• November 14, 2022
  • Posted by General Electric Credit Union
  • 5 read

Want to Cover Long-Term Care with Medicaid? Here’s How to “Spend Down” to Meet Requirements

Many Americans enroll in Medicaid to cover the cost of long-term care insurance at an “approved” skilled care facility. In fact, over 75% of Ohio nursing home residents are on a Medicaid program.1 But not everyone is eligible for this coverage. Not only do nursing home placements have to be medically justified, but individuals must also pass an income and assets test.  

For the latter, an individual must have no more $2,000 in “countable resources,”2 which is anything that can be converted to cash to pay for expenses. Examples include checking and savings account balances, retirement accounts, life insurance policies, and mutual funds. Assets that hold value but do not count toward the resource limit, such as the applicant’s primary home, are referred to as non-countable assets. Outside of assets, an applicant’s income must also be less than his/her monthly nursing home bill. 

What happens if an applicant doesn’t meet these financial requirements? “Spending down” may be a viable option to qualify for coverage. This is the process of reducing the total value of assets. While using the value of assets to pay for medical expenses is one way to achieve this, gifts (also referred to as “asset transfers”) are another option that is permissible in some cases under Medicaid law. 

Treatment of gifts by Medicaid

Any asset transferred within 5 years before filing a Medicaid application must be reported to the Medicaid caseworker. This can be something as simple as a charity donation or a graduation gift. No matter the occasion, Medicaid will presume the asset was transferred for the purpose of qualifying for benefits. The applicant does have the right to try to prove the transfer was for non-Medicaid reasons, but this is difficult.
Luckily, certain transfers are permissible and will not be penalized. This includes: 

  • The transfer of a home to a spouse or minor dependent child.
  • The transfer of real estate to a sibling with an equity interest who resided in the home for one year immediately preceding institutionalization.
  • The transfer of a home to a child who resided in the home for two years immediately preceding institutionalization where the child provided care which kept the parent out of the nursing home. This exception requires supporting documentation.
  • The transfer of any resource to or for the benefit of a spouse or a blind or disabled child.
  • Cases of undue hardship.

All of the above can be used for the purpose of “spending down.” Other transfers should be reviewed by a Medicaid attorney before applying for benefits to ensure they’re in line with requirements. By confirming in advance, filers will have a better understanding of their coverage options and can strategize alternatives if they do not qualify for Medicaid.  

Medicaid is funded jointly by federal and state governments. It is administered in Ohio by County Medicaid offices and in Kentucky by the Cabinet for Health and Family Services. The eligibility rules and procedures are constantly being revised. When faced with the need for long-term care, look to a qualified Medicaid planner. At General Electric Credit Union (GECU), members can turn to Investment Services, available through CUSO Financial Services, L.P. (CFS),3 to better understand their health care options in retirement. Visit us online to learn more about setting up a no-cost, no-obligation consultation.

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