Before talking about Medicaid’s long-term care benefits for people with Alzheimer’s or other forms of dementia, it is important to understand what Medicaid is. People who understand Medicaid and its sub-programs may want to skip this section of the article.
Medicaid is health insurance for low-income Americans of all ages. Recipients of Medicaid must have monthly income and countable assets (including what money they have in the bank) below a certain amount. The income limit is $2,742 per month in 2023, and the asset limit is $2,000. However, these numbers can differ depending on the state because Medicaid is managed at the state level and therefore varies depending on where one resides.
Medicaid is often confused with Medicare, but they are very different. Medicare is health insurance for all Americans aged 65+, regardless of their income. Medicare is managed at the federal level, so it’s the same for all recipients regardless of their state of residence. Medicare covers medical needs like doctor visits, diagnostic tests, hospitalization, and medications. In contrast, Medicaid pays for many long-term non-medical services and supports that people with Alzheimer’s or other forms of dementia require.
There is also the option that some elect by using Medicare Advantage plans. These are private insurers who offer Medicare benefits and supplemental coverage, some of which may be non-medical support for people with dementia that is similar in coverage to Medicaid.
A key factor to understanding Medicaid is knowing the difference between institutional Medicaid and Home and Community-Based Services (HCBS).
– Institutional Medicaid is also known as Nursing Home Medicaid because it is provided in nursing homes.
– Home and Community-Based Services are Medicaid services for people living at home or “in the community”.
The phrase “in the community” can include adult foster care homes, adult family homes, adult day care, and assisted living residences with memory care units which are assisted living options for people with dementia. The HCBS program is meant to prevent someone living with dementia from having to move into a nursing home because they are unable to live independently.
Medicaid is run at the state level. Because of this, many states have their own names for their Medicaid program. In California, it is called Medi-Cal, in Massachusetts, MassHealth, and in Washington State, Apple Health.
Institutional Medicaid, is also called nursing home Medicaid. This is a nationwide entitlement program that is in all 50 U.S. states and the District of Columbia. This means that if someone is eligible for Medicaid, the state must pay for their nursing home care.
HCBS Medicaid Waivers
Home and Community-Based Services are most provided via Medicaid Waivers, often referred to as 1915(c) Waivers. The HCBS program can be provided in a variety of settings, including at home and memory care residences.
Medicaid Waivers are not an entitlement. This means eligibility does not guarantee benefits due to the limited number of participants accepted to the program. A person with dementia can be eligible for the program but may be placed on a waitlist for services. Waitlists in some states can be several years long, although these are extreme cases. Keep in mind that some Medicaid waivers are meant for a specific group of people, such as those with Alzheimer’s disease or related dementia.
Aged, Blind and Disabled (ABD) Medicaid
HCBS programs are also available in some states via their Aged, Blind, and Disabled Medicaid program, also known as regular Medicaid. Generally, the covered services are more limited than through Medicaid waivers. Unlike Medicaid waivers, Home and Community-Based Services through the ABD Medicaid program are an entitlement. That means that after meeting the requirements for eligibility, there are no waitlists and the state must cover HCBS services for a dementia applicant. Additionally, a state’s regular Medicaid program has more restrictive financial eligibility requirements than those for HCBS Waivers.
To think about what Medicaid covers in the home is beyond traditional home health care benefits. That is because many support services offer home assistance. First, we will discuss the range of benefits, and then how a Medicaid beneficiary can access this coverage.
Beyond home health care, which is critical for people with dementia or Alzheimer’s, is personal care or assistance with activities of daily living (ADLs). This offers support and assistance in doing everyday activities like bathing, grooming, mobility, toiletry, transferring, and eating. Medicaid assesses a recipient’s care needs and pays for a healthcare professional to visit the home and assist with ADLs.
Most states also offer assistance with the Instrumental Activities of Daily Living, such as medication management, shopping for essentials, light house cleaning, and food preparation. Chore services, typically for home maintenance, are sometimes a benefit as well.
Medical alert services, called personal emergency response systems (PERS) in formal Medicaid language, are regularly covered by Medicaid. However, Medicaid will typically pay for the most basic service, which may or may not include GPS tracking to prevent wandering.
Another benefit that may be available is home modifications. This can benefit people with dementia by allowing them to continue living at home. Examples include the addition of grab bars, widening doorways, adding ramps to allow wheelchair access, and installing walk-in showers.
Medicaid might pay for assistive technology, such as electronic pill boxes to remind people with dementia to take their medications. There can also be coverage for in-home respite care to give unpaid family caregivers a break from their caregiving duties.
Medicaid recipients can access in-home support services either through their state’s regular Medicaid program or through an HCBS Medicaid Waiver.
Adult daycare offers supervision during daytime hours, typically only on weekdays, in a structured and dedicated environment. Meals, activities, personal care assistance, and medication management can be included.
For people with dementia, regular adult day care may not provide enough structure. Specialized adult daycare centers, sometimes called Alzheimer’s Day Treatment Centers, may be a better option. The staff here receives specialized training in dementia-related behavior challenges and there is additional security that prevents wandering. In nearly all states, Medicaid will pay for adult daycare.
Many states also offer adult daycare as a benefit of their regular Medicaid program, as well as an HCBS Waiver benefit.
For most people with Alzheimer’s or dementia, typical assisted living communities cannot provide adequate support. Instead, these communities have memory care wings often on a secured floor or standalone residences.
Medicaid will normally pay for support and care services in assisted living and memory care residences. An important distinction must be made: By law, Medicaid cannot pay for the cost of room and board, or “rent”, for its beneficiaries who reside in assisted living residences. Instead, Medicaid pays the cost of care services in those residences. In very ballpark terms, half of the monthly cost of memory care goes toward “rent” and the other half towards the care the residents receive. Care usually includes the following:
– Help with ADLs
– Help with IADLs
– Transportation to doctor’s appointments
– Personal Emergency Response Systems (PERS) or medical alert devices
In most states, these services in assisted living and memory care are covered by an assisted living Medicaid waiver. Some states also offer personal care assistance through their regular Medicaid program. In these states, the law generally does not put restrictions on the location in which personal care can be provided. That means that the care recipient can still receive “personal care”, but instead of living at home, they can live in a memory care residence.
Adult foster care is similar to assisted living in that people with Alzheimer’s or dementia live in these facilities full-time. However, there are far fewer residents. Instead of 10 to 100 residents that normally reside in a memory care residence, there may be only 1 to 4 residents in a home.
Adult foster care homes are often the homes of private individuals who “take in” people with dementia in return for compensation from Medicaid. Medicaid’s coverage of adult foster care is difficult to generalize. In a few states, Medicaid has programs that pay for adult foster care. Many states do not have explicit laws defining their Medicaid policy for adult foster care or ones that distinguish between adult foster care and assisted living. That means Medicaid would likely cover care costs, but not room and board, in adult foster care.
Adult foster care can be called many things depending on where you live. They can be referred to as adult family homes, adult family living, family care homes, and community care foster family homes.
In all 50 states and Washington D.C., Medicaid will cover nursing home care for people with Alzheimer’s or another form of dementia. This is an entitlement program, meaning anyone who is financially and functionally eligible (see below) must receive coverage. Unlike memory care communities, states are not prohibited from paying the cost of room and board in nursing homes. That means that Medicaid will pay all costs of living in a nursing home, including rent, meals, and personal care. Remember, Medicaid will not pay for room and board in assisted living or memory care.
Do all nursing homes accept Medicaid patients? No, not every nursing home will accept people paying with Medicaid. There are private-pay-only nursing homes. Fortunately, the vast majority of nursing homes do accept Medicaid. In California, for example, it is estimated that 90% of nursing homes accept Medicaid. Complicating matters is the fact that nursing homes may only accept a certain number of Medicaid beneficiaries. If one enters a Medicaid nursing home as a private payer and then becomes Medicaid eligible, the nursing home, by law, must continue to house and provide care for that individual.
Medicaid Long Term Care is a collection of programs designed for persons with low income, limited financial assets, and functional needs. The actual income and assets limits, as well as functional criteria, are determined by each state separately. Furthermore, the income and asset requirements vary based on the Medicaid program and the applicant’s marital status. Functional criteria also vary based on the program for which one is applying.
Medicaid’s financial eligibility criteria are complicated and change annually. Below is the general eligibility criteria. Remember that these are nationwide norms that do not apply in all states. To see state-specific eligibility requirements, click here.
Nursing Home Medicaid and HCBS Medicaid Waiver Applicants
In 2023, single nursing home Medicaid applicants and HCBS Medicaid waiver applicants are permitted up to $2,742 in monthly income. This amount is 300% of the SSI Federal Benefit Rate. However, nursing home Medicaid applicants must surrender the majority of their income to Medicaid in exchange for their care. Patients receiving Medicaid-funded assisted living services are often limited to a small monthly personal needs allowance, while those receiving Medicaid care at home are permitted to keep their income.
Single applicants are also permitted up to $2,000 in countable assets. Countable assets exclude one’s home provided they live in their home or have an “intent” to return to the home, and their home equity interest does not exceed approximately $603,000 – $906,000 (depending on their state). Home equity interest is the current value of one’s home minus any outstanding mortgage. California is one exception, as there is no home equity interest limit.
Regular State Medicaid Applicants
In 2023, the income limit is usually lower for single people applying for their state’s regular Medicaid program. Income limits can be hard to define because in about half of the states, single applicants are permitted $914 per month in income, and in the other half, the single income limit is $1,215 monthly. In addition, applicants are allowed up to $3,000 in countable assets. This excludes things such as one’s home, vehicle, clothing, and furniture.
Single applicants must demonstrate a medical need for Medicaid Long Term Care. This usually means an applicant must require a nursing home level of care. However, there is no clear definition of what this means.
Often, states use an inability to complete a specific number of activities of daily living as a measure to determine if applicants require a nursing home level of care. An online ADL assessment tool is available here. As an example, a state may determine a person with dementia who needs assistance with bathing, getting dressed, and eating requires the same level of care as provided in a nursing home. A diagnosis of Alzheimer’s disease or related dementia does not automatically mean an applicant meets a nursing home level of care.
Applicants applying for long-term care through their state’s Medicaid program do not always need to demonstrate they require such a high level of care. Benefits under the Aged, Blind and Disabled Medicaid program, usually have a lower threshold for functional need (meaning an applicant can be more independent) than under Nursing Home Medicaid and HCBS waivers.
Nursing Home Medicaid and HCBS Medicaid Waiver Applicants
For married nursing home Medicaid and HCBS Medicaid waiver applicants, a considerable amount of income and assets can be allocated to their non-applicant spouses. The rules allow this because the “well spouse” (non-applicant spouse) needs adequate funds to continue to live on their own. These are also referred to as spousal impoverishment laws. In this mixed-status situation, the couple’s incomes are evaluated independently.
Largely, the same income rules apply as described above for a single applicant. In some situations, a portion of the applicant’s income can be transferred to the non-applicant spouse. This is called a monthly maintenance needs allowance.
In 2023, the maximum allowable amount that can be transferred is $3,715.50 per month. Unlike income, a couple’s assets are not evaluated separately. Rather, they are considered jointly owned. As of 2023 in all states, the non-applicant spouse is permitted up to $148,600 in countable assets, not including the value of their home, vehicle, or other personal effects. This is called a community spouse resource allowance and is in addition to the $2,000 in assets the applicant’s spouse can retain.
Regular State Medicaid Applicants
Regular Medicaid is also referred to as Aged, Blind and Disabled Medicaid. When only one spouse of a married couple is applying for the regular state Medicaid program, spousal impoverishment laws do not apply. In this situation, the incomes of both spouses are used to determine the applicant spouse’s eligibility. The couple’s assets are still considered jointly owned and the non-applicant spouse is not allocated additional assets. In 2023, income limits can be hard to define because in about half of the states, married couples are permitted $1,371 per month in income, and in the other half, the maximum limit is $1,643 monthly. The couple can keep up to $3,000 in assets. This is a combined value and does not change if only one spouse is applying for the program. Certain assets, such as the couple’s home, are exempt from the asset limit.
The medical need for Medicaid’s long-term care program is the same for an applicant’s spouse as for single applicants. They must require a level of care that is consistent with what is provided in a nursing home. The one exception is that some regular state (or Aged, Blind and Disabled) Medicaid programs for long-term care permit a lower level of care and can accept more independent patients.
A diagnosis of Alzheimer’s or another form of dementia does not mean one will be automatically qualified to need a nursing home level of care.
Nursing Home Medicaid and HCBS Medicaid Waiver Applicants
In 2023, married couples applying for nursing home Medicaid or an HCBS Medicaid waiver must have a monthly income of less than $5,484 and countable assets of less than $4,000. The reason behind this is that many states consider married spouses who are both applying for benefits considered as single applicants. Therefore, each individual is allowed up to $2,742 in monthly income which is equal to 300% of the Federal Benefit Rate and $2,000 in assets. Some assets, such as the couple’s primary home (given that one spouse continues to live in the home or intends to live in the future), household furnishings, and a motor vehicle are not counted towards the asset limit.
Regular State Medicaid Applicants
When a married couple is applying for coverage for both spouses, they are permitted the same level of income and assets as when just one spouse applies for the program. Regular Medicaid is also referred to as Aged, Blind and Disabled Medicaid. In 2023, income limits can be hard to define because in about half of the states, married couples are permitted $1,371 per month in income, and in the other half, the maximum limit is $1,643 monthly. The couple can keep up to $3,000 in assets. Some higher-valued assets are not counted towards the asset limit, including the couple’s home and vehicle.
Applicants must demonstrate that they need a nursing home level of care. Unfortunately, a diagnosis of Alzheimer’s disease or related dementia does not automatically mean that this requirement is met. Not all regular long-term care state Medicaid programs require this level of care, although applicants will always need to prove a need for care.
When someone is over the financial eligibility requirements for Medicaid does not mean they cannot become eligible. There are many alternative pathways to eligibility. This is in addition to planning strategies to help applicants who do not immediately qualify but cannot afford their care costs.
Some of these strategies are complicated and can violate Medicaid’s look-back rule if not done correctly. The look-back rule is a period in which Medicaid looks back at all past asset transfers to ensure assets were not given away or sold under fair market value to meet Medicaid’s asset limit. The look-back period is 60 months in all states except New York and California, which are 30 months. Violating the look-back rule can result in a period of Medicaid ineligibility.
To further complicate matters, alternative pathways to eligibility are not consistent across all states and not all planning strategies are available in every state. It is highly recommended that people with dementia who are over Medicaid’s financial requirements contact a professional Medicaid planner for assistance in gaining financial eligibility.
Medically Needy Pathway
For people who make more than the income limits but have high monthly medical expenses, some states allow for a medically needy pathway for eligibility. This pathway can be called a spend-down program. With this option, there is a “spend-down” period. During this timeframe, applicants spend their “excess” income (the income over Medicaid’s limit) towards medical bills and care expenses. This can be expenses such as Medicare premiums, prescription drugs for dementia, and personal care assistance in the home. Once the applicant’s income is “spent-down” to Medicaid’s income limit, the applicant can be eligible for Medicaid during the remainder of the spend-down period.
The medically needy income limit varies widely depending on the state, but it is often lower than the income limits for other pathways toward eligibility. The medically needy pathway is not an option in all states.
Qualified Income Trusts
Qualified Income Trusts (QITs), also called Miller Trusts, allow for some Medicaid applicants with dementia to meet the income limit. As a simplified explanation, a Miller Trust is an irrevocable trust (the conditions of the trust cannot be changed or canceled) in which the individual’s “excess” income (over Medicaid’s income limit) is deposited each month and does not count towards Medicaid’s income limit. The money in the account, which is managed by a trustee, can only be used for contributing towards the cost of care of a person with dementia. Any remaining funds after the death of the Medicaid recipient must be paid to the state. The amount can be up to the dollar value paid by the state paid for long-term care. In this case, the state is a named beneficiary of the trust. This option is not available nationwide, about half of the states allow applicants to create QITs.
Community Spouse Resource Allowance
This is a way that non-applying spouses are given a way to protect and retain more of their assets. The non-applying spouse needs resources to live on that are not counted toward their loved one’s eligibility when they are applying for nursing home Medicaid or HCBS Medicaid. The person who is applying is still able to retain $2,000 in countable assets, but this becomes a complicated process for the other spouse that is not uniform across all 50 states. The Community Spouse Resource Allowance is designed to keep families from being impoverished due to applying for Medicaid. The federal government has set limits to protect this. These figures change annually and change from state to state. In 2023, this ranges from $29,724 to $148,620. In a little bit more than a quarter of the states, one hundred percent of the couple’s assets are counted toward the maximum asset limit. This includes residents of Alaska, California, Colorado, Florida, Georgia, Hawaii, Illinois, Louisiana, Maine, Minnesota, Mississippi, South Carolina, Vermont, and Wyoming. In the rest of the states, a fifty percent rule is used. That means that the couple’s assets are added up and split in half and the non-applying spouse can retain their portion. As with all Medicaid rules and processes, it is always recommended to consult a Medicaid professional planner who is an expert in this area and your specific state regulations.
Asset Spend Down
Spending countable assets on non-countable assets can help Medicaid applicants meet the asset limit. One way to do this is by paying for home and safety modifications that enable a person with dementia to continue to live in their home. As an example, a wheelchair may be required as mobility diminishes, and modifications can be made to have doorways widened, roll-in showers and pedestal sinks added, and flooring replaced to be more wheelchair-friendly. Other ways to “spend down” assets include paying off debt, making fixes to a personal vehicle (including buying new tires), installing a new roof, and purchasing medical equipment like a wheelchair or hearing aids.
Irrevocable Funeral Trusts
Prepaying funeral and burial costs through an irrevocable funeral trust is another way to spend down excess assets. Essentially, once the funeral trust is created, the funds in the trust are no longer considered to be owned by the Medicaid applicant. This is because the trust is irrevocable, meaning once it is created, the agreement cannot be altered or terminated, and the individual no longer has access to the funds. Irrevocable funeral trusts can be purchased for the Medicaid recipient, his or her spouse, and their children, and are generally limited to $15,000 per person.
The purchase of a “Medicaid-exempt annuity” is another option to lower a Medicaid applicant’s countable assets. This works by converting a lump sum of cash that is countable assets into a stream of income, thus no longer counting toward the asset limit. Remember, an annuity payment is counted towards Medicaid’s income limit, which sometimes may cause a Medicaid applicant to be over the income limit.
When only one spouse of a married couple is applying for long-term care via an HCBS Medicaid waiver or institutional Medicaid, an annuity can be a smart option. This is because the income stream can be paid to the non-applicant spouse and their income is not used in calculating the eligibility of the person applying.
Before implementing any planning strategy to lower countable income or assets, it is highly recommended to contact a professional Medicaid planner for assistance. Medicaid planners are knowledgeable and know the ins and outs of planning techniques available in your state. In addition, they implement planning techniques without violating Medicaid’s look-back rule, which avoids an unnecessary period of Medicaid ineligibility. To find a professional Medicaid planner, click here.