Medicaid Coverage

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What is Medicaid?

Medicaid is a joint US Federal and State program that helps cover medical costs for some people with limited income and resources.

Medicaid offers benefits not normally covered by Medicare, like nursing home care and personal care services. The rules that dictate the eligibility for Medicaid are different in each state.

Qualifying for Medicaid 

In general, you need to meet your state’s rule for your income and resources and meet other requirements, like being a resident of that state. You might be able to get Medicaid if you meet your state’s limit, but your income is too high to qualify.

Some states let you ‘spend down’ the amount of your income that is above the state’s Medicaid limit. This can be done by paying non covered medical expenses and cost sharing (like medical premiums and deductibles) until your income is lowered to a level that qualifies you for Medicaid.

What Medicaid helps you pay for; If you have Medicare and qualify for Medicaid coverage,

  • Your state will pay your Medicare part B (Medical Insurance) monthly premiums
  • Depending on the level of Medicaid you qualify for, your state might pay for: your share of Medicare costs, like deductibles, coinsurance, and co-payments, part A(Hospital Insurance) premiums, if you have to pay a premium for the coverage, you’ll automatically get extra help with your drug costs, Medicaid may pay for other drugs and services that Medicare doesn’t cover.

The process of how you can apply for Medicaid can be verified at your state’s Medical Assistance (Medicaid) Office.

People with both Medicare and Medicaid 

People who have both Medicare and full Medicaid coverage are considered ‘dually eligible ‘. When you are dually eligible, Medicare pays first, then you can get Medicare covered services. Medicaid then pays last after Medicare and any other insurance you may have would need to settle their part.

If you’re dually eligible, Medicare covers your prescription drugs. You’ll automatically be enrolled in a Medicare Drug Plan that takes care of your drug costs, but Medicaid may still cover some drugs that Medicare doesn’t cover.

You can still pick how you want to get your Medicare coverage. If you choose to join Medicare Advantage Plan, there are special plans for dual eligible that make it easier for you to get the services you need, including Medicare Drug Coverage (Part D), and may also cost less, like:

  -Special Needs Plans

  -Medicare-Medicaid Plans (only available in certain states)

  -Program of All-inclusive Care for the Elderly (PACE) plans that help people get care outside of a nursing home

Medicaid eligibility requirements 

In general, Medicaid beneficiaries must be residents of the state in which they are receiving Medicaid. They must be either citizens of the U.S. or certain qualified non-citizens, such as lawful permanent residents.

On top of that, some eligibility groups are limited by age, parenting status, or pregnancy. You may qualify for free or low-cost health care based on your income and family size. Eligibility rules differ from state to state.

People eligible for Medicaid coverage are historically low-income children and their parents, pregnant women, people with disabilities, and people aged 65 and above.

Under the Patient Protection and Affordable Care Act (ACA, P.L, 111-148, as amended), other low income adults may get coverage depending upon the state coverage rules.

Minimum income and other eligibility criteria are set by the federal government and states. Some states may opt to cover additional people beyond the federal minimums.

To be eligible for Medicare, you must meet the requirements for an eligibility group that your state covers under its Medicaid program. But regardless of the specific eligibility group, you must meet two types of requirements to qualify. These are namely:

  1. General requirements 
  2. Financial requirements 

If you have already met those, you will also need to meet functional requirements to qualify for long-term services.

General Medicaid requirements 

There are many pathways that lead to being eligible for Medicaid. For example, most states provide Medicaid to anyone who’s receiving benefits under the Supplemental Security Income (SSI) program.

A number of states provide Medicaid to older adults or persons with a disability with an income that’s below 100% of the federal level ($131 per month for an individual in 2012).

The other general categories and status that must be met include:

  • Age 65 or older
  • Have a permanent disability as per the definition of that term by the Social Security Administration 
  • Be blind.
  • Be a pregnant woman.
  • Be a child, or the parent or caretaker of a child.

Certain other requirements include:

  • Be a U.S. citizen or meet certain immigration rules
  • Be a resident of the state where you apply
  • Have a social security number

Financial requirements 

There are two particular pathways that are commonly used to make people eligible for Medicaid long term care services. These groups are the special income level group and the medically needy. To be eligible for Medicaid, you must have limited income and assets.

Income 

The amount of income you can have varies depending on the state you’re in and the eligibility group the state covers. When the state determines your financial eligibility for Medicaid, the state will count some of your income though not all. Your income includes these sources:

  • Regular benefits payments such as social security retirement or disability payments
  • Veterans benefits, pensions, salaries, wages, interests from bank accounts, and certificates of deposits, dividends from stocks and bonds.

However, Medicaid generally doesn’t count things such as nutritional assistance like food stamps, housing assistance provided by the federal government, home energy assistance, or some of your earnings if you have earned income from work you do.

Medicaid will count payments which you are entitled to even if you don’t receive all of the payment. For instance, if you have earnings from which income taxes are withheld, Medicaid will count the entire amount of your earnings, including the amount that’s withheld in taxes. If you and your spouse receive joint income, for instance rental income, half of that is allocated to you.

Special Income Level Group

There’s an optional group for states. Over 40 states have chosen to cover it and therefore it’s widely available as a pathway to receiving long term care services under Medicaid.

To be eligible under this group, a person must meet the general eligibility requirements such as being aged, blind, or with a disability. The person must also be in an institution such as a nursing home for 30 consecutive days.

The amount of income a person must have is comparatively high, $2,130 a month in 2013. That’s 3 times higher than the amount of income a person must have, which is $710 a month in 2013, and be eligible to qualify for Medicaid because he or she is receiving SSI benefits. The amount of countable assets a person can have is similar to other pathways, about $2,000 for an individual.

Once eligibility is determined by the state, the countdown of 30 days since one has been in an institution is done. That means that Medicaid will pay for all the care you receive from the beginning of your stay in the nursing home.

Although the program is aimed at people who are in institutions such as nursing homes, states can use the same rules to make people eligible for home and community-based services. This means that people with high incomes can get long-term care services while still living in their homes under this program.

This is regarded in the sense that the amount of income you can have under this program is higher than the other pathways to medical eligibility, you may be required to pay part of your long-term care services out of your own income.

Medically Needy

This is an option that has been adopted by 33 states. Under this pathway, a state chooses to cover it includes people with high income and high medical expenses provided that the general eligibility requirements such as age, vision states and disabilities criteria are met first.

People who are eligible as medically needy have too much income to qualify for Medicaid through any other pathways but can still qualify for Medicaid as medically needy by ‘spending down’ the income that’s above their state’s income limit.

Spending down

A person spends down his or her excess income to the state’s medically needy limit by incurring expenses such as doctor visits, prescription drugs, or anything else the state considers to be medical or remedial care. It should be noted that the person doesn’t have to pay an expense for it to be counted as incurred expense. The person only has to incur the obligation to pay the expense.

The incurred expenses are subsequently subtracted from his or her income and if the remaining income does not exceed the state’s income limit, the person is eligible as medically needy.

This limit varies from state to state. In most states that cover the program, the income limit for an individual is less than $500 a month.

For a person with high income, the spend down liability can be considerable. But a person receiving long term care services, particularly an in-patient in a nursing home, incurring enough expenses because of the cost can happen very quickly.

When one becomes eligible after spending down, the program only pays for the Medicare one receives after he or she has met his ‘spend down’ liability.

Income Only or Miller Trusts

In states without Medically Needy Medicaid, applicants often use a trust to effectively lower their countable income below the state’s limit. Income Only Trusts, commonly called Miller Trusts, are trusts that can be established by or for a person of any age, regardless of the disability status.

The trust can be funded with the person’s income, such as social security benefits, pensions, and others. It can’t be funded with assets such as money from bank accounts or the sale of stocks or bonds.

And just like the special needs or pooled trust, a Miller Trust must contain a clause that says that says that upon the death of the person to whom the trust is established, any funds remaining in the trust must be paid to the state’s Medicaid program, up to the amount the program paid for services on behalf of the person.

Mostly, if one’s state covers nursing home care for the medically needy, it won’t recognize Miller Trust.

Assets

When the state determines your financial eligibility for Medicaid, some of your assets are counted, while others are excluded. During the Medicaid application process, you’re required to provide documentation of what assets you have. The assessment of your income is straightforward but that of assets can be fairly complex. Assets that can be counted include:

  • Checking and savings account
  • Stocks and bonds
  • Certificates of deposits
  • Real property other than your primary residence 
  • Additional motor vehicles you have more than one

Assets that can be counted for determination of eligibility include:

  • Primary residence 
  • Personal property and household belongings 
  • One motor vehicle
  • Life insurance with a face value of under $1,500
  • Up to $1,500 in funds set aside for burial, and pre-need burial arrangements. 
  • Assets held in specific kinds of trusts

Limits of Home Equity 

When determining eligibility for Medicaid, your home, regardless of its value, is exempted from being counted as a resource as long as it’s the principal place of residence. But your home can affect whether Medicaid will pay for your long term care services, including nursing home care and home and community based waiver services.

If your equity interest in the home exceeds a certain level, Medicaid cannot pay for your long term care. Equity value of your home is the fair value (the sale value on the open market), minus any debts secured by the home such as mortgage or home equity loan. But your equity interest, which is what’s important, depends on whether you own the home by yourself or with someone else, for instance, your spouse. In that case, it’s divided among the owners and what you are entitled to becomes your equity interest.

In 2013, the minimum home equity limit was $563,000. If it exceeded that equity interest level, Medicaid denied you payment for your long term services. However, states can use a higher limit (as high as $803,000 in 2013) when housing in the state is expensive, and some states have chosen to use a lower limit. It all depends on the housing levels of your state and the state’s decisions.

However, there are some exceptions to the rule. If your spouse or your child who’s under 21, or blind, or disabled, lives in the home, the rule doesn’t apply. Again, the state can bypass the rule if it determines that applying that rule will cause you undue hardships.

Other important considerations

  • Unless specifically excluded, any other real property such as a vacation home that you and your spouse own is counted as an asset in Medicaid eligibility determination.
  • The full value of an asset that you own jointly with someone else may be counted as belonging entirely to you. For example, a jointly owned checking or savings account will be considered to be entirely yours since it can be withdrawn all at once by both of you.
  • The amount of countable assets you can have and still qualify for Medicaid varies from state to state. In most states, you can retain about $2,000 in countable assets, while married couples still living in the same household can retain about $3,000 in countable assets. Although this doesn’t sound much, it’s important to note that many assets are not counted when determining Medicaid eligibility.
  • If one spouse lives in an institution and the other in the community, the community spouse is allowed to keep more of the couple’s assets without disqualifying the one in the institution from Medicaid coverage. In addition, the community spouse may be able to have some of the institutionalized spouse’s income set aside for his or her use.

Considerations for married people 

The asset limit for an individual is about $2,000 and $3,000 for a couple living together in most states (2013). But if one spouse is in an institution such as a nursing home and the other one is in the community, different rules apply.

There’s a program known as Spousal Impoverishment which has rules designed to keep the spouse living in the community from being impoverished when the other spouse enters a nursing home.

If not followed, a state would consider a couple’s jointly owned assets to belong to the institutionalized spouse and most of the couple’s income must have to be used to pay for the cost of nursing home care, leaving little or nothing for the spouse in the community.

Under the rule, the community spouse is allowed to keep a portion of the assets (normally half) up to a maximum of $115,920 in 2013. In about half the states, the community spouse can keep all if the couple’s total assets are less than the limit.

In addition, the rule provides that at least some of the spouse’s income can be protected for the community spouse to use to cater for  living expenses. In 2013, the maximum amount of the institutionalized spouse’s income that can be protected was $2,898 a month.

But in determining the amount, the state will take into consideration any other income the community spouse has.

Share of cost

Depending on how much income they have, people in nursing homes and those receiving home and community-based services may have to pay part of the cost for care. This share of the cost post-eligibility treatment of income is due to two reasons:

Firstly, when you are in a nursing home, almost all you need is provided for; medical care, food, shelter, and you’re eligible for Medicaid which the program pays through reimbursement to the nursing home. You therefore don’t have living expenses.

Secondly, in most states, a person with high income can still be eligible for Medicaid if in a nursing home. Had the person been living in the community, he or she would spend on food, shelter, and utilities, but all these are now catered for in a nursing home and paid for by Medicaid. So if you have a high income, the ‘extra income’ can be used as ‘shared cost’.

The state determines how much extra income you have by starting with your total income then deducting certain items and expenses. Deductions include small allowances for personal needs, an amount to take care of the needs of a spouse or children still at home, allowance to maintain your home, among others that can be considered genuine.

After the deductions, whatever is left is ‘extra income’ and you’re expected to use it to pay for your care. If nothing is left after the deductions, you are not included in the ‘share of the cost’ part of the program.

The state takes your share of cost into account and pays to the nursing home less that amount, that you or your family are asked to pay.

This can also apply if you have a high income, and you receive home and community based services. But in this case, you’d have a larger maintenance needs allowance because a person receiving home and community-based services has the same expenses as anyone else living in the community.

In fact, a number of states don’t bother such individuals to pay. They allow them to keep all of their income to help them pay for their living expenses in the community.

Functional requirements 

A medical specialist, for instance a nurse or a social worker in your state must evaluate your personal needs that determine if you need long term services.

Usually, this is determined based in part on whether you need assistance performing activities of daily living (ADL) such as bathing, dressing, using the toilet, transferring to or from the bed to chair, caring for incontinence, eating, and other undertakings that are vital for day-to-day living.

If you do not meet Medicaid functional eligibility criteria, Medicaid can’t pay for your long term services regardless of financial eligibility. But if you meet the general and financial requirements for eligibility, Medicaid will still cover other services such as doctor visits and prescription drugs.

General Concepts of Medicaid 

Medicaid is usually the last resort of payments for medical services incurred if an individual is eligible as a result of low income or high medical expenses yet they have other coverage options such as Medicare (among individuals aged 65 and older and certain individuals with disabilities) or private insurance (for example, from a child’s non-custodial parent). Medicaid wraps around to provide additional services that are covered by Medicaid but not the primary insurance.

At the time of its enactment, states that chose to participate in Medicaid were required to provide coverage to all categorically needy individuals who received cash payments under the federal assistance programs for the blind, aged, and disabled and families with dependent children.

Each federal assistance program was administered by the states which often set the eligibility levels below the federal poverty level (FPL).

In addition to mandatory coverage of categorically needy individuals under Medicaid, states could choose to cover an optional group of medically needy individuals who fell within one of the federal assistance categories (aged, blind, disabled and families with dependent children) but whose high income made them ineligible.

Until the mid 1980s, eligibility for Medicaid continued to be closely linked to the receipt of cash payments under Aid to Families with Dependent Children (AFDC) programs and Supplemental Security Income (SSI).

Between 1984 and 1990, Congress made changes that expanded the program to pregnant mothers and children. Mandatory and optional eligibility was also extended to additional low-income individuals aged 65 and older, people with disabilities, and families transitioning from welfare to work, among others.

There was also the creation of the ‘State Children’s Health Insurance Program (CHIP) in 1997 which has been implemented as a Medicaid expansion in many states, and the expansion of Medicaid eligibility for non-elderly adults and the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended).

Medicaid eligibility groups are typically defined by the population they cover and the financial criteria that apply. Some are mandated by federal law and others may be covered as a state option.

Children, pregnant women, on-aged, non-disabled, non-pregnant adult women, those above 65, and people with disabilities are some groups that benefit from this program.

Some states include most individuals who receive SSI and children in foster care as automatic qualifiers. In other cases, the individuals must meet financial criteria that vary both by group and state.

For example, pregnant women with an income below 133% FPL are eligible while in other states pregnant women with above the same 133% FPL are eligible.

ACA extended eligibility to adults under 65 with incomes at or under $133 FPL ($17,774 for a single person in 2021), who are not pregnant and do not have Medicare coverage. Although technically a mandatory group, the U.S.  Supreme Court ruling in June 2012 effectively made it a state option, so some states have not adopted it.

The ACA made a number of other significant changes. For all groups, the ACA included a Maintenance of Effort (MOE) provision that prevented states from reducing eligibility below what was in place on the date of its enactment on March 23, 2010.

The provision was in effect until 2024 for adults but continued through FY 2019 for children regardless of a group’s mandatory or optional status.

The ACA also aligned states’ minimum Medicaid eligibility threshold for children at $133% FPL, requiring some states to shift older children from separate CHIP programs into Medicaid.

Under ACA, income eligibility for many individuals (under 65) and not eligible on the basis of disabilities or a need for LTSS is now based on modified adjusted gross income (MAGI).

The goal of the new income counting rule is to coordinate determinations of eligibility with the subsidies for health insurance coverage provided through the exchanges created by ACA.

No asset tests apply to individuals whose eligibility is based on MAGI. However, states may require an individual’s asset to fall below a certain level in order to qualify for Medicaid on the basis of disability or 65 and older.

The treatment of both income and assets can be complex for individuals in need of LTSS (Walker and Accius 2010).

For instance, to reduce the amount paid by Medicaid, people receiving LTSS may be required to make a contribution towards the cost of the care that varies by eligibility pathway, community versus institution status, and presence of spouse living at home.

In addition to the financial criteria, other requirements must be met in order to receive the full range of benefits. These include being a national of the U.S. or a qualified alien.

Non-qualified aliens (as well as qualified aliens subject to a five year bar on full benefits) who meet income and all the other eligibility criteria for the program can only receive limited emergency Medicaid coverage.

On top of that, individuals in need of LTSS may be required to meet functional eligibility criteria that demonstrate that they have difficulty performing activities necessary for self-care and independent living.

Sources

  • Long Term Care.gov
  • Smartasset
  • MACPAC
  • Humanhealth
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