Introduction
A quick glance at the Google search results for Medicaid eligibility criteria might lead you to believe a client can’t qualify, but this is often not the case. A closer look can reveal adjusted income limits, exempt assets or more lenient medical requirements across state lines. There are also planning strategies and financial tools that can reduce assets or income to help seniors meet their financial criteria and qualify for the long-term care they need. Read on to learn more about these alternative pathways to Medicaid eligibility.

How Spousal Protections Can Lower Countable Income and Assets

In all states, Medicaid provides a way for married couples to allocate income and assets of the spouse applying for Medicaid to their non-applicant spouse. These protections can dramatically lower the applicant’s countable income and assets and make them Medicaid-eligible, when at first glance they appear to be financially ineligible.

Formally known as the Community Spouse Resource Allowance and the Monthly Maintenance Needs Allowance, these protections are intended to prevent the non-applicant spouse from living in poverty by allowing the couple to have assets or income beyond their limits. So, not only do they protect the community spouse, they also provide the applicant spouse with a less restrictive path to eligibility.

Community Spouse Resource Allowance

In most states in 2024, the Medicaid asset limit for eligibility for married couples with both spouses applying is a combined $3,000 or $4,000. For married couples with just one spouse applying, however, the asset limit for the applicant spouse is $2,000 in most states, but the asset limit for the non-applicant spouse can be as much as $154,140 thanks to the Community Spouse Resource Allowance (CSRA). While Medicaid considers all assets of a married couple to be joint assets, up to $154,140 can be allocated to the non-applicant spouse.

The CSRA figure can vary by state and the couple’s financial situation.

There are three types of Medicaid long-term care relevant to seniors and the CSRA applies to two of them – Nursing Home Medicaid and Home and Community Based Services (HCBS) Waivers. The CSRA does not apply to Aged, Blind and Disabled (ABD) Medicaid.

Monthly Maintenance Needs Allowance

The Monthly Maintenance Needs Allowance (MMNA) allows an applicant spouse to have income over the normal limit so they can transfer the excess to a low-income community spouse to help prevent them from living in poverty. If the community spouse’s income is below the Minimum MMNA in their state, the applicant/beneficiary spouse can transfer some or all of their income to the community spouse until they reach that Minimum MMNA, even if that means the beneficiary spouse has monthly income over their income limit for Medicaid eligibility. As of July 1, 2024, some states use one standard figure of $3,853.50/month as their Minimum MMNA, while other states use a Minimum MMNA of $2,555/month that can increase to a Maximum MMNA of $3,853.50/month depending on the community spouse’s living expenses. The income limit for Medicaid long-term care eligibility is $2,829/month in most states in 2024.

So, an extreme example of how the MMNA might work is a community spouse with zero income of their own living in a state with a $3,853.50/month Minimum MMNA and a $2,829 income limit. In this case, the applicant/beneficiary spouse would have an income limit of $6,682.50/month: $2,829/month for their own income + $3,853.50/month to transfer to the community spouse so they can reach the MMNA limit = $6,682.50/month.

It should be noted that Nursing Home Medicaid beneficiaries are required to give almost all of their income to the state to help cover the cost of care. Also, the MMNA only applies to Nursing Home Medicaid and HCBS Waivers, it does not apply to ABD Medicaid.

Medically Needy Pathway to Lower Countable Income

Some states offer the Medically Needy Pathway. This allows Medicaid applicants/beneficiaries who are over their income limit to become eligible by spending their excess income on medical bills and long-term care costs. This can include expenses for medication, hearing aids, hospital stays, as well as non-medical services like personal care assistance with the Activities of Daily Living (mobility, bathing, dressing, eating, toileting).

Anyone using the Medically Needy Pathway has to spend their excess income until they reach their state’s Medically Needy Income Limit, and they have to do that every “spend down” period. This is either one month or six months in most states. Once they reach their Medically Needy Income Limit, Medicaid will cover their healthcare expenses for the rest of the spend down period, and the cycle starts all over again when the next spend down period begins. In this way, the Medically Needy Pathway operates like healthcare insurance with a deductible.

As of 2024, the following states offer a Medically Needy Pathway: Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin, as well as the District of Columbia. States that don’t have the Medically Needy Pathway offer a different way for seniors who are over the income limit to become eligible, which is discussed below.

Qualified Income Trusts to Lower Countable Income

In states that don’t have the Medically Needy Pathway discussed above, seniors who are over the income limit can still qualify for Medicaid using a Qualified Income Trust (QIT). The method is fairly straightforward: Medicaid applicants/beneficiaries deposit their excess income into the QIT until it reaches their income limit in order to maintain their eligibility on a month-to-month basis. In order for a QIT to comply with Medicaid rules, it must be irrevocable, the beneficiary must be the state and the trustee (the person who manages the trust) can not be the grantor (the person who established the trust, in this case the Medicaid beneficiary or their representative).

Using ABD Medicaid as an Alternative

In order to qualify for Nursing Home Medicaid or HCBS Waivers, which cover long-term care in the home and other places in the community, applicants must meet the medical criteria of needing a Nursing Facility Level of Care (NFLOC). The exact definition of NFLOC can vary by state, but in general it means needing the type of full-time care and supervision associated with a nursing home. For seniors who don’t need a NFLOC but still need some long-term care services and supports, ABD Medicaid could be an option.

Instead of needing a NFLOC to receive long-term care via ABD Medicaid, seniors only have to show a need for that specific long-term care service or support. For example, a senior who doesn’t need a NFLOC but does need help with medication management could potentially have that service covered by ABD Medicaid.

There are two possible drawbacks to this alternative pathway to eligibility. First, the financial criteria for ABD Medicaid in most states is more strict than the financial criteria for Nursing Home Medicaid or HCBS Waivers. Second, ABD Medicaid does not, in general, offer as many long-term care services and supports as HCBS Waivers.

It is worth noting that ABD Medicaid’s name varies by state. For example, in Florida it is called Medicaid for Aged and Disabled and in Texas, Medicaid for the Elderly and People with Disabilities.

Moving Out of State for Medicaid Eligibility

Medicaid’s financial and medical eligibility criteria can vary between states, so seniors who are not eligible in one state might be eligible in a different state. Since Medicaid has no waiting period for new residents, a senior could move to a new state with friendlier eligibility criteria and immediately apply for Medicaid.

For example, the individual asset limit for Medicaid eligibility in most states in 2024 is $2,000, but it’s $31,175 in New York, $17,500 in Illinois and there is no asset limit in California. It’s a similar situation with income limits. In most states in 2024, the individual income limit is $2,829/month, but it’s $1,732/month in New York and $1,255/month in Illinois. These financial limits can also change depending on the program. In North Carolina, for example, the income limit for Nursing Home Medicaid is just having less income than the average cost of nursing home care in the area, but the individual income limit for HCBS Waivers in North Carolina is $1,255/month.

While the medical criteria for Nursing Home Medicaid and HCBS Waivers in every state is needing a Nursing Facility Level of Care (NFLOC), how a NFLOC is defined and measured can vary by state. For example, one state might consider needing help with three of the five Activities of Daily Living (mobility, bathing, dressing, eating, toileting) as the definition of a NFLOC, while another state may consider needing help with two of those activities as the definition of a NFLOC. So, a senior who is not medically eligible in one state might be eligible in another.

Using Medicaid Planning to Meet Financial Limits

There are other Medicaid Planning strategies that can help seniors who don’t meet their financial eligibility criteria qualify for Medicaid. These techniques can impact income or assets, and they make use of specific financial tools. The rules governing these strategies and tools can be complicated, and they can also vary by state, which is why we recommend consulting with a Certified Medicaid Planner before implementing them. Below we discuss just a few of the more common strategies.

Medicaid Compliant Annuities
Seniors can reduce their assets to become Medicaid eligible by purchasing a Medicaid Compliant Annuity. The purchase will not violate the Look-Back Period, so it can be made any time before applying. While the total value of a Medicaid Compliant Annuity will not count toward the applicant’s asset limit, the monthly payouts from the annuity will count toward their income limit. In order to be Medicaid compliant, these annuities must be fixed, immediate, irrevocable and non-transferable. The state must also be named the annuity’s beneficiary, and the monthly payments must be based on the life expectancy of the Medicaid beneficiary and pay back the entire purchase amount of the annuity.

Half-a-Loaf
Seniors can give their family roughly half of their assets with this strategy. That gift will lead to a Look-Back Period violation and a penalty period of ineligibility, but the senior uses the other half of their assets to purchase a Medicaid Compliant Annuity and its monthly payouts will cover long-term care costs during their ineligibility. By the time the annuity payments end, the senior will be eligible for Medicaid long-term care. Calculating how much money to give away and the exact timing of the annuity payments is complicated and should be handled by Medicaid Planning professionals.

Medicaid Asset Protection Trusts
Any asset placed in a Medicaid Asset Protection Trust (MAPT) will not be counted toward the asset limit. This includes the home with one exception – Michigan does not exempt homes in MAPTs from the asset limit. However, these trusts violate the Look-Back Period, so they must be used at least five years ahead of time (in most states) in order to be an effective Medicaid Planning tool. These trusts are also expensive to create, so they are only recommended for people with at least $100,000 worth of assets.

Irrevocable Funeral Trusts
Purchasing an Irrevocable Funeral Trust (IFT) can reduce assets for seniors over their asset limit, and the purchase will not violate the Look-Back Period. These trusts will eventually be used to cover all funeral and burial expenses for the Medicaid beneficiary, but their value does not count against the asset limit. Some states place a limit on the value of the IFT that can be exempt from the asset limit, but many do not. However, any money in the IFT that is not spent on final expenses must go to the state.

The above are just a few of the many strategies Medicaid Planners can apply to help clients become Medicaid-eligible for long term care.