Janet’s mother has limited financial resources and is covered by Medicaid. To help her pay for her basic needs and living expenses, Janet starts depositing money into her mother’s checking account every month. Janet’s generous act helps her mother buy groceries and pay for dental work, but they can also make her ineligible for Medicaid. When it’s time for Janet’s mother to have her annual Medicaid renewal, the state will view Janet’s monthly deposits as income for her mother. If the total of those deposits pushes Janet’s mother over her income limit for eligibility, she could lose her Medicaid coverage.

You need to be very careful when it comes to making any kind of financial contributions to family members who are Medicaid recipients. Some states allow it, but even those states have specific and limiting rules governing the process, which is known as Medicaid Family Supplementation.

How Income Affects Medicaid Eligibility

Medicaid is meant for people with limited financial resources, so applicants and beneficiaries have to meet two financial requirements: an asset limit and an income limit. These limits can vary by state, but in general they are low.

In most states in 2024, the individual income limit for Medicaid long-term care coverage is $2,829/month. This means individuals must have $2,829/month or less in total income to qualify for Medicaid. Most income is counted, including Social Security benefits, pension payments, retirement account payments, wages, salary, rental income, etc. The 2024 individual asset limit for Medicaid long-term care in most states is $2,000. Since the income limit is most relevant to this discussion, we won’t detail the asset limit any more in this space.

Any money given to a Medicaid recipient on a regular basis can be considered income, even if it’s immediately used to pay for necessities, so it could push the Medicaid recipient over their income limit. If this happens, they could become ineligible and potentially lose their Medicaid coverage and benefits.

However, some states allow certain financial contributions to Medicaid recipients from their family members without counting those contributions toward the recipients’ income limit. These allowed and approved contributions are known as Medicaid Family Supplementation.

Medicaid Family Supplementation Basics

The rules for Medicaid Family Supplementation vary by state in terms of what the family can contribute, or even if it’s allowed at all. But states that do allow it follow these basic guidelines:

1) Family members can only supplement existing Medicaid coverage/benefits.
2) Money should never be given directly to the Medicaid recipient.
3) Done correctly, Family Supplementation will not count as income for the Medicaid recipient, which means it won’t impact their eligibility.

Just to be clear, supplement in this case means enhance, upgrade or add to. So, Family Supplementation can only add to the coverage the Medicaid beneficiary is already receiving. If it doesn’t, the financial contributions will not be considered Family Supplementation and they will be counted toward the income limit.

The next few sections give an overview of what Medicaid Family Supplementation can and can’t be used for with a few examples to help explain. To find the exact rules in your state for your situation, get in touch with our team of professionals at Eldercare Resource Planning.

What Can Family Supplementation Be Used For?

Medicaid will cover long-term care services and supports in multiple settings, such as nursing homes, assisted living facilities and private homes. Family Supplementation can be used to enhance a Medicaid recipient’s long-term care in all of those locations. Here’s how:

In Assisted Living

Perhaps the most common use for Family Supplementation is to help pay for room and board expenses in assisted living facilities. Medicaid does not cover room and board expenses, but it will cover long-term care services and supports in assisted living facilities. So, a family member helping to pay for room and board at an assisted living facility where Medicaid is covering the long-term care benefits would be viewed as supplementing the Medicaid coverage.

Family Supplementation can also be used to pay for any goods and services offered by the assisted living facility but not covered by Medicaid, like a private phone or cable television. And it could be used to upgrade the services at the facility that are covered by Medicaid, like increasing the number of hours of personal care assistance, for example.

In Nursing Homes

For seniors with long-term nursing home coverage through Medicaid, Family Supplementation can be used to upgrade from a semi-private to a private room. Medicaid only covers semi-private or shared nursing home rooms, so upgrading to a private room with Family Supplementation is fairly routine. Nursing home residents can also use Family Supplementation to pay for goods and services offered by the nursing home but not covered by Medicaid, like phone, cable or an upgraded food menu.

At Home

If the Medicaid beneficiary is receiving long-term care benefits at home, Family Supplementation can be used to enhance those benefits. For example, if Medicaid is paying for a wheelchair and a wheelchair ramp, Family Supplementation could be used to buy a type of wheelchair or ramp Medicaid wouldn’t pay for on its own. Or if Medicaid is covering nurse visits, Family Supplementation could be used to increase the number of visits or the length of stay.

How the Medicaid Family Supplementation Process Works

As mentioned above, family members hoping to use Medicaid Family Supplementation should never give money directly to the Medicaid beneficiary. These kinds of transactions will be viewed as countable income by Medicaid state officials.

Medicaid Family Supplementation rules do allow sending payments directly to nursing homes, assisted living facilities or caregivers. While making payments this way will not be counted toward the income limit, they may impact the senior’s Supplemental Security Income (SSI), if they have any. Paying bills directly is considered an in-kind payment, and in-kind payments can impact SSI benefits and wind up reducing them by as much as one-third.

Using a third-party Supplemental Needs Trust lets family members make monetary contributions to a senior’s care without impacting Medicaid eligibility or SSI benefits. To use this kind of trust, the contributing family member would create and fund the trust and is known as the trust’s “grantor.” They can also be the “trustee” and manage the trust and the payments made to the senior, who is known as the trust’s “beneficiary.” The family member/“grantor” can also choose a third person to act as the trustee, either another family member or a professional trustee who will charge a service fee. Or, they can get in touch with our team.

Consequences for Violating Family Supplementation Rules

If a senior accepts financial contributions from a family member that are not allowed under their state’s Medicaid Family Supplementation rules, they could go over their state’s income limit and become ineligible for Medicaid. Some states would allow the Medicaid recipient to solve the problem – return the money and stop accepting future payments – without taking away their benefits or making them re-apply for Medicaid. Or, the state could take away the senior’s coverage for the month the violation occurred, but allow those expenses to be covered by Retroactive Medicaid, so the senior would not have to cover any expenses out of pocket.

But in states with stricter rules, or in cases where the senior keeps receiving money from family members despite being told it was violating Medicaid Family Supplementation rules, the senior could lose their benefits and be forced to re-apply for Medicaid.

How a Certified Medicaid Planner Can Help with Family Supplementation

Before you make any financial contributions to a Medicaid recipient, or before you accept any if you are the recipient, it would be a good idea to consult with one of our Certified Medicaid Planners. They can tell you exactly what the Medicaid Family Supplementation rules are in your state, and if your family contributions will impact the Medicaid recipient’s income limit.

They will know all the available benefits of your Medicaid coverage, including those you might not be accessing, so they will be able to tell you exactly what your Family Supplementation contributions can and can’t be used for. They’ll know if their payments might affect any Supplemental Security Income benefits, or anything else for that matter.

Our team at Eldercare Resource Planning can also be huge help if you want to create and utilize a Supplemental Needs Trust. We partner with Elder Law Attorneys who can help you draw up legal documents just like these. And having a Certified Medicaid Planner on your side is crucial if you break, or have already broken, Medicaid Family Supplementation rules.