Medicaid is a joint federal and state program that helps people with limited income and few assets cover health care costs and long-term care costs. But what exactly does low income and limited resources mean? Can you get Medicaid if you own a home? Can you own a car on Medicaid? What about a life insurance policy?
Many people believe they are ineligible for Medicaid coverage of nursing home costs and doctor’s bills simply because they own property or have some money in the bank. The truth is there are a variety of assets that seniors can own and still be eligible. It is just a matter of learning the rules and making a legal and financial plan to ensure they are met.
Keep in mind that each state administers its own unique mix of Medicaid programs and sets its own financial and medical eligibility requirements (within federal parameters) for each. Medicaid considers both income and assets in the financial qualification process, but this article will focus on asset limits.
Medicaid Asset Limits in 2022
Generally, a single Medicaid applicant who is 65 or older may keep up to $2,000 in countable assets to qualify financially. Medicaid programs consider certain assets to be exempt or “non-countable” (usually up to a specific allowable amount). Any cash, savings, investments and property that exceed these limits are considered “countable” assets and will count towards an applicant’s $2,000 resource limit.
Keep in mind that states do have some wiggle room when it comes to setting asset limits. For example, a single New York State Medicaid applicant who is blind, disabled or age 65+ is allowed to retain $16,800 in liquid assets. California’s Medicaid program, which goes by the name Medi-Cal, will actually begin to phase out the asset test for elderly and disabled individuals this year. On July 1, 2022, the $2,000 asset limit will increase to a whopping $130,000 for an individual applicant. Medi-Cal plans to completely eliminate the asset test no sooner than 2024.
Limits for married couples are even more complicated and vary by state, Medicaid program, and whether one or both spouses are applying for Medicaid.
An applicant’s primary residence is exempt if it meets a few fundamental requirements. First, the home must be in the same state in which the owner is applying for Medicaid.
Second, the applicant’s equity value in their home (fair market value minus debts if owned singly) must be $636,000 or less, although some states use higher limits of up to $955,000. Medi-Cal, does not enforce a maximum equity value limit on primary residences.
Third, the applicant must either continue residing in the primary residence or have an “intent to return home” if they are hospitalized, recovering at a senior rehabilitation facility or living in a nursing home. If a Medicaid applicant’s spouse or dependent child continues living in the home following their move to a nursing home, then the house is considered exempt regardless of its value.
One automobile of any current market value is considered a “non-countable” asset for Medicaid purposes as long as it is used for the transportation of the applicant or another member of their household.
Funeral and Burial Funds
Generally, Medicaid considers the value of any non-refundable pre-paid funeral plan or burial contract exempt. This includes irrevocable funeral trusts (IFTs) in most states. IFT limits vary, but the cap is typically $15,000 or less per spouse. For example, Nebraska sets a max value of $5,372, whereas New York and Michigan are the only two states that do not consider IFTs of any value exempt for Medicaid purposes. Some states also allow applicants to set aside up to $1,500 in an irrevocable pre-need funeral arrangement and/or a revocable burial fund that is considered an exempt asset.
Property for Self-Support
According to federal law, only an applicant’s equity interest in any real or personal property that is essential to their self-support is taken into account. Examples include farms, rental properties, equipment and other real estate investments that generate income. Up to $6,000 of an applicant’s equity interest in the property is exempt from their allowable assets, but only if the property generates a net annual income of at least six percent of the equity value annually. Any value above the $6,000 cap is counted as an asset.
Life Insurance Policies
Both the face value and cash value of life insurance policies can impact Medicaid eligibility. Only the cash value of a life insurance policy owned by an applicant may be counted, therefore Medicaid ignores all term life insurance policies. Generally, Medicaid exempts whole life insurance policies that total up to $1,500 in face value for an individual applicant. However, if a policy or policies exceed the face value limit, then the cash value of the policy/policies will count towards their asset limit. Of course, some states permit higher exemption amounts, others allow partial exemptions, while still others enforce limits on a combined total of both life insurance and burial funds.
Seek Help With Medicaid Application and Spend-Down
Medicaid is a very complex government program. Just because a senior’s assets exceed the general limits listed above does not mean they are automatically ineligible for coverage. Different states implement slightly different rules and resource limits, and an elder can devise a personalized asset spend-down strategy to meet their state’s eligibility criteria.
In addition to asset limits, there are many other guidelines for calculating countable income and determining one’s medical need for care and assistance. Furthermore, different financial rules apply for married couples. It is recommended to familiarize yourself with these eligibility requirements early on in case you ever need to help an aging loved one apply for Medicaid (or file an application yourself).
Working with a certified elder law attorney who has extensive knowledge of the unique Medicaid program in your state and is well versed in legal and financial Medicaid planning strategies is crucial. In most cases, handling the application process without any professional assistance can result in a determination of ineligibility and even a costly Medicaid penalty period<.
To see if you or an aging loved one might qualify for Medicaid to help pay for long-term care or home and community based services (and to explore potential eligibility for other assistance programs), visit Benefits.gov to use the Benefit Finder tool.