Before we answer the question that serves as the title of this blog post, we must explain why Medicaid is important to many senior citizens who will qualify for Medicare. Some people are aware of the situation, but many are not, so we will provide clarification before we go forward with the details.
The majority of senior citizens will someday need living assistance. Many will reside in nursing homes or assisted living communities that provide custodial care. Others will be able to get the care that they need in their own homes from a professional home health aide. Medicare will not pay for custodial care of any kind. It will pay for convalescent care after an injury or surgery, but it will not pick up the tab for assisted living expenses.
To understand the magnitude of the gap in Medicare coverage, you have to know little bit about the current state of long-term care costs. Generally speaking, you can expect to pay somewhere in the vicinity of $100,000 per year for a room in a nursing home in the greater Detroit area. You are looking at right around $40,000 for an assisted living community, and an in-home health aide that provides frequent care can be more expensive than that. As you can see, we are talking about a good bit of money.
The Medicaid Solution
Medicaid is a health insurance program that is administered by the federal government along with each respective state government. You are probably aware of the fact that the program is designed for people with sparse financial resources. There is a $2000 asset limit, but there are a number of things that you may own that are not considered to be countable assets for Medicaid purposes.
The most significant piece of property that is not countable is your home. However, there is an equity limit, and it is adjusted slightly year-by-year to account for inflation. In 2018, the home equity limit in the state of Michigan is $572,000.
In addition to the home, one vehicle that is used as a primary source of transportation is not counted. An applicant can have up to $1500 of whole life insurance, and unlimited term life, which is life insurance without a cash value. Things like furniture, appliances, and other household items are not counted, and personal effects are not countable. A burial plot is allowed, and up to $1500 for final expenses can be retained by the applicant.
The Healthy Spouse
In many cases, an elder will require long-term care while his or her spouse is still capable of independent living. Elder law professionals prefer to the healthy spouse as the “community spouse.” The community spouse is entitled to certain property rights when the other spouse is applying for Medicaid coverage to pay for nursing home care.
We have previously touched upon the fact that there is a $572,000 equity limit that applies to home ownership. If a healthy spouse is remaining in the home, there is no equity limit at all.
The healthy spouse is entitled to a Community Spouse Resource Allowance (CSRA). This allows the community spouse to retain ownership of half of the shared assets that are considered to be countable by Medicaid. However, there is a limit, and at the time of this writing it stands at $123,600 in Michigan.
In addition to this upper limit, there is also a minimum Community Spouse Resource Allowance of $24,720. To explain this by way of example, let’s say that a couple has $40,000 worth of countable assets. Half of that is $20,000, but because there is a minimum allowance, the healthy spouse would be able to keep $24,720.
When an individual is enrolled in the Medicaid program, just about all of that person’s income must be used to defray the costs, but there is an exception to the rule. If the healthy spouse is relying on all or some of the income to maintain a minimum standard of living, a Monthly Maintenance Needs Allowance will be allotted. The maximum allowance in 2018 in our state is $3090 a month, and the minimum is $2030 per month.
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