Medicaid has very strict rules that applicants have to abide by in order to qualify. Many of these qualifying rules have to do with your assets and how much you own.
In that sense, Medicaid has strict income and asset requirements, so it can be difficult to know what things you can buy without endangering your Medicaid eligibility.
So we put together this comprehensive article on how you can spend down your assets to qualify for Medicaid (and the CDPAP program). We will also talk about income limits for Medicaid in the state and what kinds of items you can spend down on and not hurt your Medicaid eligibility status. Lastly, we will talk about some strategies on how to protect your income and assets from Medicaid in old age.
How Does Medicaid Work?
Medicaid is a means-tested healthcare program that is designed to give coverage to those who fall below a certain income/asset threshold. Unlike Medicare, applicants for Medicaid must make under a certain annual income. Income and asset thresholds for Medicaid differ depending on your age and the state in which you live. Medicaid is one of the most widespread healthcare programs in the country and provides coverage for around 1 in 5 Americans.
Medicaid is structured as a state-federal partnership and states have the flexibility in how they determine Medicaid programs. In that sense, states have the right to determine covered populations, covered services, and delivery models for healthcare.
There is a core set of services that Medicaid must cover under federal law, but there are several options services that states might offer such as prescriptions, dental care, physical and occupational therapies, and preventative and mental health services. Since Medicaid services individuals with low income, federal law prohibits Medicaid from chagrin premiums for those under 150% of the federal poverty line.
Medicaid waivers are exceptions in Medicaid laws that allow the federal government to circumvent laws that normally apply to Medicaid programs. In other words, waivers are exceptions to Medicare eligibility so that individuals who might not otherwise get care can get care. For example, an individual might get a waiver for in-home care for Medicaid instead of long-term institutional care. There are various waivers, such as Home and Community Based Services (HCBS) waivers that allow individuals to receive long-term care in a home or community center rather than a long/term nursing facility.
What is the Maximum Income for a Single Person to Get Medicaid in NY?
According to the New York State Department of Health, as of 2021, the maximum income limit to get Medicaid in NY is $17,775 for a single individual under 65 and $24,040 for a family of two. Medicaid income limits increase for up to families of 10, after which the income threshold is raised by $6,266 per additional person. Asset limits are $15,900 for individuals and $23,400 for married couples, for both regular Medicaid and Medicaid waivers.
For seniors over the age of 65, blind, or has some other disability, the annual income limit for 1 person is $10,600 while the limit for 2 seniors is $15,600. For the purposes of Medicaid, “income” is defined as any source of money, including wages, alimony, pensions, SSDI, SSI, annuity payments, gifts, IRA disbursements, etc (Note: COVID-19 stimulus checks are not considered income and so do not affect Medicaid eligibility).
“Assets” are defined by Medicaid law to include any resource or good that has an immediate cash value, such as cash, stocks, bonds, savings, checking accounts, and houses. However, there are several types of assets that are considered exempt from the state asset limit for Medicaid eligibility. For example, NY exempts the following assets from counting towards your total assets:
– Burial funds up to $1,500
– Personal belongings
– Household items
– One vehicle
– Primary home or residence (with equity restrictions)
More generally, assets can be divided into what are called countable and uncountable assets. Countable assets are those that are highly liquid (easily converted to cash) and non-countable assets include assets that do not count towards the Medicaid limit.
It is important to realize that not meeting these requirements does not necessarily mean that you will be ineligible for Medicaid or that you cannot become eligible for Medicaid. Sometimes Medicaid eligibility is considered on a case-by-case basis and you might be able to qualify even if you exceed the income threshold if there are other, extenuating circumstances.
What Does Medicaid Spend Down Mean?
Since Medicaid has very strict income and asset thresholds, applicants can “spend down” their income or assets to meet any state-mandated thresholds. In other words, a “Medicaid” spend down means spending your income or selling your assets so that you fall under the legal Medicaid income or asset threshold. Through selling assets, you can become eligible for Medicaid services.
However, Medicaid state laws have restrictions on what kinds of spend down purchases and sales you can make and still be eligible for Medicaid. These limits are often determined by one’s marital status. For example, applicants cannot try to reduce their income or asset level by gifting money to others.
Depending on the state in which you live, Medicaid spend down options might encompass Share of cost, Surplus income, Excess Income, or Spend Down. These programs will let applicants spend their extra money to lower their income threshold and become eligible for Medicaid services. In some states, you can form what is known as a Qualified Income Trust, in which a portion of your income is siphoned away into a trust controlled by a third-party. This trust money is not counted towards your income/asset limit but it can only be used for a very limited selection of uses, such as certain medical expenses and long-term care.
What Can you Spend Down on Medicaid in NY?
In the state of NY, the Medicaid Excess Income program is the spend down program for the state. In order to be eligible to the NY spend on programs, you must be either under 21, over 65, blind or otherwise disabled, or the parent of a child under age 21. A Medicaid caseworker will determine your excess income on a case-by-case basis. Generally, they take your gross monthly income and make deductions to determine how much income you must spend to be under the threshold limit for Medicaid services. Deductions for your gross income will differ depending on whether you are under 21, over 65, blind or disabled, or parent to someone under 21.
The state of NY will allow you to spend down your excess income on the following goods and services so that you are eligible for Medicaid coverage:
– Outpatient care and services. These services may include things like prescription drugs, medical supplies, or bills from a doctor’s office. If your doctor’s bills and medical service bills exceed your excess income amount, then you can get Medicaid one month at a time for outpatient services.
– Inpatient services. If you need inpatient services, then you can qualify for spend down Medicaid limits if your medical bills for inpatient services are equivalent to your monthly excess income for at least 6 months.
Here is a specific example with actual numbers to illustrate how this works. The individual monthly income limit for Medicaid eligibility in the state is $895 per month. Say you make $1,200 a month. Your income exceeds the limits, but you can still qualify for Medicaid through the spend down program. Specifically, your income exceeds the limit by $1,200-$895 = $305. Now let’s say that your Medical bills are $905. In this case, you could pay $305 of your medical bills and Medicaid would cover the remaining $600. You spent $305 to meet the state’s Medicaid eligibility requirements and that is how spend downs work.
In the case of past medical bills, you can submit past paid medical bills to contribute to your excess income limit if those bills were incurred within 3 months of you applying for Medicaid services with excess income. So for example, if you have a paid dental bill in April from services in March and you also have unpaid medical bills for April and May. You can include the dental bill towards your excess income if you apply for Medicare in June. Past unpaid medical bills can apply to your income limit regardless of how old they are.
New York state allows for another option if your bills do not exceed your monthly excess income. You can contact your local social services department and pay your monthly excess income amount through what is called the Pay-in Program. If you do not have medical bills and you do not have the Pay-in Program, then you will be ineligible for Medicaid services.
Bills that can be counted towards your excess income include bills for:
– Medical expenses. Virtually any kind of medical expense for any doctor can count towards your spend down limit, even those expenses do not come from a Medicaid-partnered provider. Prescription drug bills are included under this portion of expenses.
– Transportation. Transportation to and from any medical appointments by Uber, taxi, bus, etc. can count towards your income limits. Make sure that you keep receipts from any of these transportation methods as proof.
– Therapists. Therapists and other home-health aide professionals that are recommended by a doctor can count to your excess income limits. In order for therapists and personal aide services to qualify, they must be approved by either the Community Alternative Services Agency (CASA) or state social services.
– Copayments. Any copayment or deductible either through private insurance, out of pocket expenses, and Medicare Part D payments qualify as copayment expenses that can be applied to your income limits.
– Medical supplies. Surgical and medical supplies for things such as wheelchairs, hearing aids, prosthetic devices, crutches, bandagings, etc. can be counted toward your excess income amount. However, supplies for non-medical and cosmetic procedures don’t count.
– EPIC and ADAP bills. Any bills that are paid through the Elderly Pharmaceutical Insurance Program (EPIC) or the AIDS Drug Assistance Program (ADAP) are eligible to count to your excess income limits. This includes both copayments and any expenses paid by either organization. You can also utilize the past 3 months of services from these organizations to your spend down amount.
– Chiropractic services. Chiropractic services from a qualified professional and organization can count towards your excess income for Medicaid eligibility requirements.
– Family medical bills. Also, Medicaid applicants can count medical bills for a spouse or dependent that is under 21 toward their own excess income spend down. Similarly, if you are under 21 and your parents have medical bills, you can use those bills to count to an income spend down limit.
Additionally, you can also spend down on your countable assets to lower your asset threshold to meet eligibility requirements in NY. NY allows you to spend down on assets for Medicaid.
– Prepaid funeral expenses. You can spend down on any prepaid funeral expenses and reduce your assets. Prepaid funeral expenses cannot be refunded and so Medicaid will determine that these assets no longer belong to you because you cannot access the money anymore if it is in trust.
– Repairs or improvements to your home. Home repairs and improvements to your home are allowed to spend on repairs to lower your asset spend down threshold. Any kind of home improvement or repair can be covered and count towards your asset spend down threshold. For example, if you or your spouse is living with disabilities, you could make changes to make their quality of life better.
– Paying off debts. Excess income can be put towards paying off debt. It does not matter what kind of debt, any kind of debt will count to your spend down limits, including loans, mortgages, children’s student loans, credit card bills, etc.
– Purchasing an annuity. You can also purchase an annuity and put the lump sum upfront towards your spend down limit. However, make sure that any annuity that you buy does not affect your income limits for Medicaid.
– Purchasing a car or repairing one. If you buy a new car, then you can put the down payment towards your asset spend down limit. You can also use any payments for repairs to your excess income limit and you can modify your car to make it more comfortable. Keep in mind that you can only use expenses to a car for your income limit only if it is the only car that you own. So if you buy a second car, then you cannot count that expense to your spend down limit.
– Personal wellness. Personal wellness investment might be eligible to count toward your excess income spend down. Items that contribute to personal health and wellness, such as extra support for your back in bed, or costs for a personal fitness trainer can be allowed to count to your income/asset spend down.
– Care provider. If you have a care provider to help with daily living tasks, then you can use any wages you pay to your income spend down limit. You can even hire a family member or friend to be a caretaker, but you must pay the caretaker a reasonable wage. The wage you pay can count to your income. If you want to hire a family member or a friend as a caretaker and wish to keep this service when you get Medicaid, you can find more details through CDPAP.
Can You Own Property and Get Medicaid?
Yes, you can own some kinds of property and they will not count to your asset threshold for Medicaid eligibility. In general, your primary home residence is exempt from the Medicaid asset threshold provided that you own less than $906,000 in equity interest from the home. In other words, if you are single and own less than $906,000 of your home, then the house does not count to your asset threshold. Also, if you are married, then your principal home will not count to your asset threshold, no matter your home equity interest. If you have a primary residence but are not currently living there, the house can be considered exempt if you plan to return there and live there.
Keep in mind that asset exemptions for your house only count for one house that is your primary residence. If you own any other property such as a vacation home, rental properties, etc., then these cannot be exempted from your asset threshold limit. This also includes any kind of non-residential property such as commercial properties, storage units, etc.
What is the 5 Year Rule for Medicaid?
Given that Medicaid allows you to decrease your assets/income to meet the threshold, the government wants to make sure that nobody is giving away or welling their possessions at lower than fair market value to lower their income or assets. The 5-year lookback period, also known as the “5-year rule” means that the government will review all asset transfers you have made in the past 5 years. If any of these transactions sold the asset for less than the fair market value or gifted, then a p[enalty period will be applied in which the applicant will not be eligible for Medicaid. This is because had those assets not been gifted or sold at below the fair market value, they could have been used to pay for the treatment. If you gift or sell assets below fair market value before the look-back period, those transactions are not considered.
The 5 year lookback period begins from the date on which the applicant applies for Medicaid. So for example, if you applied for Medicaid on June 1st, 2021, then the lookback period would look at the period between 6/1/16-6/1/21.
Currently, the state of New York has a lookback period of 5 years (60 months) for nursing home Medicaid and currently does not have a lookback period for the Community Medicaid program. However, New York does plan to switch to a 30 month lookback period for the Community Medicaid sometime this year.
It’s important to realize that even if a person passes the initial lookback period inspection, if they come into some asset then either gift it or sell it for under fair market value, then they can be in violation of the 5 -year lookback rule.
How Can I Protect my Money from Medicaid?
Long-term medical care can either be paid with out of pocket funds, a long-term insurance plan, or Medicaid. Since most people do not make enough to pay out of pocket for all long-term medical care and long-term care insurance is hard to find and takes years to become viable, many people end up relying on Medicaid to pay for long-term care. As we have just covered though. If you surpass the income or asset threshold, then you need to spend down your assets to qualify for Medicaid. However, many seniors do not want to get rid of all of their assets, as they might wish to transfer those to their family when they pass away. Additionally, when a Medicaid recipient dies, the government will recover the benefits it gave you through the deceased’s estate. Fortunately, there are ways that you can safeguard your assets from Medicaid requirements and ensure they are passed down to your descendants.
An irrevocable trust allows you to put your assets away for another person after a time frame. Trusts accounts are controlled by a third-party and you can designate who you want the trust to go to. Since the funds in a trust are no longer legally considered yours, they will not be counted as countable assets to your asset spend down limit. Any proceeds that are generated from the sale of an asset in a trust will not affect Medicaid eligibility.
Gift Non-countable Assets
As we have already covered, some assets are considered non-countable and do not count to your asset limit threshold. These non-countable assets can be given away with little to no consequences to your Medicaid eligibility. Things like household goods, personal effects, your house, and retirement accounts like IRAs or 401(k)s are not considered countable assets. However, keep in mind that gifting these assets might incur specific tax penalties, depending on the type of asset gifted.
Purchase an Annuity
You can also purchase an annuity to lower your asset threshold to below the Medicaid limit and establish a stream of income for you in future years. The annuity must be Medicaid compliant and monthly income withdrawals must keep your monthly income under and income thresholds.
Many of the transfer limitations for the lookback period are exempt for transfers between spouses. In other words, one spouse can transfer any assets under their name to under their spouse’s name, and that transfer will be exempt from any lookback period. In New York, the spouse can then “refuse” to support the spouse who needs care and they can get Medicaid. New York and Florida are the only two states that allow for this kind of spousal transfer and spousal refusal.