When the time comes to begin the process of moving to a nursing home, many Americans quickly find out that the financial situation they worked hard to earn over their lifetimes knocks them out of the tests associated with Medicaid. However, they also realize that the average cost of nursing home care is between $5,000 and $6,000 a month, which is way beyond their means. This group of Medicaid applicants fell into the gap: they can’t afford nursing care with the assets and income currently in their possession, but they do not qualify for help under Medicaid either.
The states and the federal governments work together to fund Medicaid for the individuals that qualify. Medicaid, separate from Medicare, was established under Title IX of the 1965 amendment to the Social Security Act, and is a health insurance program for individuals with low income. Generally, Medicaid is available for the aged, blind and disabled, and those who qualify for SSI (Supplemental Security Income). Although many Americans have and use Medicaid, the elderly primarily use this program to help cover the costs of the ever-increasing prices of nursing homes and long term care.
To be eligible for Medicaid in Arkansas, there are two overarching tests:
- Conditional Test:
- The applicant must be a United States citizen
- The applicant must be a resident of Arkansas
- The applicant must be over the age of 65
- The applicant must currently need skilled nursing care
- Financial Test:
- Income Test: The applicant must not receive income of more than $2,163 per month, per individual (for 2014) from all sources derived, including social security and retirement.
- Asset Test: The applicant must have non-exempt assets worth $2,000 or less.
Although many Americans meet the conditional tests, Medicaid is generally denied for the applicants that fail to meet the financial tests.
Should an applicant receive more than $2,163 per month of income, but less than the amount required to pay the nursing home bills, Arkansas allows the applicant to create a Miller Trust. This type of trust helps bridge the gap between the amount of money the individual has and the amount of money it costs for long-term skilled nursing care. Once the applicant is eligible for Medicaid under all other requirements, he or she can create an irrevocable trust for which will hold all of the applicant’s income. The funds from this trust will pay the nursing home, and Medicaid can pay any remainder amount to the nursing home that is required. If the applicant is married to a healthy spouse that does not also require long-term skilled nursing care, some of the applicant’s income may be contributed to the healthy spouse should the healthy spouse need some of that income to live. This is called the Community Spouse Monthly Maintenance Needs Allowance, however, if the healthy spouse receives income greater than the needs allowance, that spouse will not be eligible to receive any of that income. Generally, the monthly income allowance for a spouse is between $1938.75 and $2,931 per month.
With regard to the assets test, certain assets are considered exempt assets and do not contribute to the $2,000 amount. The following assets are not counted towards the $2,000 limit:
- Personal possessions including furniture, clothing, household items, and jewelry
- One motor vehicle if it is worth less than $4,500. If the motor vehicle is valued more than $4,500, it is excluded if it is used to get to the doctor or is equipped for a specific disability.
- The applicant’s principal residence, if it is located in Arkansas.
- Prepaid funeral plans if they are irrevocable.
- Burial spaces
- Life insurance without a cash surrender value
- Assets that are used as income producing property or property that is used in a trade or business.
If the applicant is married and both spouses require skilled nursing care, the asset test increases to $3,000 of non-exempt assets between both individuals. If the applicant is married, but his or her spouse does not currently require skilled nursing care, then federal law states that the Medicaid applicant’s spouse should not become impoverish. Therefore, the healthy spouse is allowed a Community Spouse Resource Allowance (CSRA) to keep some of the assets and will not be forced to spend down all of the non-exempt assets prior to the applicant receiving Medicaid. To determine this number, the couple must take the total of all non-exempt assets as of the date of admission to the nursing facility, and divide that number by 2. If the final number is less than $23,448, then the CSRA is $23,448. If the final number is more than $117,240, the CSRA is $117,240. If the number is in between those, the specific number is the CSRA.