For most individuals, the object of long-term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done within the following rules of Medicaid eligibility.
THE ASSET RULES
In Rhode Island Medicaid is administered by the Department of Health and Human Services (the “DHS”). However, in order to qualify for federal reimbursement, the state program must comply with applicable federal statutes and regulations. So the following explanation includes both – and federal law as applicable.
The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $4,000 in “countable” assets in his or her name. “Countable” assets generally include all belongings except for (1) the home and associated land, regardless of value; (2) household goods and personal effects, regardless of value; (3) one motor vehicle, regardless of value (4) life insurance with a face value less than $4,000; (5) a burial site or burial plot; (6) irrevocable burial contracts or trusts; and (7) assets that are considered inaccessible for one reason or another.
There are also special rules, which are applicable if the applicant is the beneficiary of a trust. If the applicant is the settlor of a revocable trust, the assets transferred to the trust are countable assets. If the applicant (or the applicant’s spouse, unless the trust is funded via the spouse’s will) is the settlor of an irrevocable trust and the applicant is a permissible beneficiary of the trust then the maximum amount which may permissibly be distributed to the applicant will be deemed to be a countable asset. If the applicant is the settlor of an irrevocable trust but under no circumstances may receive any distribution from the trust, then the trust’s assets will not be deemed to be countable assets, although the transfer of assets to the trust may violate the asset transfer rules to be discussed later.
If assets are jointly held with someone else, the ownership interest deemed to the applicant for Medicaid depends on the type of asset. All assets held in banks under joint names are presumed to belong totally to the applicant for Medicaid. Other property held jointly, such as stocks, bonds, and real estate, are deemed to belong to the applicant in proportion to the number of owners. These deeming rules are presumptions and may be rebutted with evidence of different ownership interests or contributions. Despite these deeming rules, under OBRA-93 any transfer of joint property will be treated as having been caused by the applicant for Medicaid, no matter who in fact affected it.
The home will not be considered a countable asset and, therefore, will not be counted against the asset limits for Medicaid eligibility purposes as long as the nursing home resident intends to return home or his or her spouse or other dependent relatives live there. It does not matter if it does not appear likely that the nursing home resident will ever be able to return home; the intent to return home by itself preserves the property’s character as the person’s principal place of residence and thus as a non-countable resource. As a result, for all practical purposes nursing home residents do not have to sell their homes in order to qualify for Medicaid. However, it should be noted that this rule only applies to principal residences as opposed to summer residences or vacant lots and, as of August 10, 1993, the State of Rhode Island has been encouraged by the federal government to sell homes of individuals who have no chance of returning to them due to poor health.
Medicaid will deny coverage for nursing home care to any applicant with home equity above $688,000 for 2023 ($1,033,000 in some states such as Massachusetts and New York) unless the nursing home resident’s spouse, child under age 21, or blind or disabled child is living in the house.
The Transfer Penalty
The other major rule of Medicaid eligibility is the penalty for transferring assets. If an applicant (or his or her spouse) transfers assets, he or she will be ineligible for Medicaid for a period of time beginning on the date of the transfer. The actual number of months of ineligibility is determined by dividing the amount transferred by the figure published by DHS as to the average cost for nursing care for that state, in Rhode Island for 2022 that figure is $9,961. For instance, if an applicant made gifts totaling $179,298, he or she would be ineligible for Medicaid for 18 months ($179,298 divided by $9,961). Another way to look at this is that for every $9,961 transferred, an applicant will be ineligible for nursing home Medicaid benefits for one month.
Transfers made in the 60-months prior to the date of application, whether into trust or otherwise, must be disclosed on the application. Therefore, there is no longer a distinction between gifts made to trusts versus to individuals. As a result, an individual could theoretically transfer enough assets to create a 4-month penalty period, enter a nursing home 4-years later without any assets and be assessed the 4-month penalty at that time, some 4+ years after the transfer. As you can see, this requires careful consideration when substantial gifts are contemplated.
Rules Applicable to Transfers to Trusts
If an applicant transfers assets to a trust, he or she will be subject to special rules, which are invoked whenever a transfer of assets is made to a trust (whether revocable or irrevocable). In all cases of asset transfers, the “look back” period is 60 months. This 60-month period applies to the transfer to an irrevocable trust of assets which cannot be paid under any circumstances to the individual making such transfer, and to income from those assets, payment of which to the individual is prohibited. Thus, the effective cap on periods of ineligibility resulting from the transfer of assets to a trust is 60 months.
Exceptions to the Transfer Penalty
Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include:
- A spouse (or anyone else for the spouse’s benefit);
- A blind or disabled child;
- A trust for the benefit of a blind or disabled child; or
- A trust for the benefit of a disabled individual under age 65 (even for the benefit of the applicant under certain circumstances).
Special rules apply with respect to the transfer of a home. In addition to being able to make the transfers without penalty to one’s spouse or blind or disabled child, or into trust for other disabled beneficiaries, the applicant may freely transfer his or her home to:
- A child under age 21;
- A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home; or
- A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided such care that the applicant did not need to move to a nursing home.
As mentioned above, recently enacted legislation provides a very important escape hatch concerning the transfer penalty. A transfer can be cured by the return of the transferred asset in its entirety. Returning even one dollar less than the original gift will provide no cure.
The state has the right to recover whatever benefits it paid for the care of the Medicaid recipient from his or her probate estate. Given the rules for Medicaid eligibility, the only property of substantial value that a Medicaid recipient is likely to own at death is his or her home. Under Rhode Island law, upon the death of a recipient of medical assistance, the total sum of assistance paid on behalf of a recipient who was fifty-five (55) years of age or older at the time of receipt of such assistance shall constitute a lien upon the estate of the recipient. The term “estate” is specifically defined in the law as “real or personal property and other assets included or includable within the individual’s probate estate”. The lien does not attach against the estate of a recipient who is survived by a spouse, a child who is under the age of twenty-one (21) or a child who is blind or permanently disabled as defined in the applicable federal statute. DHS interprets the statute in such a way as to preclude a lien in every case in which the recipient is survived by a person enumerated therein regardless of whether the survivor resides in the home.
TREATMENT OF INCOME
When a nursing home resident becomes eligible for Medicaid, all of his or her income (i.e. Social Security, annuity, promissory note payments), less certain deductions, must be paid to the nursing home. The deductions include a $50-a-month personal needs allowance and a deduction for any uncovered medical costs (including medical insurance premiums). Therefore, all of the nursing home resident’s income less the personal needs allowance must be paid to the nursing home in the event that a spouse enters such a home. For 2020, if an applicants income exceeds $9,961 per month they are not eligible for Medicaid benefits. If they have income under $9,961 but greater than $6,700 and they want to start a penalty period, they can do so but cannot get community Medicaid benefits, like Rx copays and doctor bills. If their income is under $6,700 then they are eligible for all available Medicaid benefits. These rules apply to applications after October 2018.
Medicaid law provides for special protections for the spouse of a nursing home resident, known in the law as the “community” spouse. Under the general rule, the spouse of a married applicant is permitted to keep one-half of the couple’s combined assets (as of the date of institutionalization) up to $148,620 as of January 1, 2023. In addition, there is a minimum resource allowance for the community spouse of $29,724. The amount the community spouse is allowed to keep is known as the Community Spouse Resource Allowance (CSRA).
So, for example, if a couple owns $50,000 in countable assets on the date the applicant enters the hospital, he or she will be eligible for Medicaid once their assets have been reduced to a combined figure of $33,724: $4,000 for the applicant and $29.724 (minimum allowance) for the at-home spouse. If the couple owned $325,000 in assets, the spouse in need of care would not become eligible until their savings were reduced to $152,620 ($4,000 for the nursing home spouse plus a maximum of $148,620 for the community spouse). In that case, it means that the non-institutionalized spouse must spend down approximately $172,380 for the institutionalized spouse to be eligible for Medicaid.
The determination of the level of the couple’s assets is made as of the date of institutionalization of the nursing home spouse. That date is the day on which he or she enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days. It is advantageous for the couple to try to have as much money as possible in their names on that date up to $297,240 so that the amount the community spouse is allowed to keep will be as high as possible.
In all circumstances, the income of the community spouse will continue undisturbed; he or she will not have to use his or her income to support the nursing home spouse receiving Medicaid benefits. In some cases, the community spouse is also entitled to share in all or a portion of the monthly income of the nursing home spouse. The DHS determines an income floor for the community spouse, known as the minimum monthly maintenance needs allowance, or MMMNA, which, under a complicated formula, is calculated for each community spouse based on his or her housing costs. (Where the community spouse can show hardship, the DHS may award a larger MMMNA, but only after an appeal to fair hearing.) The MMMNA for a community spouse as of January 2023 with no other income will range from a low of $2,288.75 a month to a high of $3,715.50 a month. If the community spouse’s own income falls below his or her MMMNA, the shortfall can be made up from the nursing home spouse’s income. Thus, the maximum amount that may be taken from an institutionalized individual’s income for the support of a spouse and/or dependents in the community is $3,715.50 per month, except:
- In the case of a court order for spousal support; or,
- In the case of a court order or a finding by an administrative hearing.
THE MEDICAID APPLICATION
Applying for Medicaid is cumbersome and tedious. Every fact asserted in the application must be verified by documentation. The application process can drag on for several months as the DHS demands more and more verification regarding such issues as the amount of assets and dates of transfers. If the applicant does not comply with these requests and deadlines on a timely basis, DHS will deny the application. In addition, after Medicaid eligibility is achieved, it must be redetermined every six months.
Rhode Island Medicaid Numbers 2023
|Community Spouse Resource Allowance:|
|Maximum||Spousal Share (1/2 joint resources as of beginning of period of continuous institutionalization), up to $148,620.00|
|Resource Allowance for Individual:||$4,000.00 (Medically Needy)|
|Monthly Maintenance Needs Allowance:|
|Allowance for Personal Needs:||$50.00 (unless specific circumstances)|
|Therapeutic Employment:||+$85+(1/2 bal., max. $265) = max. $400|
|Guardianship, Legal, & Tax:||varies|
|Shelter Allowance:||$653.25 (unless excess)|
|Standard Utility Allowances:||$676.00 (no heat/non distinction)|
|Home Equity Limit:||$688,000.00 Minimum|
|Divestment Penalty Divisor and
Allowable Income Limit:
|$9,961.00/mo (through 3/31/2023)
$10,190/mo (effective 4/1/2023)