A Place for Mom's Family

Based on information from the Centers for Medicare and Medicaid Services (CMS) and other sources.

Medicaid is a federally-funded, state-run health program that provides medical assistance for eligible individuals and families (including parents, children, seniors, and people with disabilities) with low incomes and resources. It pays for your health care costs, including doctor's visits and eye care, and in some cases dental care. Medicaid does not pay money to you; instead, it sends payments directly to your health care providers. Depending on your state's rules, you may also be asked to pay a small part of the cost (co-payment) for some medical services.

Although state participation in Medicaid is not mandatory, all states have participated since 1982. Names for state Medicaid programs vary, as do how the programs are administered and the guidelines for eligibility and services.

This article is provided as a summary of Medicaid benefits and eligibility requirements, and may not provide all of the information you need to make an educated decision about your health coverage. For more information regarding each state’s Medicaid, see the state-by-state Medicaid programs later in this document.

The Medicaid program provides medical benefits to groups of low-income people, including some who may have no medical insurance or may have inadequate medical insurance. Although the federal government establishes general guidelines for the program, the Medicaid program requirements are actually established by each state. Whether or not a person is eligible for Medicaid depends on the state in which he or she lives.

Many groups of people are covered by Medicaid. Even within these groups, though, certain requirements must be met. These may include your age; whether you are pregnant, disabled, blind, or aged; your income and resources (like bank accounts, real property, or other items that can be sold for cash); and whether you are a U.S. citizen or a lawfully admitted immigrant. The rules for counting your income and resources vary from state to state and from group to group. There are special rules for those who live in nursing homes and for disabled children living at home.

Medicaid does not provide medical assistance for all poor persons. Even under the broadest provisions of the federal statute (except for emergency services for certain people), the Medicaid program does not provide health care services, even for very poor people, unless they are in one of the designated eligibility groups. Low income is only one test for Medicaid eligibility; assets and resources are also tested against established thresholds. Medically needy persons who would be categorically eligible except for income or assets may become eligible for Medicaid solely because of excessive medical expenses.

You may qualify for Medicaid if you meet one or more of the following qualifications:

You’re aged, blind, or disabled, have limited income and resources, and require long-term care

You’re terminally ill and want to get hospice services

You have children and a limited income

You receive, or are eligible for, Supplemental Security Income (SSI)

You’re pregnant, and meet income requirements

Your family’s assets are less than $2,000

You receive adoption or foster care assistance

You’re also eligible for Medicare, and have limited income and resources

In general, you should apply for Medicaid if your income is low and you match one or more of the descriptions above. 　Even if you are not sure whether you qualify, if you or someone in your family needs health care, you should apply for Medicaid and have a qualified caseworker in your state evaluate your situation.

The services covered by Medicaid vary by state, but many programs include the following:

In-patient hospital services

Out-patient hospital services

Prenatal care

Vaccines for children

Physician services 

Nursing facility services for individuals aged 21 or older

Family planning services and supplies

Rural health clinic services

Home health care for individuals eligible for skilled-nursing services

Laboratory and x-ray services 

Pediatric and family nurse practitioner services

Nurse-midwife services

Early and periodic screening, diagnostic, and treatment services for children under age 21

Some states also include the following additional services:

Mental health care

Case management services

In-patient psychiatric care

Personal care, such as help with the activities of daily living

With the exception of hospitals and nursing homes, each state Medicaid program determines and enforces standards that must be met for a provider to receive Medicaid reimbursement. Approved providers, or Medicaid vendors, are provided with a vendor number that authorizes their reimbursement for treatment of Medicaid-eligible individuals.

Medicaid covers a wider range of health care services than Medicare does. Some individuals, called Medicare dual eligibles, are eligible for both Medicaid and Medicare. See the web page http://www.cms.hhs.gov/DualEligible/ for more information on dual eligibility.

A Medicaid waiver is a provision in Medicaid law that waives particular rules to enable states to operate their Medicaid programs in more flexible ways. An HCBS (Home and Community Based Services) waiver allows states to cover some long-term care services that are not normally covered under the Medicaid program.

For general information on Medicaid, visit the CMS website at http://www.cms.hhs.gov/home/medicaid.asp.

For free health insurance counseling, contact the State Health Insurance Assistance Program (SHIP) for your state.

The Deficit Reduction Act of 2005, (DRA), signed into law on February 8, 2006, made significant changes to the Medicaid laws. The home, formerly a wholly exempt asset, is now exempt only up to $500,000 of equity value. The "look back" period for gifts is extended from the three years to five years and penalty periods now begin only after the applicant is completely spent down and already in the nursing home. Rules for the treatment of annuities are significantly changed as well.

In this article, some of the changes are outlined and planning techniques that are still available are explained. This advice is general in nature and detailed planning should be undertaken only with the help of an experienced elder law attorney. In addition, Medicaid laws differ from state to state, so some of these planning methods may work in some states and not in others.

Many tried and true planning techniques can still be utilized in the post-DRA world.

Paying off mortgages, credit card debt, car loans, and so on should be explored as a method for reducing countable assets. For married couples, this has the added advantage of reducing the monthly bills for the community spouse.

Home Improvements. Because the home often is the major exempt asset, families should explore upgrades and deferred maintenance as a way of converting countable assets such as cash or stocks, into equity in the home. Such spending has the added advantage, for a couple, of avoiding costly and worrisome home repairs and improvements after the spouse is in the nursing home.

Purchase a New Car. If married, the couple may own one automobile of any value. Thus, consideration should be given to selling an older vehicle and purchasing a new one. For single individuals, only $4,500 of the value is exempt unless the applicant can show that the vehicle is necessary for providing medical care. A letter should be obtained from the primary physician indicating that the vehicle is necessary.

Purchase Personal and Household Items. Items such as furniture, household goods, clothing, and electronic equipment have never been considered countable assets, and this has not changed since the passage of the DRA.

Irrevocable Prepaid Funeral and Burial Plans. Such plans have long been exempt and remain so after the DRA. Since we will all need it someday, paying in advance for a "pre-need" plan makes good sense. The funeral home should be advised that the client may apply for Medicaid so that the language of the contract can reflect that the plan is irrevocable.

Business Property. For single individuals, or married couples, business property may be exempted when the business is essential to producing income for the applicant or community spouse. The entire value may be exempted. This can be an important issue to spot in areas with many entrepreneurs and small businesses.

Exempt Transfers of the Home. The primary residence of the applicant may be given without a transfer penalty to any of the following: a spouse who remains in the home; a child who has lived in the parent’s home and provided care for at least two years; a sibling of the applicant who has an equity interest in the home; a blind or disabled child; or a sole benefit trust for the spouse or disabled child.

Transfers Made for Non-Medicaid Qualifying Purposes. This is an area where great caution must be taken. There is a rebuttable presumption that any gifts made within five years prior to the application were made for purposes of qualifying for Medicaid. Such gifts will be treated as transfers without fair consideration (such as gifts) and penalized. Families (and their lawyers) should carefully document the purpose of the gift, such as a down payment for child’s home, college tuition for a grandchild. Individuals who already have a chronic illness which may result in institutionalization should avoid such gifts, as the presumption may be impossible to overcome. Probate avoidance techniques, such as placing homes into joint tenancy with children, must be undertaken with great care.