Vincent & Romeo, LLC | Dedicated to serving the legal needs of the elderly, the disabled, and their families.
Call Now, For Phone Consultation

Denver Metro Office

Boulder County Office

Denver Metro Office

Guiding Clients Through the Long-Term Care Maze


Introduction: Paying for Long Term Care: Insurance, Financial Planning, Medicaid

I. What Is Medicaid?

A. Medicaid is a federal-state needs-based program providing medical services and assistance for qualified individuals.

B. Contrast Medicaid with Medicare

  1. Medicaid is a needs-based program providing health care based on financial and medical need.
  2. Medicare is a public health insurance program based on Social Security insured status and eligibility for Social Security benefits.

II. Eligibility Requirements

A. Eligibility for Medicaid is based on three eligibility requirements: categorical, income and resource.

B. Categorical requirements: An applicant must have medical conditions requiring institutionalization, and have been in fact admitted to a nursing home or a hospital or a combination of both for at least 30 consecutive days (unless applying for HCBS-Medicaid/assisted living, under which there is no time requirement). Assessment is performed on site by a caseworker from the single entry point organization, which in Boulder county is ACMI.

C. Income requirements: An applicant’s income cannot exceed $2,313 per month in 2019. If more than $2,313, but less than the average regional cost of care figure ($9,516 in 2019 for Denver Metro area), the applicant can still be “income-eligible” through use of a so-called “Miller Trust.”

D. Resource requirements: A single applicant cannot have countable resources of over $2,000.00. Married couples may retain more assets, as outlined below.

III. Treatment of Income

A. When an applicant has income greater than the Medicaid cap ($2,313 in 2019) yet less than the monthly cost of a nursing home ($9,516 in the Denver metropolitan area in 2019); the applicant falls into the so-called “Utah Gap.”

B. If a person is in the Utah Gap, an income trust must be established. The trust is typically a simple checking account. The Medicaid recipient’s income is placed in the trust account each month. Nursing home applicants are allowed to keep a personal needs allowance of about $87, which is carved out of their income, while assistant living residents may keep roughly $116.00/month. The balance is paid to the assisted living facility or nursing home (unless receiving benefits at home in which case the applicant retains the first $2,313 of their income).

IV. Treatment of Resources

A. Resources fall into two categories: Exempt and non-exempt.

B. Exempt resources are assets which are not counted in determining the $2,000 resource limit for Medicaid eligibility purposes.

C. Examples of exempt resources include:

  1. The home including contiguous property. For single applicants the equity limit is $585,000. For married applicants, there is no limit so long as the non-Medicaid spouse is living in the home.
  2. One motor vehicle, regardless of its value, if married or if it is used for medical purposes, is handicapped equipped or is used for employment, as verified by a physician.
  3. Personal property and household goods.
  4. An irrevocable pre-paid funeral and burial or cremation plan. Any unspent funds must be paid to the State of Colorado Medicaid program.
  5. Wedding and engagement rings.
  6. Necessary medical equipment.
  7. Life insurance with a face value of $1,500 or less. If more, cash surrender value is counted.

D. Non-exempt resources are counted toward the $2,000 resource limit.

E. Examples of non-exempt resources include cash, CDs, money market funds, stocks, bonds, cash surrender values of life insurance with a face value in excess of $1,500, second homes, IRAs and cars, etc.

V. Spousal Impoverishment

A. In the past, when one spouse entered a nursing home (the “institutionalized spouse”), virtually all of his or her income was used to pay the nursing home expense. The spouse who remained at home (the “community spouse”) still faced the same expenses the couple had together, but with significant reduction in income, thereby rendering that spouse impoverished. Additionally, the couple was forced to use their resources to pay for the nursing home care, which diminished the assets available for use by the spouse at home. More recently the so called “spousal impoverishment” provisions of the Medicaid regulations have modified this and made more liberal provisions for the community spouse.

B. There are two parts to the spousal impoverishment provisions of the law: income and resources.

C. Income Provisions

  1. The community spouse is guaranteed a minimum monthly income, called the “Minimum Monthly Maintenance Needs Allowance.” This amount is currently $2,058 per month, and is adjusted annually on July 1. If the community spouse’s income falls below this level, that portion of the institutionalized spouse’s income necessary to bring the community spouse to the guaranteed level is contributed to the community spouse.
  2. The Minimum Monthly Maintenance Needs Allowance can be increased if it can be shown that the community spouse’s shelter expenses (mortgage, rent, utilities, HOA) exceed 30% of the Minimum Monthly Maintenance Needs Allowance, or if exceptional circumstances exist that would create severe financial distress for the community spouse without an increase in the contribution from the institutionalized spouse. The maximum amount that can be available for the community spouse is $3,161 in 2019. This figure is adjusted annually on January 1.

D. Resource Provisions

  1. The community spouse is permitted to keep up to $126,420 in 2019 of the spouses’ countable resources. This is called the “Community Spouse Resource Allowance.” It can be funded with assets of the spouse’s choice up the dollar limit of $126,420. For example, the allowance could be filled by the spouse keeping her IRA worth $50,000, cash of $60,000, and a life insurance policy on her husband with cash value of $16,400 (countable) and a death benefit of $100,000 (not countable).
  2. The community spouse does not have to use any of the funds set aside as the Community Spouse Resource Allowance for the care of the institutionalized spouse. The balance of the couple’s countable resources is set aside to the institutionalized spouse. The institutionalized spouse must first spend them down to $2,000 before he or she is resource eligible for Medicaid.
  3. The Community Spouse Resource Allowance can be increased under certain circumstances.

VI. Spend Down

A. When a single Medicaid applicant has more than $2,000 in countable resources, or a married couple has more than $126,420 in countable assets, they must spend down the excess.

B. Spend down can be accomplished in several ways.

  1. Use the countable resources to pay for the nursing home care.
  2. Pay off legitimate debts.
  3. Convert countable resources to exempt resources. For example, excess resources could be spent on repairs and improvements to the principal residence, a newer car, personal property, prepaid burial and funeral plans, non-covered medical equipment, etc. In addition, for married couples, excess resources may, in some cases, be used to purchase an annuity, which pays income for the life of the community spouse.
  4. Use of certain types of annuities.

VII. Transfers of Assets

A. Frequently, individuals who have too many resources to qualify for Medicaid attempt to become eligible by giving away their property. If a voluntary transfer is made, for less than fair market value and for the purpose of securing Medicaid eligibility, the applicant may incur an eligibility penalty, meaning that he or she will not be eligible for Medicaid benefits for a certain number of months depending on the value of the property transferred. The penalty is calculated by dividing the value of the asset transferred by the average monthly cost of nursing home care in the state, which in 2019 is $8,613. The answer to the equation is the number of months’ penalty. The penalty does not begin to run until the applicant is “otherwise” eligible, which usually means, the date of application.

B. Despite the transfer penalty provisions, a penalty will occur only if the applicant applies for Medicaid within the applicable 60-month so-called “look back” period.

C. With proper planning, single individuals may be able to save a significant portion of their assets through a gifting plan. Gifting is often employed as a Medicaid Planning strategy for single individuals, and if done properly, frequently preserves 50% or more of the individual’s assets.

VIII. Medicaid Planning

A. Medicaid Planning refers to the process of helping individuals and families qualify a loved one for Medicaid while still preserving assets for a spouse or children. Techniques range from converting countable assets to exempt assets, gifting, and purchase of certain Medicaid exempt annuities.

EXAMPLE: Bob and Carol are married with 2 children, Ted and Alice. Bob is 76, healthy but has mid-stage Alzheimer’s disease and will soon move to a memory care facility at a cost of $8,000/month. The couple is concerned that all of their savings will go to pay for Bob’s care, leaving Carol with insufficient funds for her needs.

Income: Bob has $3,000/month from Social Security and a pension. Carol has SS of $2000/month.

Home worth $650,000, remaining mortgage of $100,000
Bob’s IRA worth $100,000
Carol’s IRA worth $50,000
Two older cars, each worth $10,000
An investment account worth $150,000 titled jointly
Bank accounts worth $50,000 half titled to Bob, half to Carol.

Total Assets: $1,020,000. Total not counting exempt home and 1 exempt car: $360,000. This is the amount they must spend down to get to Medicaid eligibility for Bob.

Eligibility Requirements:

Income: Bob’s income is over the initial limit of $2,313, but less than the income cap of $9,516. Income will not be a disqualifier here.

Assets: The home and one car are exempt. All other assets are countable. All assets are looked at no matter how titled. So, the couple has $360,000 in countable assets.


  1. Carol keeps her IRA and $76,420 in cash or investments to fill up her $126,420 spousal asset allowance.
  2. The home is re-titled to Carol’s sole name. Inter-spousal transfers are allowed without penalty. This may possibly avoid estate recovery.
  3. $50,000 of excess assets is used to pay off the mortgage.
  4. $30,000 of excess assets is invested in home repairs, furniture, and improvements.
  5. Both cars are sold and a new car is bought, with a 7 year warranty, at a net cost of $40,000
  6. $113,580 of excess assets remains which Carol uses to purchase an irrevocable spousal annuity for 5 years paying her roughly $1,893/month in exempt income.

Result: Bob is eligible for Medicaid which will cover all of his $8,000/month cost at the nursing home above and beyond his income contribution of $1,258/month.

Estate Recovery Program

A. In order to recoup Medicaid payments made, Colorado law permits the state to place a lien against the real estate of a Medicaid recipient and/or to file a claim in the probate estate of a deceased Medicaid recipient.

B. There are techniques for avoiding estate recovery, such as joint tenancy, life estates and interspousal transfers. However, be cautious in changing title to property as a transfer penalty can result and there may be tax considerations.


© Vincent & Romeo, LLC 2-11-2018

Subscribe to our Monthly E-Newsletter

Slide arrow right to submit
Photo of elder law client