Medicaid Benefits for Long Term Care Nursing Home Costs

What is the Medicaid look-back period and the penalty period?

In Florida, Medicaid eligibility for long-term nursing home care is based on the assets and income of the Medicaid applicant, as well as the assets and income of the Medicaid applicant’s spouse. If the Medicaid applicant or spouse has excess assets, many legal steps may be available to allow the applicant to become Medicaid-eligible without spending all funds on the nursing home!

Call our Florida elder law attorneys for a consultation. With our help, you may be able to preserve assets and save thousands of your hard-earned dollars.

CAUTION: Medicaid eligibility criteria for nursing home long-term care are complex and change frequently. An improperly filed application may result in denial of benefits. Consult with The Karp Law Firm. Our Florida elder law attorneys are knowledgeable in Medicaid law and the legal implications of transfers.

Here’s a brief summary of Medicaid eligibility requirements for long-term nursing home care.

CATEGORICAL REQUIREMENTS

The Medicaid applicant must be a citizen or resident alien of the U.S., and must have medical needs requiring nursing home placement, or must be physically or cognitively impaired to the degree that nursing home placement is required.

INCOME REQUIREMENTS

Medicaid Applicant:

The Medicaid applicant’s gross monthly income cannot exceed $2,901 (effective Jan. 1, 2025). If the applicant’s income exceeds that level, a qualified income trust, composed solely of the applicant’s income, may be established in order to qualify for eligibility.

Medicaid Applicant’s Well Spouse (“Community Spouse”):

There is no limit on the well spouse’s gross monthly income. If the well spouse’s gross monthly income is below $2,555.00 (effective July 1, 2024), a portion of the applicant’s income may be diverted to the well spouse. This portion is known as the Minimum Monthly Maintenance Needs Allowance. Under certain circumstances, this diversion can bring the spouse’s income higher than the Monthly Maintenance Needs Allowance.

ASSET REQUIREMENTS

Medicaid Applicant:

The Medicaid applicant cannot own countable assets in excess of $2,000.00, in addition to exempt and countable assets.

Medicaid Applicant’s Well Spouse (“Community Spouse”):

The Medicaid applicant’s well spouse may retain up to $157,920 (effective Jan. 1, 2025) in assets plus exempt, non-available, and income-producing assets.

TYPES OF ASSETS

Countable Assets:

Medicaid considers countable assets to be available to the applicant and/or spouse, and therefore countable assets are considered for Medicaid eligibility purposes.

Non-Available Assets:

These are assets that the applicant or community spouse cannot access or cannot readily liquidate. They are not counted for determining Medicaid eligibility. An asset may also be considered non-available if it produces income but cannot be readily liquidated. An example would be income-producing rental property. The Florida Medicaid recovery lien will attach to a non-available asset at the death of the beneficiary, if the asset is in the beneficiary’s name only or is subject to probate.

Exempt Assets:

Exempt assets are not counted in determining Medicaid eligibility. Medicaid considers the following to be exempt assets when assessing an individual’s application for long-term care Medicaid benefits:

Homestead: Medicaid considers the homestead to be an exempt asset; however, applicants with equity interest in their home in excess of $731,000 (effective January 1, 2025) are not eligible for long-term care benefits, even though those applicants may qualify for Medicaid benefits other than nursing facility or other long-term care services.

Home equity is calculated using the current market value of the home, minus any debt. The current market value is the amount for which it can reasonably be expected to sell on the open market in its geographic area. If a home is held in any form of shared ownership, Medicaid considers only the fractional interest of the applicant requesting long-term care Medicaid benefits.

Exceptions to Home Equity Policy: Medicaid’s home equity policy does not apply if any of the following are residing in the applicant’s home: The Medicaid applicant’s spouse, the Medicaid applicant’s child under age 21, the Medicaid applicant’s blind or disabled child of any age.

The home equity policy may be waived by Medicaid when denial of long-term care eligibility would result in demonstrated hardship to the individual.

Motor Vehicle: Medicaid considers one motor vehicle to be an exempt asset, regardless of the vehicle’s age or type. Medicaid also considers exempt a second vehicle over 7 years old, except for certain luxury and antique cars or customized vehicles (except for use by person with a physical disability.)

Personal Property: Personal property is considered an exempt asset for Medicaid eligibility purposes, except for certain valuable art/jewelry.

Life Insurance:

Life Insurance Owned by the Medicaid Applicant: When assessing an applicant’s qualifications to receive Medicaid benefits for long-term nursing care, Medicaid considers exempt the total combined face value of all life insurance policies owned by the applicant, up to $2,500.00. Term policies are exempt.

Life Insurance Owned by the Well Spouse: When assessing an applicant’s qualifications to receive Medicaid benefits for long-term nursing care, Medicaid considers exempt the total combined face value of all life insurance policies owned by the well spouse, up to $2,500.00. Term policies are exempt.

Burial Plans:

For the Medicaid Applicant: Plans up to $2,500.00 or an irrevocable plan in any amount.

For the Well Spouse: Plans up to $2,500.00 or an irrevocable plan in any amount.

IRAs, 401ks, 403bs

These are qualified plans and are considered “hybrids” under Medicaid laws because they can be treated as either assets or income. Medicaid considers the following to be exempt assets when assessing an individual’s application for long-term care Medicaid benefits.

Income: Generally, if the applicant or spouse draws from the qualified plan on a monthly basis in an amortized fashion using the Social Security Administration tables for longevity rather than the IRS minimum withdrawal tables, the plans can be treated as income.

Assets: If the qualified plan is not being drawn from as income, it is considered an asset.

MEDICAID LOOK-BACK & PENALTY PERIODS FOR TRANSFERS

Under certain circumstances, the Medicaid applicant and/or spouse may transfer assets to others to help establish Medicaid eligibility. Below are current guidelines Medicaid uses when examining transfers and determining if a penalty period is applied.

Interspousal Transfers

Transfers between a husband and wife are exempt. However, under certain circumstances, the Medicaid applicant and/or spouse may transfer assets to others to help establish Medicaid eligibility.

Transfers To Others

An uncompensated transfer is one for which nothing had been received in return. For example, if an applicant or applicant’s spouse gives $10,000 to a child. An under-compensated transfer is one in which less than fair market value is received in return for the gift. For example, “selling” your house to a grandchild for $1.

Medicaid carefully examines uncompensated and under-compensated transfers to others. Medicaid may impose a penalty period as a result of such transfers. During the penalty period, the applicant will not be eligible to receive benefits.

Look-Back Period

All transfers made by the applicant or the applicant’s spouse, whether from an individual or to an individual, or from a trust or to a trust, have a five year look-back period.

The look-back period and the penalty period resulting from transfers begins on the later of the following dates:

The date the individual would otherwise meet all other eligibility requirements, except for the transfer.
The first day of the month in which the individual transferred the asset.
The first day following the end of an existing penalty period.

Penalty Period

All uncompensated and under-compensated transfers, including those within the applicable look-back period, are aggregated to determine the penalty period, which begins to run when the applicant is otherwise eligible for Medicaid nursing home benefits. The total value of these transfers is divided by a penalty divisor, which is the average monthly nursing home cost. As of July 1, 2024, the penalty divisor is $10,438.00 (this figure may be revised annually).

Example of How Penalty Period Is Calculated

Diane transferred $10,438 to her son in December 2023 and $10,438 to her daughter in January 2024. She then applies for Medicaid in September 2025. She meets all eligibility requirements except for the uncompensated transfers she has made. The penalty period begins to run at that point. Medicaid would deem her ineligible for benefits for the next 2 months (sum of $10,438 and $10,438, divided by $10,438 per month exemption = 2 months). She will be eligible for Medicaid benefits, assuming she still meets all other criteria, in November 2025. She must pay out-of-pocket for nursing home expense out of pocket until that date.

In the event that an applicant and his other family face a situation where gifting is going to create a delay in Medicaid eligibility, or if Medicaid has been denied and the delay of eligibility has been determined by the Department of Children and Family Services, legal steps may be taken to eliminate or reduce the period of ineligibility. Contact our Florida elder law attorneys.

Annuities

If the annuity was purchased on or after November 1, 2007, or if other transactions that change the course of an annuity payment or treatment of income or principal have been made on or after November 1, 2007, Florida law requires that the State be named as the irrevocable remainder beneficiary either at the time of Medicaid benefits approval, or upon re-certification.

Also, the State must be named as a remainder beneficiary in the first position for the total amount of Medicaid assistance paid by the State on the applicant’s behalf. If the applicant has a spouse, minor child or disabled child, the State must be named as the remainder beneficiary either in the first position, or the second position after the spouse, minor child or disabled child.

A final word: Annuities have become extremely complicated with regard to Medicaid eligibility. Before you purchase an annuity, talk with our elder law attorneys who will review your situation and advise you about the best course of action.

Contact our attorneys today.

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