Case Study: Married with One Spouse Applying for Medicaid Long Term Care

Meet Martin and Jane

Meet Martin, 82, and Jane, 79. Martin has been living at home with Jane, who has been acting as his primary caregiver. However, Martin’s health has been on the decline for several months, and Jane can no longer give him the proper care he needs.

Martin has been suffering from dementia for several years. He now needs assistance with three of the Activities of Daily Living as defined by Medicaid: dressing, toileting and mobility (getting in and out of bed and into another room). The other two Activities of Daily Living are bathing and eating. Needing help with three of the five constitutes needing a Nursing Facility Level of Care (NFLOC) in their state, and needing that level of care is the medical requirement for Medicaid’s nursing home coverage.

While Martin may be medically eligible for Medicaid, Jane is worried about his financial eligibility. They have $125,000 in combined savings, which is well above Medicaid’s eligibility asset limit in their state, which is $2,000. Plus, they have a household valued at $200,000 and a small rental property worth $75,000. Medicaid considers married couple’s assets to be jointly owned.

Martin’s income, $2,500/month, is under another one of Medicaid’s financial eligibility limits: the income limit. Jane’s income is $1,000/month, but since she is not applying her income won’t count towards Martin’s limit. Unlike assets, Medicaid treats married couple’s incomes separately.

Since nursing homes cost $10,500/month in their area, Jane knows they can’t cover it with their income, and paying Martin’s nursing home bills out-of-pocket will quickly deplete their savings. She could sell the house, but then where would she live? And how will she afford to live independently if all of their resources are going towards Martin’s nursing home expenses.

Jane doesn’t see a way out, so she reaches out to Eldercare Resource Planning

$98,000
Worth of Assets Preserved
Thanks to Eldercare Resource Planning

Goals

• Secure Medicaid eligibility for Martin.

• Ensure Jane has the financial resources to support herself and live independently.

Solution

After her initial consultation with Eldercare Resource Planning, Jane decides that help from our integrated team of Certified Medicaid Planners, financial consultants and legal advisers is just what she and Martin need. She wants to help Martin qualify for Medicaid, but she also needs to maximize her own resources, and she knows her best chance of doing that is by teaming up with a Certified Medicaid Planner (CMP). We can also make sure Martin’s application is completed and submitted correctly, saving Jane that stress and ensuring that Martin won’t be denied because of a typo or technicality. Even a small mistake could lead to a denial or a penalty period of ineligibility.

Process

One of our CMPs will start the planning process by determining which of Martin and Jane’s assets will be counted toward the Medicaid asset limit, and the value of those countable assets. The couple’s house will not be counted toward the limit because Jane will remain living there, but the $75,000 rental property and the $125,000 in savings will all be counted. Martin and Jane don’t have any retirement accounts, stocks, bonds or other countable assets, so their asset total is $200,000, which puts Martin well above his $2,000 limit.

However, thanks to the Community Spouse Resource Allowance, Jane can keep $100,000 of the couple’s assets and it will not be counted toward Martin’s asset limit. That total can vary by state and with each individual case, but the intent of the Community Spouse Resource Allowance is to make sure the spouses of Medicaid beneficiaries do not end up living in poverty.

Jane will keep the rental property and $25,000 in savings, which leaves $100,000 in savings, still well over Martin’s $2,000 asset limit. But the CMP has a plan to “spend down” that excess $98,000 so Martin meets the limit. The couple could spend down the excess money on almost anything, as long as they were spending on themselves (spending on others violates the Look-Back Period) and not buying anything that would be a countable asset, like a second car or expensive jewelry. They could pay off any debt they might have, take a vacation or make home modifications for safety and accessibility. A state caseworker or someone from the nursing facility would suggest Martin spend down by paying out of pocket for his nursing home. But to get the most out of their savings, our CMP advises Martin and Jane to spend down using a specific financial tool that we will discuss in the next section.

Our CMP would also make sure Martin meets the income limit for eligibility, which he does, so no action is needed. But there are ways to qualify for Medicaid if you are over the income limit. It should also be noted that anyone receiving Medicaid’s nursing home coverage, like Martin hopes to be, is required to give almost all of their income to the state to help cover the cost of care. They are only allowed to keep a small personal needs allowance (between $30 and $200/month depending on the state), enough to make Medicare premium payments if they are dual eligible and enough to make spousal income allowance payments to qualified spouses (in this case, Jane does not qualify). 

Financial Tools

Our CMP suggests Martin and Jane spend down by purchasing a Medicaid Compliant Annuity for $98,000. This won’t violate any Medicaid rules, it will immediately make Martin asset eligible and it will make the most out of the couple’s savings by providing Jane with income.

In short, annuities works like this: You purchase an annuity with a lump sum of cash, and the company you purchased it from (usually an insurance company) pays you back that total over predetermined length of time with monthly payments. In this case, Martin and Jane purchased an annuity worth $98,000 that will pay Jane back over the course of three years, which means she is going to get $2,722.22/month for the next three years.

Not all annuities are Medicaid Compliant Annuities, which need to follow multiple rules in order to meet Medicaid standards, including being immediate, fixed and irrevocable. Fortunately for Jane, she didn’t have to worry about buying the wrong kind of annuity because she had a CMP by her side while she made the transaction. 

$98,000 Preserved

With the help of a CMP from Eldercare Resource Planning, Martin and Jane successfully reduced their countable assets by utilizing the Community Spouse Resource Allowance and purchasing the Medicaid Compliant Annuity. That made Martin asset eligible, and he was approved for Medicaid after the CMP helped the couple complete and submit their application. The $2,722.22/month that Jane receives from the annuity is a tremendous help as she adjusts to living on her own, and the couple can feel great about making the most of their savings.

In fact, with the help of Eldercare Resource Planning, Martin qualified for Medicaid and the couple kept or used all of their resources for themselves.

• Jane has $100,000 in savings thanks to the Community Spouse Resource Allowance, an extra $2,722.22/month in income thanks to spending down on a Medicaid Compliant Annuity, and she can still live in her home.

• Martin has all of the $10,500/month in nursing home expenses covered by Medicaid, and he has peace of mind knowing that Jane is living comfortably and their life savings was put to good use.

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