IS YOUR HOME PROTECTED FROM MEDICAID?

In 1965, President Lyndon Johnson signed into law Title XIX of the Social Security Act, better know as Medicaid.   Medicaid is a joint venture between the Federal and State governments to assist States in providing medical assistance to certain eligible individuals and families with low incomes and resources.   Under the Federal guidelines, each State is charged with establishing its own eligibility standards, determining the type, amount, duration and scope of services and setting the rate of payment for services.   Eligibility varies greatly among the States, therefore, an individual may qualify for Medicaid assistance in one State but not another.   More than 41 million people received assistance from Medicaid in 1999.   In 2000, total expenditures from the program totaled $194.7 billion, with $111.1 billion coming from the Federal government and $83.6 billion coming from State funds.   This article will deal with the issue of eligibility as it relates to the principal residence of a potential Medicaid recipient needing a skilled nursing home.  

To qualify for Medicaid in Connecticut, an individual can have the following assets:

•  $1,600 in total assets including cash, CDs, mutual funds, etc.

•  A burial plot

•  A pre-paid irrevocable funeral contract, limited to $5,400 with a Connecticut funeral home or       a refundable funeral contract for up to $1,200

•  Term life insurance

•  Cash value life insurance if the face value of the policy or policies is $1,500 or less

•  Long-term care insurance

What about a home?   If dad goes on Medicaid, will mom lose the house?   Should I transfer my home to my children in order to qualify for Medicaid?   Can the state put a lien on my house if I start collecting benefits?   Let’s examine these and other questions that can be critical to families with assets that took a lifetime of hard work to accumulate.

Your home is defined by Connecticut statutes as:
   1)    the real property used as a principal residence by an institutionalized individual immediately prior to his or her              

          institutionalization; or

   2)   the real property used as prinicipal residence by the spouse of the institutionalized individual; or

   3)   the real property used as a principal residence by an individual receiving home and community-based

         services under a Medicaid waiver.

Your house is an ecludible asset (not counted) in determining Medicaid eligibility if you intend or are expected to return to the home.   You would not have to sell the house and the state would not put a lien on it.   Your house is still an excludible asset if you don’t expect to return home and any of the following people live in it:

•  Your spouse;

•  Your child under age 21;

•  Your adult blind or disabled children;

•  Your sister or brother who has an equity interest in the home and who resided     there for a period of at least one year before you went into a nursing home.

Again, you will not be forced to sell your home and no liens will be placed on it.  

If, however, you are unable to return to your home and none of the above listed relatives remains in the home, it becomes a countable asset and you would no longer be eligible for Medicaid benefits.   In addition, you must attempt to sell your home by listing it with a realtor and/or placing a “For Sale” sign on the property.   The state would put a lien on the property while you are trying to sell it and upon sale, would take from the proceeds a reimbursement of amounts it paid on your behalf to the nursing home.   You must now pay for the nursing home yourself from the remaining proceeds.   You would not be eligible for Medicaid again until your assets are $1,600 or less.   (See above eligibility requirements).  

It is important to note that before the state can place any lien on your property, you must be given written notice.   In addition, you have a right to request an appeal called a Fair Hearing if you feel the state has placed a lien unjustly.

Great consideration and extreme caution must be used when considering the transfer of your home to someone for less than fair market value (a gift) in order to qualify for Medicaid.   The laws in this area are very complicated and you should seek the council of someone who is knowledgeable in Medicaid law as well as estate and gift and income tax law.  

Joel M Sachs, CPA, CSA

Konowitz, Kahn & Co, PC

Certified Public Accountants