While there is a lot of information available online concerning federal Medicaid benefits for long-term care, distinguishing between what is factual and what is fictional can be difficult at best. This can make it especially difficult when Medicaid planning for your loved one.

While Medicaid is a federal government benefit, each state in the U.S. decides how the federal funds will be disbursed and how each prospective recipient will qualify.

The following list will help to dispel some of the common myths surrounding Medicaid benefits and inform you of certain Medicaid rules that can help you along your caregiving journey.

Myth 1: Medicaid, Medicare Health Insurance, & Private Health Care Insurance Will Cover The Care Costs Of Long-Term Care

Medicaid and Medicare Health Insurance are not the same, but often get confused with one another.

• Medicare only pays for limited health insurance coverage in a nursing home and typically after only three overnight stays.

  • The care must be “skilled care” that licensed nurses and physicians can only provide.

  • Medicare Health Insurance will only pay the full care costs for the first 20 days.

  • Days 21 through 100 of skilled care is an 80/20 split between Medicare health insurance and supplemental health insurance (if the patient has it).

  • In many cases, Medicare health insurance pays nothing because only custodial care that can be provided by non-skilled caregivers at home or in a facility is required. This is where Medicaid Long-Term Care Coverage may be required.
    
    

Myth 2:  If My Spouse Needs Long-Term Care, I Have to Lose Everything Before I Can Receive Enrollment Eligibility for the Medicaid Program

When a couple separates because one must enter a nursing home to prevent the impoverishment of the community spouse, (otherwise known as the spouse not entering the nursing home) the community spouse may keep a share of the parties’ assets.

• The protected resource allowance (PRA), is ½ of the total countable resources that the couple (and each member of the couple) owns as of the first day of the month in which the ill spouse is institutionalized.

  • This is referred to as the “snapshot date” which is the number of assets that the Medicaid applicant and spouse, if applicable, have on the first day of the month that the individual medically requires assistance. 

• The PRA is subject to a minimum and a maximum that can change annually; however the currently protected resource allowance is currently set at a minimum of $26,076 for all states in the U.S. except Alaska and Hawaii and the maximum is $130,380 for all states in the U.S, except Alaska and Hawaii, for 2022.

• Exclusions include: 

  • The home (within equity limits), most expensive automobile, most tangible personal property, and many burial arrangements are excluded from countable resources.
    
    

Myth 3: I Could Go To Jail If I Give Away Assets To Qualify For Medicaid

In 1996 Congress made it a crime to purposely transfer assets to meet eligibility requirements for the Medicaid Program (Granny Goes to Jail Statute). In 1997, after following significant criticism, Congress changed the law to eliminate any criminal penalty for these financial transfers.

• Under the changed version, only persons who offer a fee counsel or assist in transferring assets when they transfer results in a period of ineligibility may be prosecuted. 

  • However, the Granny Goes To Jail Statute was ruled unconstitutional and unenforceable in a federal case in New York.

• Transferring or gifting assets will result in a period of ineligibility for Medicaid if done within 5 years of the application according to the Deficit Reduction Act 2005 (DRA).

  • There are several ways that a person entering a nursing home can lawfully transfer assets without Medicaid eligibility.
    
    

Myth 4: I Have to Be In A Nursing Home Before I Can Receive Long-Term Care Medicaid Benefits

When a person needs nursing home care but wishes to remain at home there is a type of care that can be delivered to the person in both a cost-effective and safe manner. Your loved one may qualify for the Virginia Community-Based Care Medicaid Waiver Program which permits the resident to remain in the home with assistance provided by community-based nurses

• More often than not, people tend to apply for the wrong type of Medicaid coverage because they do not know the difference between Community-Based Care and Long-Term Care in a nursing facility.
  
  

Myth 5: If My Spouse Qualifies For Medicaid Long-Term Care Services & Support, The State Will Take My Home Away After Their Death

It is true that many states have an aggressive estate recovery policy permitted under federal law. However, estate recovery is permitted against the estate of the beneficiary, not the spouse of the beneficiary.

• As long as assets are titled in the name of the community spouse, the state cannot take the asset to satisfy the institutionalized spouse’s claim.
  
  

Myth 6:  I Can Gift Money In $15,000 Increments & Qualify For Medicaid Long-Term Care Services And Support

This myth actually refers to the current gift tax exemption amount to not qualify for Medicaid and would result in a penalty.  If the gifts were made within the last five years, the applicant submits an application to Medicaid (DRA 2005).

• Medicaid requires that all transfers of assets made within the last five years before submitting the Medicaid application be reported.

• Regardless of whether the transfer is made to a person or a trust, an ineligibility period for Medicaid will be imposed.

• The ineligibility period will not begin to run until the time of the Medicaid application or when the person would otherwise have been eligible for Medicaid coverage, whichever is later.

• Occasionally an application will be submitted intentionally to have it denied in order to trigger the enrollee’s Medicaid cover penalty period.
  
  

Myth 7:  There Is No Medicaid Disqualification If I Sell My House To My Child for $1.00 As Long As I Am Considered To Be Low-Income

Many states use the tax-assessed value of the real estate to determine its value for Medicaid Long-Term Care Services and Support purposes. Selling the home for less than the city assessed value would result in an uncompensated value transfer and a period of ineligibility for Medicaid Services

• For example, if a home in Virginia was sold for $1.00, however, the tax assessed value was $250,000, the uncompensated value transfer would be $249,000 and would result in a penalty period of 38.77 months in Southern Virginia, and a penalty period of 27.56 months in Northern Virginia. 

  • The above penalty periods can vary from state to state based on the Divestment Penalty Divisors Established by the specific state Medicaid Manual.
    
    

Myth 8: I Can Transfer All Of My Assets To A Trust Or An Adult Child To Become Eligible For Medicaid

Due to DRA 2005, the look-back period on transfers is 5 years whether assets are transferred to an individual or to an Irrevocable Trust.

• The Irrevocable Trust cannot have any language stating the grantor or creator of the trust can receive any income or principal from the trust.

• Language for an Irrevocable Trust used for Estate Planning Purposes and Legally Compliant for Medicaid is very specific

• The Irrevocable Trust must be funded, meaning that assets must be retitled from the individual's name into the name of the trust.
  
  

Myth 9: Medicaid Health Coverage Only Provides Assistance To Low-Income Seniors

Medicaid can actually provide both health care coverage and medical services, dental care, home health, and long-term care to young adults, families, pregnant women, and children who have low-income and are also medically needy.

• Each state has a specific outlined health plan under Medicaid Services with a list of participating health care providers that may cover both inpatient, outpatient, behavioral health prescription drugs, and mental health services.

• There are specific children’s health insurance programs funded by the State Medicaid Program. In addition, there are also community-based services for both young adults with disabilities children with disabilities, families, and pregnant women
  
  

Myth 10: All Care Facilities Are Medicaid Providers That Accept & Provide Low-Cost Medicaid Long-Term Care

Unfortunately, many care facilities are not dually certified to accept Medicaid and are strictly private pay. This means that the resident would need to utilize their monthly income from supplemental security income (SSI) and any other monthly income from pensions and assets to cover the cost of healthcare services and custodial services.

• Your local Department of Health and Human Services (HHS) can provide you with a list of facilities that do accept Managed Care Medicaid Benefits.
  
  

Need Help Navigating  Medicaid For Your Loved One?

There are many Medicaid myths and misinformation surrounding eligibility. Adding to that confusion is the fact that Medicaid criteria can vary as there are both federal and individual state laws in place.

Even with the expansion of the Affordable Care Act, there are many individuals and families that still cannot afford health insurance coverage nor apply for federally-funded Medicaid Services. Many Medicaid applicants do not realize that the Department of Human Services cannot provide guidance as to how to specifically become eligible for Medicaid.

Medicaid can be an extremely effective source to cover long-term care medical expenses and it is imperative that the applicant or representative obtain credible and reliable advice and assistance for their care needs before they attempt to file. Qualified assistance can be obtained by an elder law attorney or geriatric case management firm that specializes in long-term care planning and assistance.

You can obtain qualified assistance by contacting www.careconnecthr.com, this geriatric case management firm assists nationally with all aspects of long-term care planning including Medicaid, or via NAELA, www.naela.org which is the National Academy of Elder Law Attorneys.

Obtaining qualified assistance will ensure that applications are not submitted in vain, and will help to avoid frustration, wasted time, and money for all involved parties.