Long-Term Care

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Can Medicaid Help Pay For Long-Term Care?

Medicaid was enacted to provide health care services for the impoverished of our nation. Recent legislation has made it extremely difficult for a person of modest means to qualify for Medicaid benefits by gifting or otherwise disposing of personal assets for less than fair market value.

The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) provided that gifts of assets within 36 months (60 months for gifts to certain trusts) prior to applying for Medicaid could delay one's eligibility for benefits. Other provisions of OBRA '93 allowed a state to recover from a person's estate (including trusts, jointly held assets, etc.) all of the payments made by Medicaid.

Even gifts to one's spouse do not help, since the combined assets of couples must fall within the eligibility levels. These levels range from a minimum of about $15,000 to a maximum of $75,000 and are selected by each state. Some assets, like a personal residence, are exempt from the eligibility calculations.

Medicaid eligibility is determined by assets and income.

Asset Test

For Medicaid purposes there are two kinds of assets:

• non-exempt assets
• exempt assets

Non-exempt assets are countable when determining Medicaid eligibility. They include: cash, stocks, bonds, 401 (k) IRA's, CD's, vacation homes, jewelry, annuities, cash value insurance, and investment property. These assets must be spent down to a very low level in order to qualify for Medicaid.

Exempt assets are excluded from the assessment of eligibility. They include: a home (primary residence), household goods, car, engagement/wedding ring, pre-paid funeral expenses, and term life insurance policies.

Although recent legislation has made transfer planning more difficult, there are still a few techniques available to help an applicant become eligible for Medicaid. These techniques can allow you to protect assets and meet the required levels for Medicaid qualification.

These include:

• Transferring assets to individuals before the "lookback" period -- typically 36 months before applying for aid.
• "Spending down" assets prior to any need for nursing home care
• Investing in exempt assets
• Changing wills and titles to property

Income test:

Medicaid also uses income to determine eligibility. Income is all the money you receive from any source including social security, interest, investments, trusts, rents, pensions, and annuity-payouts. If the patient has a monthly income that exceeds the cost of a nursing home, the patient is ineligible for Medicaid. Furthermore, some states, called cap states, set a cap on an applicant's monthly income. If the patient's monthly income exceeds this amount, Medicaid benefits are completely denied. In the remaining states, if a patient's income falls below the nursing home's cost, the state will require that the patient contribute the majority of the cost of the care, while Medicaid will pay the rest.


The Medicaid program was designed to help low income elderly pay for long term care costs. Because of this, many middle income families find the eligibility requirements difficult to meet. Although there are a few strategies that may help these individuals qualify, it is risky to rely solely on Medicaid.

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