning, the | | | | the community. |
| property must be counted as an asset. | | | | The so-called "spousal protections" work this way: if |
| The Transfer Penalty | | | | the Medicaid applicant is married, the countable assets |
| The second major rule of Medicaid eligibility is the | | | | of both the community spouse and the institutionalized |
| penalty for transferring assets. Congress does not | | | | spouse are totaled as of the date of |
| want you to move into a nursing home on Monday, | | | | "institutionalization," the day on which the ill spouse |
| give all your money to your children (or whomever) on | | | | enters either a hospital or a long-term care facility in |
| Tuesday, and qualify for Medicaid on Wednesday. So | | | | which he or she then stays for at least 30 days. |
| it has imposed a penalty on people who transfer | | | | In Illinois, the community spouse may keep one half of |
| assets without receiving fair value in return. | | | | the couple's total "countable" assets up to a maximum |
| This penalty is a period of time during which the person | | | | of $84,120 (in 2000). Called the "community spouse |
| transferring the assets will be ineligible for Medicaid. | | | | resource allowance," this is the most that Illinois allows |
| The penalty period is determined by dividing the | | | | a community spouse to retain without a hearing or a |
| amount transferred by what Medicaid determines to | | | | court order. |
| be the average private pay cost of a nursing home in | | | | Example: If a couple has $100,000 in countable assets |
| Illinois. The period of ineligibility starts on the first day of | | | | on the date the applicant enters a nursing home, he or |
| the month of the transfer. | | | | she will be eligible for Medicaid once the couple's |
| Example: If a Medicaid applicant made gifts totaling | | | | assets have been reduced to a combined figure of |
| $90,000 in a state where the average nursing home bill | | | | $52,000 -- $2,000 for the applicant and $50,000 for the |
| is $5,000 a month, he or she would be ineligible for | | | | community spouse. |
| Medicaid for 18 months ($90,000 ÷ $5,000 = 18). | | | | In all circumstances, the income of the community |
| Another way to look at the above example is that for | | | | spouse will continue undisturbed; he or she will not |
| every $5,000 transferred, an applicant would be | | | | have to use his or her income to support the nursing |
| ineligible for Medicaid nursing home benefits for one | | | | home spouse receiving Medicaid benefits. But what if |
| month. | | | | most of the couple's income is in the name of the |
| In theory, there is no limit on the number of months a | | | | institutionalized spouse, and the community spouse's |
| person can be ineligible. | | | | income is not enough to live on? In such cases, the |
| Example: The period of ineligibility for the transfer of | | | | community spouse is entitled to some or all of the |
| property worth $400,000 would be 80 months | | | | monthly income of the institutionalized spouse as |
| ($400,000 ÷ $5,000 = 80). | | | | described above in “treatment of income.”.. |
| However, the IDPA may look only at transfers made | | | | In exceptional circumstances, community spouses may |
| during the 36 months preceding an application for | | | | seek an increase in the income allowance either by |
| Medicaid (or 60 months if the transfer was made to | | | | appealing to the IDPA or by obtaining a court order of |
| certain trusts). This is called the "look-back period." | | | | spousal support. |
| Effectively, then, there is now a 36-month limit on | | | | Estate Recovery and Liens |
| periods of ineligibility resulting from transfers. This | | | | Under Medicaid law, following the death of the |
| means that people who make large transfers must be | | | | Medicaid recipient a state must attempt to recover |
| careful not to apply for Medicaid before the 36-month | | | | from his or her estate whatever benefits it paid for the |
| look-back period passes. | | | | recipient's care. However, no recovery can take place |
| Example: To use the above example of the $400,000 | | | | until the death of the recipient's spouse, or as long as |
| transfers, if the individual made the transfer on January | | | | there is a child of the deceased who is under 21 or |
| 1, 1998, and waited until February 1, 2001, to apply for | | | | who is blind or disabled. |
| Medicaid -- 37 months later -- the transfer would not | | | | The IDPA is permitted to seek recovery of paid |
| affect his or her Medicaid eligibility. However, if the | | | | benefits in all of the benefit recipient’s probate |
| individual applied for benefits in December 2000, only | | | | property. Given the rules for Medicaid eligibility, the only |
| 35 months after transferring the property, he or she | | | | probate property of substantial value that a Medicaid |
| would have to wait the full 80 months before | | | | recipient is likely to own at death is his or her home. |
| becoming eligible for benefits. | | | | In addition to the right to recover from the estate of |
| Exceptions to the Transfer Penalty | | | | the Medicaid beneficiary, IDPA must place a lien on real |
| Transferring assets to certain recipients will not trigger | | | | estate owned by a Medicaid beneficiary during her life |
| a period of Medicaid ineligibility. These exempt | | | | unless certain dependent relatives are living in the |
| recipients include: | | | | property. If the property is sold while the Medicaid |
| (1) A spouse (or a transfer to anyone else as long as it | | | | beneficiary is living, not only will she cease to be eligible |
| is for the spouse's benefit); | | | | for Medicaid due to the cash she would net from the |
| (2) A blind or disabled child; | | | | sale, but also she would have to satisfy the lien by |
| (3) A trust for the benefit of a blind or disabled child; | | | | paying back the state for its coverage of her care to |
| (4) A trust for the sole benefit of a disabled individual | | | | date. The exceptions to this rule are cases where a |
| under age 65 (even if the trust is for the benefit of the | | | | spouse, a disabled or blind child, a child under age 21, or |
| Medicaid applicant, under certain circumstances). | | | | a sibling with an equity interest in the house is living |
| In addition, special exceptions apply to the transfer of a | | | | there. |
| home. The Medicaid applicant may freely transfer his | | | | Whether or not a lien is placed on the house, the lien's |
| or her home to the following individuals without incurring | | | | purpose should only be for recovery of Medicaid |
| a transfer penalty: | | | | expenses. The IDPA may seek to enforce the lien at |
| (1) The applicant's spouse; | | | | any time there is a transfer of the real property, in |
| (2) A child who is under age 21 or who is blind or | | | | cases of fraud, or at the time of death of the owner. |