Long-term care is challenging to navigate in the U.S. In-home-paid care and long-term care facilities are prohibitively expensive for most Americans, with the median annual cost of an assisted living facility in the United States coming in at $54,000, meaning that families need to do careful planning. Medicaid was created in 1965 to provide health coverage to people with significant medical needs but minimal assets and inadequate income to cover their medical expenses. Medicaid covers the cost of long-term care for low-income people who meet Medicaid eligibility, medical, and financial requirements.
When someone wants to apply for long-term care Medicaid, whether for services in their home, an assisted living facility, or a nursing home care, there is an asset (resource) limit. To be eligible for Medicaid, you cannot have assets above the limit. Medicaid's look-back period is designed to keep Medicaid applicants from giving away assets or selling them below fair market value just to meet Medicaid's asset limit.
A Medicaid applicant must have income and assets below a specific amount to be eligible. Suppose the applicant's income or assets exceed Medicaid's financial limits in their state. In that case, an applicant may become eligible by "spending down" income or assets during the look-back period to meet the threshold where they become eligible.
Of course, there are rules about how to legally spend down financial resources. For instance, one rule doesn't allow for gifting. If this rule, or any others, is violated, the applicant will be denied Medicaid.
Asset and income limits for Medicaid are not the same across all of the United States. Still, all Medicaid programs require either limited income or assets or both.
You can use the Spend Down Calculator from the American Council on Aging. This tool will help you determine an approximate amount of your (and your spouse's) assets that must be spent before qualifying for Medicaid long-term care benefits.
Not all assets owned by the applicant count towards Medicaid's asset limit. Knowing which assets are countable and non-countable when determining if you or your loved one is over the asset limit is essential.
Countable assets are assets that Medicaid considers when determining a person's eligibility. They can include:
Non-countable assets are assets that Medicaid does not consider when determining a person's eligibility. They can include:
This may change for married couples whose spouse does not need Medicaid-funded long-term care.
Between countable and non-countable assets, different rules in different states, and the complications between single and married applicants, it can be unclear to determine where you land concerning the Medicaid asset limit.
A single elderly applicant is usually limited to $2,000 in countable assets, but this number may be based on state. For instance, single applicants in Connecticut can keep only $1,600 in assets. In contrast, New York has a much higher limit of $16,800 (in 2022).
When a married couple in which both spouses are applying, they can typically keep up to $3,000 of their combined countable assets. Again, this number may vary based on the state or the Medicaid program for which the couple is applying.
Even if only one spouse applies, the couple's assets are considered jointly owned. However, the federal spousal impoverishment rules protect the spouse from having too little income or resources on which to live. Generally, as of 2022, the asset limit for the applicant is $2,000, but a more significant portion of the couple's assets can be protected for the non-applicant spouse through the Community Spouse Resource Allowance. As of 2022, this amount can be as high as $137,400, though there are exceptions based on state.
Spending down non-countable assets is important if an applicant exceeds the asset limit for Medicaid eligibility. However, knowing the allowable Medicaid spend down items and operating cautiously is vital to avoid violating Medicaid's 60-month look-back period.
Medicaid reviews the last 60 months (five years) of an applicant's financial activity when determining their eligibility for long-term care support. A person cannot gift or do asset transfers out of their name or sell assets under fair market value in these five years before applying for Medicaid to ensure people aren't abusing the system with illegitimate expenses.
The penalty period for violating the five-year look-back period is an extended period of time that one is made ineligible for Medicaid, which varies state by state.
Suppose you or your loved one anticipate needing Medicaid-supported long-term care. In that case, you'll ideally want to plan more than five years in advance, allowing your family to keep assets in the family and avoid a Medicaid healthcare spend-down.
Note: California has a more lenient look-back period of 30-months for long-term home and community-based services. Similarly, New York is in the process of implementing a 30-month look-back period.
Asset spend down can be complicated and, if not done with extreme caution, can result in Medicaid ineligibility. A professional Medicaid planner will be able to help you spend down your income and/or assets without violating Medicaid's look-back period while ensuring that healthy spouses maintain maximum assets.