As you get older, the cost of healthcare seems astronomical. With limited assets and fixed income, getting the long-term care you need may seem out of reach. The good news is you may qualify for Medicaid, which is different from Medicare. Medicaid is a needs-based government program that pays for the cost of long-term care for the elderly. But qualifying for Medicaid is complicated. You must stay below the Medicaid asset limits, or you won’t be eligible.
Medicaid asset limits explained
For basic healthcare, Medicaid eligibility is based on your income. However, Medicaid considers your assets when evaluating your eligibility for long-term care. If you are 65 or older, you may keep up to $2,000 in assets for Medicaid. Married couples applying for Medicaid nursing home coverage are allowed $4,000 in countable assets.
To determine eligibility for long-term care, Medicaid looks at your countable and noncountable assets. Countable assets include bank accounts, certificates of deposit, stocks and bonds. You qualify for coverage if your total countable assets are $2,000 or less.
Noncountable assets are exempt from Medicaid’s asset limits. The following assets are considered exempt:
Your primary residence
Your primary residence is exempt from the asset limit for Medicaid if it meets a few criteria.
- Your primary home must be in the same state you are applying for Medicaid.
- The home’s equity falls below the state’s limit. Your equity is calculated as the difference between its fair market value less the debt you owe on the house. In most states, the equity cannot exceed $636,000. However, some states have limits of up to $955,000.
- Who lives in your home is critical. Even if you move into a nursing home, your primary residence is noncountable if your spouse or dependent child lives there. If no one else lives with you, your primary residence could still be exempt if you have the intent to return after being sick or hospitalized.
Laws require states to seek reimbursement for long-term care expenses paid on behalf of a Medicaid recipient. The state will look to your estate to recover its costs through the Medicaid Estate Recovery Program (MERP). The state may place a lien on the recipient’s home if the estate cannot pay what is owed. The lien prevents the estate from selling the home until the debt has been repaid.
Your primary car
Your primary vehicle is exempt from Medicaid if it is used for transportation by the applicant or a household member. There is no limit on the current market value.
Burial allowance or trust
The government usually exempts funds paid in anticipation of death. A prepaid funeral plan and pre-purchased plots for you and your immediate family are exempt. Suppose you haven’t made any advance burial preparations. In that case, you may be able to set aside up to $1,500 in an irrevocable pre-need funeral arrangement or a revocable burial fund. There may be different Medicaid asset limits by state.
Personal property — furniture, jewelry and clothing — is exempt. Other personal property, such as home improvements or modifications, are exempt.
Medicaid financial eligibility
Medicaid is a need-based program. You must pass income and asset eligibility requirements to qualify for long-term care under Medicaid.
If you are single and 65 years or older, your income must be less than the amount specified by your state of residence to qualify for Medicaid. For married couples where only one spouse is applying for coverage, only their income is considered when determining Medicaid eligibility. Many states allow applicants to allocate a portion of their monthly income to their non-applicant spouse to avoid impoverishment.
On the other hand, asset eligibility looks at the resources you have to pay for your care. For people 65 years or older, Medicaid resource limits are $2,000 for single individuals and $4,000 for married couples. When your countable assets exceed these thresholds, you are not eligible.
What to do if you’re over Medicaid asset limits
You won’t qualify for Medicaid if you exceed asset or income limits. But you can plan and work toward becoming eligible for Medicaid.
Spending down strategy
When you are over Medicaid’s asset or financial limits, consider implementing a spending-down strategy. By taking this approach, you can work toward reducing your assets and income so that you can qualify for Medicaid. Your spend-down plan may include paying down debt, making renovations on your home or setting up an irrevocable funeral trust.
Be wary of how you plan to spend your funds. Medicaid established a lookback period to prevent applicants from giving away resources to family and friends. This period starts when you apply for Medicaid and goes back 60 months in most states.
All financial transactions over the 60 months are reviewed to see if any assets were given away, transferred or sold for less than their fair market value. Any violations of this lookback period will delay your eligibility.
State assistance programs
Just because your income and assets aren’t low to qualify for Medicaid doesn’t mean you can afford your medical care. If you struggle to pay for your medical care or prescriptions, you may find help through state or government assistance programs.
Many states offer financial assistance to pay for medical bills or prescriptions. Programs vary and are usually provided through the state’s Department of Human Services. For example, Minnesota offers medical assistance coverage for qualified applicants. Wisconsin seniors can get help with medication costs through the SeniorCare program.
Medicaid eligibility is complex. Every state has its requirements and limits. If you don’t carefully plan for Medicaid eligibility, your coverage could be delayed or denied. And with a 60-month lookback period, a delay in coverage impacts your ability to get care when needed.
A Medicaid planner can also advise on how to protect your assets after death. States may place a MERP claim on your remaining assets to recoup the money they paid on your behalf for long-term care. Getting help from a Medicaid planner is critical to protect your financial interests.
How to apply for Medicaid
You can complete an application online through the Health Insurance Marketplace to apply for Medicaid. Or, you can contact your state’s Medicaid Agency for help with eligibility, applications and claims.
How to Plan for Medicaid Eligibility
Medicaid provides much-needed financial help to elderly adults seeking long-term care. Yet the complex rules, financial limits and different state requirements complicate determining whether you are eligible for Medicaid. Careful planning is critical to ensure you fall below the Medicaid asset and financial limitations.
What does Medicaid consider countable assets?
Countable assets include bank accounts, certificates of deposit, stocks bonds, and life insurance policies.
How can I protect my IRA from Medicaid?
You can cash in your IRA and use the funds to buy exempt assets. If you currently rent, consider spending money on purchasing a new home.
What is the highest income to qualify for Medicaid?
Income limits vary by state. The most common income limits are $2,523 for single and $5,046 for married.