26 May Success Story Of The Month: Government Pays For Care Cost At Home
Many who need long-term care would prefer getting that care at home rather than in a skilled nursing facility. However, many are unaware that there is a Medicaid program (Star+Plus Waiver) which pays for a caregiver to come to where the Medicaid recipient lives (i.e., 35-40 hours per week) if the applicant meets certain eligibility requirements. The case discussed below concerns a married couple and one spouse needs care and the other does not.
The 3 major differences in the rules for eligibility for care at a nursing home vs. care at home are as follows:
(1) Penalty rules differ.
An uncompensated transfer that does not meet an exception is subject to a period of 5 years of ineligibility (if made within 5 years of the application) under the Star+Plus Waiver program. In contrast, an uncompensated transfer is divided by the average daily nursing home care cost in Texas if the applicant is in a nursing home. The penalty (for the nursing home Medicaid program) starts from the month the applicant applies and is otherwise eligible. As a result, if the applicant made a gift of $7000 and the average cost of care was approximately $7000 per month, then there would be a 1-month penalty (the applicant would have to private pay 1 month). In contrast, there would be 5 years of ineligibility under the Star+Plus Waiver Medicaid program.
(2) Applicant keeps income up to the cap even if the well spouse’s income exceeds the spousal limit.
The income cap for eligibility of an applicant is presently $2742 (gross) per month for both programs. There is no limit on the amount the well spouse (known as the community spouse) is permitted to have (although it makes a difference in how much of the assets can be kept by the couple without “spenddown” (which will be described below). However, if the applicant’s gross income combined with the community spouse’s gross income exceeds the spousal limit (currently $3715.50), then there cannot be a diversion from the institutionalized spouse to the community spouse under the nursing home Medicaid program. As an example, if the community spouse had monthly income of $4000, then there could be no diversion of income from the institutionalized spouse to the community spouse and the applicant would essentially give up his or her income as their cost of care (applicant’s co-payment) if the applicant was in a skilled nursing facility.
In contrast, there would be no co-payment if the Medicaid applicant’s income per month was less than the income cap under the Star+Plus Waiver program. It should be mentioned that if the applicant’s income exceeds the cap, then a qualified income trust would overcome that eligibility issue. If the applicant applied for Star+Plus Waiver Medicaid, then the excess over the cap would be paid to the State for the caregivers.
(3) Expansion formula is different.
Even though the government looks at the countable resources and divides that amount by two not to exceed $148,620 to determine how much the community spouse can keep without a spenddown, that resource limit can be expanded if the couples combined, non-countable resource income (i.e., Social Security, pension) is lower than the spousal limit ($3715.50 for the Medicaid program if the applicant is in a nursing home). That formula is different for the Star+Plus Waiver Program and often expansion can even be greater. As a result of this difference, far more countable resources are often permitted for eligibility under the Star+Plus Waiver Medicaid program.
The facts for our success story are as follows:
Husband and wife live at home, but husband’s health requires skilled care. The husband prefers to stay at home. The husband and wife have $50,000 in checking and savings and a rental property worth $300,000. Although the husband’s income is less than the income cap, the couple’s non-countable resource income is around $4200 per month. As a result, if the husband went into a nursing home, then there would not be eligibility until the couple’s countable resources were down to $148,620. This would force the sale of the rental property, which they don’t want to do.
However under the Star+Plus Waiver Medicaid program, all countable resources totaling $350,000 (rental property, checking and savings) could be kept without spenddown due to the different formula for expansion.
The income for ½ of the rent and the husband’s Social Security exceed the income cap of $2742. Since there is no transfer penalty between spouses (even if within 5 years), the husband transfers his interest in the rental property and the rental income to his wife.
As a result of this simple plan using the rules, the following was accomplished:
- The government pays for husbands’ care for 35 hours per week plus drug costs.
- There is no need for a qualified income trust since the rental property and its subsequent income was transferred to the wife.
- The husband keeps all of his income since his Social Security is below the cap (unlike if he were in a nursing home).
- There is no need to sell the rental property due to the different formula rule for expansion.
One negative is the potential loss of “step-up” in basis if the husband dies first and the wife sold the property during her life since the rental property was partitioned and became the separate property of the wife. In this case, the wife has no plans on selling the rental property during her life. So, the benefit of the government paying for the care cost at home plus medications probably for the remainder of the husband’s life far exceeded the potential of the loss of step-up in basis if the husband died first and the wife sold the property during her life.
Similar to tax laws, knowledge of the rules is important to see if your goals can be met (in this case, cost of care eliminated and assets preserved).
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