The ability to pay for long-term care is a widespread concern for American seniors and their families. Even those who have saved meticulously for retirement, health care and other contingencies can find themselves running low on funds rather quickly.
Typically, as a senior’s care needs increase, so do the costs of the services that meet them. There are many different programs that can help older adults pay for short-term and long-term care, but the eligibility requirements for each and the care types each one covers vary. Long-term nursing home care is at the high end of both the care and cost spectrum. Medicaid and VA pensions are needs-based benefits that can be used to pay for long-term care, but understanding how each one works and how they work together is complicated.
Every senior’s financial situation, marital status and care needs are different, therefore long-term care planning—whether in advance or at the time of need—is never a one-size-fits-all task. Understanding what kinds of assistance certain benefits programs provide and how to qualify for them is the first step. It is best to gather as much information as possible to ensure that all care decisions are sound and in an elder’s best interest.
There are three different “tiers” of VA pension that a wartime veteran (or surviving spouse) may qualify for: the basic Veterans Pension, the Housebound allowance, or the Aid and Attendance (A&A) benefit. The A&A pension is the highest level available, and residing in a nursing home is one of several functional criteria that can determine eligibility.
Pension funds are awarded as a monthly monetary benefit to supplement a recipient’s income and can be used however they see fit. However, since there are income and asset limits to qualify for VA pensions, these additional funds will only go so far when it comes to paying for long-term care services.
For example, the maximum annual pension rate (MAPR) in 2021 for single veterans who qualify for the Aid and Attendance pension amounts to only $23,238 per year (approximately $1,937 per month). For a married veteran, this rate is $27,549 annually ($2,296 monthly). Additionally, an applicant is still allowed to keep up to $130,773 in net worth (income plus assets, including their spouse’s net worth) in 2021.
According to the most recent Genworth Cost of Care Survey, in-home care services cost around $24 per hour, the median monthly cost of assisted living is $4,300, and the median monthly cost of a semi-private room in a nursing home is $7,756. Clearly, even the largest VA pension will not fully cover the cost of an applicant’s residential long-term care, especially when factoring in other costs of living for themselves and their spouse. For this reason, VA pensions are primarily used to offset the costs of in-home care, adult day care and assisted living.
Long-Term Care Medicaid
Medicaid programs vary widely from state to state. Essentially, though, Medicaid long-term care is intended for people with low income and limited assets who meet medical and/or functional criteria for a nursing home level of care. Generally, the hard income limit for Medicaid in 2021 is $2,382, but some states allow seniors who are over this limit and have high medical bills to still qualify by “spending down” their excess income. The countable asset limit for Medicaid is $2,000 for a single applicant and $3,000 for a married couple but may be higher in some states.
State Medicaid Plans are entitlement programs that provide nursing home care to eligible applicants. Additional types of long-term care, such as in-home care, adult day care or assisted living may be included in some states, but these so-called “home and community based services” (HCBS) are typically provided through Medicaid waivers. These are enrollment plans that cap how many people can participate, so long waitlists are common for Medicaid waiver programs.
Should a wartime veteran spend down all their assets and require nursing home care, they will eventually qualify for Medicaid, which will pay the entire difference between their income and the cost of the nursing home. But how exactly do these two government programs overlap?
Veterans Pension vs. Medicaid
Based on the above information, it would appear pointless for a veteran who qualifies for Medicaid to also apply for VA pension benefits if they are already in a nursing home or will need to move to one in the near future. After all, Medicaid will pay their nursing home bill regardless of whether they are receiving a VA pension. Nevertheless, Medicaid rules require that applicants also apply for VA benefits (if they are entitled to them). Essentially, Medicaid should be used as the last resort for individuals who have exhausted their own funds and all other benefits available to them.
At first glance, it may appear that receiving a VA pension could disqualify a veteran from Medicaid coverage in the nursing home by putting them over the income limit. However, states view VA pensions differently for Medicaid purposes. Some do not count A&A funds as income at all, while others only consider part of an A&A pension payment as income. So, as a practical matter, a VA pension does not necessarily disqualify an applicant from receiving Medicaid-covered nursing home care. While an individual can technically qualify for both A&A and Medicaid, they will not enjoy the “full” benefits of both programs at the same time.
Note that, for a single veteran (or surviving spouse) with no dependent children, any A&A pension to which they are entitled will be reduced to $90 per month once they enter a nursing home paid for by Medicaid. That $90 is not counted as income, does not go to the nursing home to offset the cost of their care, and can be added to their “personal needs allowance” (PNA) and used for personal expenses. PNAs range from $30 to $200 per month, depending on the state. While these personal funds are not considered income, they will be counted as assets if they are not spent in a timely manner. The senior risks losing their nursing home coverage if their assets exceed the Medicaid limit.
Aid and Attendance pension income can be especially helpful in instances where a veteran has a spouse and/or dependent child. For example, if a veteran is in a nursing home and has a spouse living at home, then their pension funds would not be reduced. Instead, they would be directed to the so-called “community spouse” while allowing the veteran to still qualify for Medicaid-covered care. Additionally, if the community spouse’s gross income falls below a certain amount (this differs from state to state), then the “institutionalized spouse” can transfer their income to their spouse without jeopardizing their Medicaid benefits. This is known as the minimum monthly maintenance needs allowance (MMMNA).
Medicaid and VA Look-Back Periods
Prior to October 18, 2018, the VA did not enforce a look-back period for asset transfers for less than fair market value (FMV). However, the VA now uses a three-year look-back period for new pension claims. If an applicant transferred funds for less than FMV that would have put them over the net worth limit ($130,773 in 2021), then they will incur a penalty period of up to five years during which they will be ineligible for pension benefits.
But, there is an exception when an applicant’s net worth is already below the VA limit. In this case, veterans are able to transfer or gift assets and still receive pension benefits so long as their countable income is within the VA limits and they meet all the other eligibility criteria. When it comes to Medicaid, though, the rules are stricter. Such a “gift” would trigger a penalty period and temporarily disqualify them from receiving benefits if it took place within five years of their Medicaid application.
During this time, the VA pension can help defray the cost of paying for long-term care privately until the Medicaid penalty period has expired. Since nursing home care is so expensive, relying on VA pension benefits is usually best when paying for lower levels of care that are less commonly covered by Medicaid, such as assisted living, adult day services and in-home care. Once a veteran or surviving spouse’s needs have increased and/or they have spent down their assets, they can then apply for Medicaid to pay for their nursing home care.
Seek Legal Guidance With Medicaid and VA Benefits Planning
Because of the ever-changing nature of these government programs, preplanning is becoming more and more important for seniors and their families. Mistakes can be time consuming and costly. It is wise to seek professional help with Medicaid planning strategies and/or VA pension planning strategies and applications. Look for a reputable elder law attorney who has experience with Medicaid and VA benefits in the state where you need care to guide you through applying for these programs.