Although Congress and the federal Centers for Medicare and Medicaid Services (CMS) have established the primary rules under which Medicaid operates, each state administers its own program. Accordingly, although the federal framework remains uniform, the rules may vary in each state, so an individual’s state’s rules need to be checked. Following is a very brief primer on the basic rules. 

 

Resource Rules

 

In order to be eligible for Medicaid benefits a nursing home resident may have no more than $2,000 in "countable" assets. The spouse of an institutionalized individual --called the 'community spouse'-- is limited to one half of the couple's joint assets up to $109,560 (in 2009) in "countable" assets. This figure changes every year to reflect inflation. Further, the community spouse may retain the first $21,912 (in 2009), even if that is more than half of the couple's assets. This figure is higher in some states, even up to the full maximum of $109,560 (in 2009).

 

All assets are counted against these limits unless the assets fall within the list of "noncountable" assets. These include the following:

 

Under the Medicaid rules, nursing home residents must pay all of their income, minus certain deductions, to the nursing home. Deductions include a $60-a-month personal needs allowance (which may be somewhat higher or lower in particular states), a deduction for any uncovered medical costs (including medical insurance premiums), and, if the resident is married, an allowance for the spouse who continues to live at home if he or she needs income support. A deduction may also be allowed for a dependent child living at home.

 

For married Medicaid applicants, the income of the community spouse is not considered in determining the Medicaid applicant's eligibility. Only income in the applicant's name is considered in determining his or her eligibility. Thus, even if the community spouse is still working and earning $5,000 a month, he will not have to contribute to the cost of caring for his spouse in a nursing home if the resident spouse is covered by Medicaid.

 

The maximum monthly maintenance needs allowance for 2009 is $2,739. This is the most in monthly income that a community spouse is allowed to have if her own income is not enough to live on and she must take some or all of the institutionalized spouse's income. The minimum monthly maintenance needs allowance of $1,750 took effect July 1, 2008 and will not rise until July 1, 2009. In determining how much income a particular community spouse is allowed to retain, states must abide by this upper and lower range. Recall that these figures apply only if the community spouse needs to take income from the institutionalized spouse.

 

 

On February 8, 2006, President Bush signed into law the Deficit Reduction Act of 2005 (DRA), which cuts nearly $40 billion over five years from Medicare, Medicaid, and other programs. The new law places new and severe restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. These restrictions have been roundly criticized by those practicing elder law.

 

The DRA significantly changed Medicaid’s long-term care rules, including the look-back period, the transfer penalty start date, the undue hardship exception, the treatment of annuities, community spouse income rules, home equity limits, the treatment of investments in continuing care retirement communities, promissory notes and life estates, and state long-term care partnership programs. Treatment of these changes is beyond the scope of this primer, but comprehension of these issues is critical to any attorney giving advice regarding Medicaid eligibility.

 

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