Spending Down to Medicaid Doesn’t Have to Impoverish Both Spouses

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One of the biggest worries of a married couple where one spouse needs to go into a

nursing home is that the spouse who is still at home will become impoverished in order

to pay their partner’s bills.

While it is true that the nursing home spouse may not have more than $2,000 in countable

 assets in order to receive Medicaid benefits, federal law permits the so-called “Community

 Spouse” to retain up to $115,920 in countable assets (cash, stocks, bonds, real estate in addition to the home, etc.). (Discover which Assets You Can Have to Still Qualify for Medicaid.)

In most states the Community Spouse may only protect 50 percent of the total countable

 assets of both spouses, up to $115,920. In other words, all countable assets—no matter

 whether titled in the husband’s name, wife’s name, or jointly—are totaled up and then

 divided by two.

The Community Spouse is then permitted to keep one-half of the total, up to $115,920.

The other half—minus the $2,000 exemption allowed the nursing home spouse—

must be “spent down” or otherwise disposed of, or converted to something that is non-countable.

The ’50 percent rule’in action

For example, consider a couple with a house, car, personal property in and around the house,

jewelry, cash in the bank, and maybe an IRA or 401(k).

First of all, the house will be exempt no matter its value, as long as the Community Spouse

 is living there. One car of any value is also exempt, as is all personal property and jewelry.

 However, the cash and retirement accounts are countable (although there are a few states

 

 that exempt an individual’s retirement accounts once they are paying out the minimum amount required under federal tax laws). If that cash and the retirement assets total, say, $200,000, then the

 

 Community Spouse can protect only $100,000 (50 percent). If it totaled $300,000, though,

 the Community Spouse can protect the full $115,920, even though that is less than 50 percent

 of $300,000.

Exceptions to the rule

For couples who have very few assets, the “50 percent rule” will allow the Community

 Spouse to protect the first $23,184, even if that’s more than 50 percent of the couple’s

 total assets.

Some states do not follow the above “50 percent rule.” These states simply allow the

Community Spouse to retain the first $115,920, even if that is more than half of the

 total assets of the couple.

Currently, these states are AK, CA, CO, FL, GA, HI, IL, LA, ME, MA, MI, VT,

 and WY (SC reduces the maximum to $66,480).

Once the protected amount is determined, the real work begins: how can you protect

 the extra assets so they are not merely spent down on the monthly nursing home bill?

This is what is known today as “Medicaid planning,” and it can get quite complicated.

 

There are many options to protect the excess assets, such as investing in exempt real estate

, purchasing a “Medicaid annuity,” using Medicaid's "Cash and Counseling" program to hire

 a family member for caregiver services, transferring money to a disabled child, using specialized trusts, etc.

Be aware that spending down to Medicaid is tricky. You cannot simply give excess assets to a

 child (unless they are considered disabled under federal law) or another family member without incurring a penalty period of disqualification from Medicaid coverage: the greater the gift, the longer

the penalty period. The exact calculation varies from state to state, but all gifts made within

 the five-year period before the date you apply for Medicaid will count against you.

Medicaid to finance Nursing home Care

An aging population doesn’t necessarily mean an increase in the number of Medicaid beneficiaries, especially for those using the federal program to fund nursing home stays, according to a recent chart from AARP.
Although nursing homes are one of the biggest drivers of Medicaid costs among the older population, notes AARP, use in these care settings has plummeted since 1995 to a figure that currently sits at barely more than 1 million

Today, most seniors rely on Social Security for 2/3s of their income or more. Cutting Social Security will keep many of us from paying for necessities as we age. These cuts are an even bigger threat to the disabled and veterans, who would face the COLA cut for 30, 40 years or more. For example, a severely disabled, unmarried veteran who claims Veterans Disability Compensation benefits today at age 30 would experience a cumulative cut of $60,121 by age 65 and $144,189 by age 85

By ABBY GOODNOUGH NY Times

The way Mitt Romney and Representative Paul D. Ryan frame it, the debate over social programs that has become a dominant theme of the presidential race is all about the future of Medicare, the government health insurance program for retirees. A protest against Medicaid cuts in San Francisco last year.ated Political Memo: Campaigns Play Loose With Truth in a Fact-Check Age (September 1, 2012) Ryan’s Budget Proposal Is Pitting G.O.P. Troops Against Top of the Ticket (September 1, 2012) Sharp Cuts in Dental Coverage for Adults on Medicaid (August 29, 2012) Times Topic: Medicaid The Election 2012 App A one-stop destination for the latest political news — from The Times and other top sources. Plus opinion, polls, campaign data and video. Download for iPhone Download for Android . But the outcome of the election will probably have a more immediate and profound effect on Medicaid, the joint state-federal program that provides health care to poor and disabled people. Few other issues present a starker difference between the Republican and Democratic tickets. President Obama, through the health care law that was a centerpiece of his domestic agenda, seeks a vast expansion of Medicaid, which currently covers more than 60 million Americans — compared with 50 million in Medicare — and costs the states and the federal government more than $400 billion a year. To fulfill the law’s goal of near-universal coverage, the president envisions adding as many as 17 million people to the rolls by allowing everyone with incomes up to 133 percent of the poverty level to enroll, including many childless adults. While the Supreme Court ruled in June that states could opt out of the expansion, Medicaid — and federal spending on it — is still likely to grow significantly if Mr. Obama wins a second term. Mr. Romney and Mr. Ryan would take Medicaid in the opposite direction. They would push for the repeal of the health care law and replace the current Medicaid program with block grants, giving each state a lump sum and letting them decide eligibility and benefits. (Currently, the federal government sets minimum requirements, like covering all children under the poverty level, which some states surpass. It also provides unlimited matching funds.) The grants would grow at the rate of inflation, with adjustments for population growth. Critics say annual increases would not keep up with rising health care costs. In pure dollar terms, the difference comes down to this: As chairman of the House Budget Committee, Mr. Ryan has proposed cutting federal spending on Medicaid by $810 billion over 10 years, largely from repealing the health care law. Mr. Obama’s expansion plan, by contrast, would cost an additional $642 billion over the same period, according to the most recent estimate from the Congressional Budget Office. For all the allegations and counterallegations about Medicare on the campaign trail, hardly any words have been uttered about Medicaid, probably because the elderly are considered a more engaged and influential voting group than the poor. But what happens to Medicaid will have a significant effect on many middle-class older people who rely on the program for nursing home care. More than half of current Medicaid spending is on the elderly and the disabled. About half of Medicaid recipients are children; an additional 25 percent are elderly or disabled people. The sharply different visions of the two campaigns come as many states, squeezed by soaring Medicaid costs and plunging revenues, are complaining bitterly about the fact that the program is swallowing an ever-larger chunk of their budgets. States have generally not been allowed to cut Medicaid eligibility since the passage of the health care law in 2010, but many have slashed optional benefits and payments to doctors and hospitals instead. Even states that support the planned Medicaid expansion, like California and Massachusetts, have made such cuts, saying that budget crises have given them no choice. Proponents of the Republican plan for Medicaid say block grants would be the best way to curb Medicaid spending and make the program more efficient. “You give me a block grant, let me do whatever I want, and I will cover the right people,” Gov. Rick Scott of Florida, a Republican, said at a meeting of the National Governors Association last year. But critics of the block grant plan say it would inevitably shrink the medical safety net for the poorest Americans. The Urban Institute, a nonpartisan research group, estimated that under a similar House budget proposal last year, 14 million to 27 million people could lose Medicaid coverage by 2021. Republicans have proposed block grants in various forms over the years, going back to the Reagan administration. One such effort provoked a political uproar in 1995, when Congress passed legislation to give each state a fixed amount of federal money for Medicaid. President Bill Clinton vetoed the legislation, saying it would make “devastating cuts” and hurt millions of poor people. Joshua Archambault, director of health care policy at the Pioneer Institute, a conservative research group in Boston, said that while block grants were “one possible tool” to curb spending and root out waste in Medicaid, many questions about the Republican proposal remain unanswered. One such question, he and others said, is how the federal government would determine the amount of each state’s block grant. “Congressman Ryan’s plan moves the conversation in the right direction to correct the perverse incentives that have put Medicaid on an unsustainable path,” Mr. Archambault said in an e-mail. “But the devil’s in the details.” Robert Pear contributed reporting. A version of this article appeared in print on September 1, 2012, on page A12 of the New York edition with the headline: 2 Campaigns Differ Sharply on Medicaid, Seeking Vast Growth or Vast Cuts. . Facebook Twitter Google+ E-mail Share Get Free E-mail Alerts on These Topics Medicaid Federal Budget (US) Health Insurance and Managed Care Presidential Election of 2012 Ads by Google what's this? Conflict Mediator Degree ACU Certificate or Master's Degree! Top Conflict Mediation Program. ConflictRes.ACU.Edu

The Supreme Court’s decision means that the Medicaid expansion is now an option for states, not a requirement. If states do not participate, experts have speculated that it could create a subset of people who earn too much to qualify for Medicaid — the exact threshold varies — but not enough to qualify for the tax credits that would help them pay for insurance. States will not have to pick up the added costs of the Medicaid expansion until 2016. After that, the federal government will gradually reduce its contribution until it reaches 90 percent of the costs by 2020.      

Cuts and savings of nearly $600 million, half of it from MassHealth HOUSE BUDGET

Our Budget Monitor shows how the HWM budget affects each major area of state government, from health care and education to public safety and the environment--including information on tax revenues. It also compares the HWM budget with the Governor's across these same areas.
Facing a budget gap of roughly $1.3 billion, the House Ways and Means Committee proposes a combination of one-time revenues and spending reductions, including:
Cuts and savings of nearly $600 million, half of it from MassHealth
Temporary revenues worth $685 million--$400 million of which is drawn from the "rainy day" fund.
For further details and analysis, read our BUDGET MONITOR

Medicaid expansion

The Medicaid expansion is part of the broader case brought by opponents of Democrats’ 2010 health-care law that the Supreme Court will begin hearing March 26. To reduce the number of uninsured Americans, the law calls for adding 17 million or more additional people to the Medicaid program in the next decade.

While the case before the court centers on the law’s requirement that most Americans carry insurance or pay a fee, plaintiffs also are arguing that the Medicaid expansion also violates the Constitution. The plaintiffs, who include attorneys general and governors from 26 states, contend the federal government is forcing them to take on expensive new responsibilities that they can’t afford.

Supporters of the health-care law point out that the federal government will pick up 100% of the costs of the Medicaid expansion for the first few years after 2014, and 90% after that. They also say states are free to leave the program if they choose, and that states can’t take federal money for Medicaid and ignore rules for how it can be spent.

Opponents of the law say that, with increasing pressure on state budgets, of which Medicaid is usually the largest share, even that 10% contribution could be too much to bear. They say states can’t truly exit from the program entirely because they have come to depend on it.