Merritt Personal Lines Manual: Medicaid
Medicaid is a jointly-funded cooperative venture between the Federal and state governments to assist states in the provision of adequate medical care to eligible needy persons. Medicaid is the largest program providing medical and health-related services to America's poorest people. Within broad national guidelines which the Federal government provides, each of the states:
- establishes its own eligibility standards;
- determines the type, amount, duration and scope of services;
- sets the rate of payment for services; and
- administers its own program.
Since the program is designed and administered at the state level, the program varies considerably by state.
If insurance companies consider you uninsurable -- because of your age or a pre-existing condition -- you probably can obtain coverage for a state-sponsored health insurance program.
These programs should be used as a last resort, because they typically offer only limited benefits, are expensive and usually include a waiting period before your coverage kicks in. But at least they're there, if you need them.
Medicaid provides medical assistance to low-income families and individuals of all ages. The program works well for seniors who have run through most of their assets. In fact, The Health Care Finance Administration reports that about half of all Medicaid spending goes to people who had financial resources when they entered a nursing home, but reached the poverty level while they were there.
A third of the $55-billion-a-year budget for Medicaid goes to those over 65, primarily to support them in nursing homes.
Medicaid offers a minimum set of services including hospital, physician and nursing home services. Additionally, state agencies have the option of covering an additional 31 services including prescription drugs, hospice care and personal care services.
Medicaid is the largest insurer of long-term care (LTC) in the United States -- covering the bulk of what most people would consider the middle class. It covers 68 percent of nursing home residents and over 50 percent of nursing home costs.
In 1995, Medicaid expenditures for healthcare amounted to $152 billion. States paid $66 billion (43 percent) and the Feds paid $86 billion (57 percent).
Using up a lifetime of assets is a frightening scenario for an older person on his or her own. But what if your spouse is still living at home and you must move into a nursing home? Will you have to sell the house to cover you nursing home costs? Where will your spouse live?
At one time, Medicaid rules did require you to liquidate virtually all of your assets -- including cash, investments (such as stocks and bonds), bank accounts, real estate and even some forms of cash-value life insurance -- to qualify for coverage. Fortunately, the federal government modified the requirements in 1993 to allow surviving spouses and disabled children to retain more of the family's assets.
Now, if you are married and you enter a nursing home while your spouse remains in your house, the at-home spouse is permitted to keep the following:
- one home;
- one care;
- the greater of one-half of the couple's assets or $75,740; and
- up to $1,919 in monthly income.
These amounts are indexed annually for inflation and are significantly lower for unmarried seniors. However, once neither spouse is living in or likely to return to the home and the house is sold, Medicaid may demand reimbursement for expenses associated with prior nursing home services.
An entire "Medicaid Planning" specialty has emerged in the estate planning field to help people avoid running through their life savings before qualifying for Medicaid. Some people are even tempted to give away assets so that they can qualify for Medicaid and still pass something along to their heirs. However, the government frowns on this: Federal provisions enacted in 1996 set criminal penalties for transferring assets for the sole purpose of qualifying for Medicaid. The penalties include fines of up to $25,000 and imprisonment for up to five years.
