Tests for Medicaid Eligibility
There are six principal tests for Virginia Medicaid eligibility for long-term care assistance:
1. Virginia residency and citizenship must exist at the time of application without any specific time requirement.
2. The applicant must be a member of a covered group (aged, blind or disabled ("ABD") or medically needy.
3. The applicant must meet functional and medical criteria, also known as the activities of daily living ("ADLs").
- Walking and standing by oneself
- Feeding oneself
- Dressing oneself
- Bathing oneself
- Behavior pattern and orientation
- Medication administration
12 Va. Admin. Code § 30-60-303.
To be eligible for Medicaid nursing home care, an individual must require assistance with at least two of the ADLs. For individuals residing outside a nursing home, a representative from the Department of Social Services actually visits the individual to determine whether this requirement is met. For individuals residing in a nursing home for a period exceeding 30 days, no screening is required. Medicaid Manual § M1420.400.
Individuals over age 65 are presumed to be disabled upon being institutionalized for a period of 30 days or longer. Medicaid Manual § 1460.530. However, individuals under age 65 are not considered presumptively disabled when continuously institutionalized for a period of thirty days or longer. Such individuals, if not otherwise deemed disabled, typically by the Social Security Administration, by receiving either Social Security Disability Income ("SSDI") or Supplemental Security Income ("SSI"), must receive a disability determination by the Department of Social Services before they can be eligible for Medicaid long-term care benefits.
4. The applicant must meet the income eligibility standards.
- Medicaid regulations require that the applicant have income less than three times the maximum SSI benefit to be categorically eligible. This number changes annually, and is currently set at $1,809 per month. Some states require individuals over the income threshold to establish a trust that is commonly referred to as a Miller Trust. Such a trust requires an additional layer of complication for applicants with more than $1,809. In Virginia, individuals with more than three times the maximum SSI benefit can be eligible as long as the medical expenses exceed the income on a monthly basis as Medically Needy recipients. This window in our Medicaid regulations provide an income cap that is effectively equal to the monthly cost of care, such that almost any applicant with an income less than the cost of care can be eligible for Medicaid long-term care benefits. The definitions of income, along with the classifications of categorically eligible individuals as well as medically needed individuals are outlined in Medicaid Manual § M1460.201B.
- Medicaid generally pays much less that the private pay rate at most facilities. The Medicaid reimbursement rate is typically 50-75% of the private pay rate and varies from each facility. Medicaid Manual § M1460.100B.9. Each Medicaid-participating nursing home has a unique reimbursement rate. For facilities in eastern Virginia, a typical private pay rate is $185 per day ($5,700 per month) and the Medicaid rate is typically $129 per day ($4,000 per month). This consideration is relevant when the applicant has income that falls between the Medicaid reimbursement rate and the private pay rate. For these individuals, especially those that have other medical expenses in addition to the nursing home room and board rate, they could technically not be eligible for Medicaid benefits in months where the applicants income is more than the Medicaid reimbursement rate. For example, if an applicant has $3,400 per month income and the Medicaid reimbursement rate is $4,000 per month, it is possible that the individual would not be eligible for benefits. However, in lieu of being Medicaid eligible, the applicant pays to the nursing home the Medicaid reimbursement rate. The particular situation to determine eligibility and patient pay for high-income recipients is addressed in Medicaid Manual § M1460.410. The practical result of this wrinkle in disparate reimbursement rates is more work for the Department of Social Services and the applicant to prove ongoing medical expenses for applicants with relatively high monthly income. A beginning point is to determine the clients income versus the private pay rate in the nursing where the applicant is likely to stay on a long-term basis.
- When performing the income vs. private pay rate analysis, it is important to understand how the applicants monthly income relates to Medicaid eligibility. When an applicant is deemed eligible for Medicaid long-term care services, they can only keep $30 per month income, as well as maintain supplemental health insurance policies. Medicaid Manual § M1470.200. Therefore, a thorough analysis of the income criteria takes the final patient pay into consideration. An individual seeking Medicaid long-term care eligibility needs to understand that, if the application is successful, what the total out-of-pocket cost will be. For example, an individual with $4,500 monthly income may receive such a small benefit from Medicaid eligibility that the effort to obtain Medicaid eligibility may not be worth the trouble. For married individuals, the patient pay and community spouse income protections are discussed in further detail later in this presentation.
5. Resource eligibility standards. The resource criteria is usually the criteria that is the most complicated for applicants. The resource limit is strict: the limit is $2,000 in countable resources, as measured at the first day of the month of application and the first of each following month. See Medicaid Manual § 1460. Medicaid eligibility cannot be obtained until the institutionalized individual can prove that the Medicaid financial criteria is met. Financial criteria is determined by reviewing all countable resources, including substantiation for every assertion.
a. Non-countable/Exempt Assets. Many assets are non-countable for Medicaid purposes, including the following:
(1) personal possessions, such as clothing, furniture, and jewelry,
(2) one motor vehicle without regard to value,
(3) the applicants principal residence under certain situations,
(4) property used in a trade or business,
(5) certain prepaid burial arrangements,
(6) term life insurance policies,
(7) a life estate in real property (subject to good faith efforts to sell),
(8) Trusts created pursuant to 42 U.S.C. 1396p.d(4)(a) and d(4)(c) , and
(9) assets that are considered inaccessible for one reason or another Medicaid Manual § M1130 et seq.
b. Generally, all assets that are not listed above are countable resources for Medicaid eligibility purposes. The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in "countable" assets in his or her name. The list of countable resources is vast, and even includes jointly-held property, with jointly-titled bank accounts presumptively all owned by the institutionalized person, cash values of life insurance policies when the cash value exceeds $1,500, IRAs, annuities, 401(k)s, etc. Any asset that is not listed as non-countable must be included in the Medicaid estate.
Gifting as a Planning Strategy
Gifts Made on or After February 8, 2006. Such transfers are specifically governed by DRA 2005, a primary purpose of which is to make asset transfers more penalizing for Medicaid eligibility purposes. The relevant parts of DRA 2005 relating to the gift penalty lookback period and when the penalty period begins to run.
1. Lookback period. For gifts made on or after February 8, 2006, the lookback period is 60 months, with the baseline date (the point at which the gift is evaluated) being the date at which the Medicaid applicant is institutionalized and applying for Medicaid. Medicaid Manual § M1450.003I. This means that, for an individual now institutionalized and applying for Medicaid, we look back five years to determine whether any uncompensated transfers have been made.
a. Effect of lengthened lookback period. Under the new rules affecting transfers occurring on or after February 8, 2006, we have what amounts to a five-year period that begins on the date of the gift, any and all gifts can preclude Medicaid eligibility, when the gift penalty period are evaluated as described below. For example, a gift of $300,000 on February 9, 2006 will be relevant and evaluated until February 8, 2011. The prudent advisor will definitely recommend that, barring some planning measures implemented in section E of this presentation, that no Medicaid application be filed prior to February 9, 2011.
2. Beginning of Penalty Period. The penalty period does not begin to run until the later of the first day of the month during or after which assets have been transferred for less than fair market value; or the date on which the individual is eligible for Medicaid and would otherwise be receiving institutional level of care but for the application of the penalty period; andwhich does not occur in any period of ineligibility imposed for any reason. Medicaid Manual § M1450.630B. Due to the dramatic change from prior law, the following illustrates each of this relevant penalty period changes for all transfers occurring on or after February 8, 2006.
a. Effect of Delayed Penalty Period Start Date. This is definitely the most complicated part of the new penalty period determination. Under the new law, again for uncompensated transfers occurring on or after February 8, 2006, the applicant must be otherwise be eligible for Medicaid but for the application of the penalty period. To break this down into simple terms, for the Medicaid penalty to begin to run (using the same formula for gifts occurring prior to February 8, 2006), the applicant must have less than $2,000 in total countable resources and the applicant must be able to prove that they meet the income and medical criteria for Medicaid eligibility. This premise can only be affirmatively proven by the filing of a Medicaid application and get approved for Medicaid benefits, with the benefits being delayed until the penalty period runs. This is a common practice with DSS, based on historical practices. In the past, if a Medicaid applicant was otherwise eligible for Medicaid, but for the gift, the Medicaid application would be approved for benefits, with the benefits to begin at the date in the future that corresponds with the end of the gift penalty period. The general consensus among elder law attorneys is that this practice will continue under the new law. Therefore, if the Medicaid applicant wants the gift penalty to begin running, they should file a Medicaid application and be able to prove that eligibility exists, but for the current penalty. Practitioners should note that this is a substantial deviation from prior rules.
To illustrate this rule, lets assume that the Medicaid applicant made a gift of $50,000 on February 9, 2006 and is applying for Medicaid on November 1, 2006, and is otherwise eligible, as evidenced by having less than $2,000 in countable resources, is institutionalized and has income less than the cost of nursing home care. Under the new law, the gift penalty would begin to run on November 1, 2006.
3. Net effect of new lookback period and penalty start date. The new rules were targeted at, and seem to accomplish the objective of, substantially limiting the ability of prospective Medicaid applicants to make gifts and obtain Medicaid eligibility. The effective result of this new provision to prevent a Medicaid applicant from applying for Medicaid within 5 years of making a gift. Alternatively, if the applicant wishes to apply for Medicaid within five years of making a gift, the apparent objective of making a prior gift to accelerate Medicaid eligibility fails.