A 73-year-old single retiree is collecting Social Security and a small state pension. He recently was told that he probably collects too much money to be eligible for Medicaid assistance to help with any kind of long-term care if he needs it in the future. He also owns a house with a mortgage.
What options does he have, except for buying a long-term care insurance policy, which may be extremely expensive at his age?
Nj.com’s recent article entitled “I think I make too much money for Medicaid. What can I do?” says that there are some steps a person can take. However, it may take time before these actions will help your situation.
Unfortunately, the article doesn’t really address the single retiree’s question, as it focuses primarily on his assets and not his income.
Having too much income is a problem that can be overcome two ways. The most common and most effective is the creation of a “Miller Trust,” also called a Medical Assistance Income Trust (MAIT) or a Qualifying Income Trust (QIT).
A Miller Trust has one purpose: it collects the Medicaid applicant’s income and uses it on his medical expenses only. When he dies, if Medicaid has paid any of his long-term care expenses, the Miller Trust pays the state back first. If there is money left, those funds can be paid to the applicant’s heirs.
By creating a Miller Trust, the Iowa income cap is raised to 125% of the average cost of care in the state, helping most people qualify for Medicaid when they would otherwise have too much income each month if the normal income cap were to apply.
The other way to reduce your income below the income cap is by giving away your income producing property. Unfortunately, this constitutes a transfer which is subject to some additional rules. That’s where the Nj.com article picks up.
Medicaid has a five-year lookback. Therefore, if the Medicaid applicant gave away all of his assets this year and went into a nursing home expecting Medicaid to pay, the program would “look back” over five years at what he owned. The program can claw back what it spends on the applicant.
But just because you are not eligible for Medicaid and its long-term care benefits today, that does not mean that you will not be eligible in the future.
That is because even if your income is above the limit, you still might be able to qualify for Medicaid, if you have significant medical expenses.
In order to qualify financially, you need to have very limited resources.
In many states, for long-term care, an applicant’s assets cannot be more than a certain amount, such as $2,000 if you are single. However, not all property counts towards the resource limit. A home may be exempt, if it is your primary residence and worth less than a certain amount.
One option is a reverse mortgage which would free up some of the equity in the home to use towards a long-term care insurance policy.
Long term care policies can still be issued for people in their 70s, but the premiums will be higher than if you had enrolled 10 or 20 years ago. However, it is still an option and would keep the retiree in his home.
There are also a number of federal and state-funded programs that make it easier for seniors to live in the community and in their homes as long as possible.
Reference: nj.com (March 11, 2021) “I think I make too much money for Medicaid. What can I do?”