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Denver Metro Office

Boulder County Office

Guiding Clients Through the Long-Term Care Maze

Medicaid Eligibilty For Long Term Care (Updated for 2023)

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 county single entry point organization.

C. Income requirements: The initial income threshold cannot exceed $2,742 per month in 2023. If more than $2,742, but less than the average regional cost of care figure ($10,551 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 initial Medicaid cap ($2,742 in 2023) yet less than the monthly cost of a nursing home ($10,551 in the Denver metropolitan area in 2023); 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 $96, which is carved out of their income, while assistant living residents may keep more. 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 $2,742 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 $1,033,000. 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 $2,289 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 $3,715 in 2023. This figure is adjusted annually on January 1.

D. Resource Provisions

  1. The community spouse is permitted to keep up to $148,620 in 2023 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 $148,620. For example, the allowance could be filled by the spouse keeping her IRA worth $70,000, cash of $60,000, and a life insurance policy on her husband with cash value of $18,620 (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 $148,620 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 2023 is $9,186. 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.


© Vincent & Romeo, LLC 2-01-2023

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