Prior to a discussion of Medicaid’s long-term care benefits for persons with Alzheimer’s or other forms of dementia, it is helpful to understand what the Medicaid program is. Persons who fully 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. Medicaid should not be confused with Medicare. Medicare is health insurance for all Americans, aged 65+ regardless of their income. Medicaid, unlike Medicare, pays for many long-term non-medical services and supports that persons with Alzheimer’s or other dementias require. That said, some persons opt to receive their Medicare benefits through Medicare Advantage plans, which in addition to Medicare benefits, offer supplemental benefits, some of which may be non-medical services and supports for persons with dementia.
Critical to understanding Medicaid, is understanding the difference between institutional Medicaid and Home and Community Based Services (HCBS). Institutional Medicaid is provided in nursing homes. Home and Community Based Services, as implied by the name, are Medicaid services provided to individuals living at home or “in the community”. The phrase “in the community” includes adult foster care homes / adult family homes, adult day care, and assisted living residences, including assisted living specifically designed for persons with dementia called “Memory Care” or “Alzheimer’s Care”. HCBS are meant to prevent people living with dementia from premature nursing home admission due to the progression of the disease. As a side note, many states have their own names for their Medicaid program. For example, in California it is called Medi-Cal, in Massachusetts, MassHealth, and in Washington State, Apple Health.
Institutional Medicaid, also called nursing home Medicaid, is an entitlement in all 50 U.S. states and the District of Columbia. This means, should the individual be eligible for Medicaid, the state must pay for their nursing home care.
HCBS Medicaid Waivers
HCBS are most commonly provided via Medicaid Waivers, often referred to as 1915(c) Waivers. As mentioned above, home and community-based services can be provided in a variety of settings, which includes at home and in memory care residences. Medicaid Waivers are not an entitlement. This means a person with dementia can be eligible for the program, but may be placed on a wait list for services. This is because waivers have only a limited number of participant slots. Wait lists in some states can be several years long, although admittedly, these are extreme cases. Also, worth mentioning, some Medicaid waivers target a specific group of people, such as those with Alzheimer’s disease or a related dementia.
HCBS are also available in some states through their regular Medicaid program, although generally the services offered are more limited than through Medicaid waivers. Unlike Medicaid waivers, home and community-based services through the state Medicaid program are an entitlement. Stated differently, meeting the requirements for state Medicaid HCBS means the state must cover HCBS services for a dementia applicant. Generally, a state’s regular Medicaid program has more restrictive financial eligibility requirements than for HCBS Waivers.
Rather than thinking only of Medicaid’s home health care benefits, one should think more broadly because Medicaid offers much more assistance in the home than just health care. First, we’ll discuss the range of benefits, and then briefly how the Medicaid beneficiary would get access to these benefits. IMPORTANT – each state offers slightly different long-term care benefits; this article is written in generalized terms, not state specific terms.
Beyond home health care, most critical for persons with dementia or Alzheimer’s, is personal care or assistance with activities of daily living, such as bathing, grooming, mobility, toiletry, transferring, and eating, which fortunately, Medicaid covers. Most states also offer assistance with the Instrumental Activities of Daily Living, such as medication management, shopping for essentials, light housecleaning, and preparing food. 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 frequently 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 are home modifications, which can assist persons with dementia in continuing to live at home. Examples include the addition of grab bars, widening doorways to allow wheelchair access, and installing walk-in showers. Furthermore, Medicaid might pay for assistive technology, such as electronic pill boxes to remind persons with dementia to take their medications, or 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 a HCBS Medicaid Waiver.
Adult day care is formal supervision during day-time hours, typically only on weekdays, in a structured, dedicated environment. Meals, activities, personal care assistance, and often medication management, are included. However, for persons with dementia, regular adult day care may not provide enough structure. Specialized adult day care centers, sometimes called Alzheimer’s Day Treatment Centers, may be necessary. Staff at these organizations receive specialized training for dementia-related behavior challenges and security is increased to preventing wandering. In nearly all states, Medicaid will pay for adult day care.
Many states offer adult day care as a benefit of their regular Medicaid program, as well as a HCBS Waiver benefit.
For most persons with Alzheimer’s or dementia, normal assisted living communities cannot provide adequate support. Instead, these communities have “memory care” wings (often a secured floor) or are standalone memory care residences. In almost every state, Medicaid will pay for some care in assisted living / memory care residences. However, an important distinction must be made. Medicaid, by law, is prohibited from paying for the cost of room and board or “rent” for its beneficiaries who reside in assisted living residences. Rather, Medicaid can pay for their cost of care 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.
In most states, care in assisted living / memory care is 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. To clarify, the care recipient would be receiving “personal care”, but instead of living at home, they would receive that care in their primary place of residence, which happens to be a memory care residence.
Adult foster care is similar to assisted living in that the person with Alzheimer’s / dementia resides in the location full-time. However, instead of there being 10-100 residents as there is in a memory care residence, there may be only 1-4 residents in the home. Adult foster care homes are often the homes of private individuals who “take in” persons with dementia and receive compensation from Medicaid for doing so. Medicaid’s coverage of adult foster care is very difficult to generalize. In a few states, Medicaid outright has programs that pay for adult foster care. However, many states don’t have clear laws defining their Medicaid policy for adult foster care or don’t have clear laws that distinguish what adult foster care is vs. assisted living. Depending on the state in which one resides, a variation of terms for adult foster care may be heard; adult family homes, adult family living, family care homes, and community care foster family homes.
As mentioned previously, in all 50 states and Washington D.C., Medicaid will cover nursing home care for persons with Alzheimer’s or other dementias. This Medicaid coverage is an entitlement. Unlike, memory care communities, states are not prohibited from covering the cost of room and board in nursing homes. Medicaid will pay for the individual’s room, meals, and their care. Do all nursing homes accept Medicaid patients? No, not every nursing home will accept persons on 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.
Long-term care Medicaid is a program designed for persons with low income, limited financial assets, and functional need. 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. Please note; the financial criteria change annually. To say Medicaid eligibility is complicated, is an understatement. Below we provide general eligibility criteria. While it applies to most states, it does not apply to all states. To see state specific eligibility requirements, click here.
Nursing Home Medicaid and HCBS Medicaid Waiver Applicants
In 2021, single nursing home Medicaid applicants and HCBS Medicaid waiver applicants are permitted up to $2,382 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. Persons 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 in 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 2021, the income limit is usually lower for single persons applying for their state’s regular Medicaid program. Single applicants are permitted either $794 / month in income (100% of the SSI Federal Benefit Rate) or $1,073 in monthly income (100% of the Federal Poverty Level). In addition, applicants are generally allowed up to $2,000 in assets, excluding exempt (non-countable) assets, such as their home and vehicle.
Single applicants must demonstrate a functional (medical) need for long-term care Medicaid. This usually means an applicant must require a nursing home level of care. However, there is no clear definition as to 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 this 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 a related dementia does not automatically mean an applicant meets a nursing home level of care. Please note that applicants who are 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.
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 called 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. That said, 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, and in 2021, the maximum allowable amount that can be transferred is $3,259.50 / month. Unlike income, a couple’s assets are not evaluated separately. Rather, they are considered jointly owned. In all states, in 2021, the non-applicant spouse is permitted up to between $66,480 and $130,380 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 spouse is able to retain.
Regular State Medicaid Applicants
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 in determining the applicant spouse’s eligibility, and while the couple’s assets are still considered jointly owned, the non-applicant spouse is not allocated additional assets. In 2021, a couple can have up to $1,191 in monthly income (100% of the SSI Federal Benefit Rate for a household of 2) or $1,452 in monthly income (100% of the Federal Poverty Level for a household of 2). The couple is allowed to keep $3,000 in assets. As with single applicants, certain assets, such as the couple’s home is exempt from the asset limit.
The medical need for long-term care Medicaid for one applicant spouse of a married couple remains the same as for single applicants; they must require a level of care consistent to that which is provided in a nursing home. The one exception is that some regular state Medicaid programs for long-term care permit a lower level of care need. Again, being diagnosed with Alzheimer’s or another dementia does not mean one will automatically be labeled as needing a nursing home level of care.
Nursing Home Medicaid and HCBS Medicaid Waiver Applicants
In 2021, married couples applying for nursing home Medicaid or a HCBS Medicaid waiver must have monthly income less than $4,764 and countable assets valued at less than $4,000. This is because many of the states consider married spouses both applying for benefits as single applicants. Therefore, each spouse is allowed up to $2,382 in monthly income (300% of the Federal Benefit Rate) and $2,000 in assets. Some assets, such as the couple’s primary home (given one spouse continues to live in the home or has an intent to live in the home in the future), household furnishings, and a motor vehicle are not counted towards the asset limit.
Regular State Medicaid Applicants
Married couples, with both spouses as applicants, are permitted the same level of income and assets as when just one spouse applies for the program. In 2021, this means the couple is allowed up to $1,191 / month in income (100% of the SSI Federal Benefit Rate for a household of 2) or $1,452 / month in income (100% of the Federal Poverty Level for a household of 2). The couple is also allowed to retain $3,000 in assets. Some higher valued assets are not counted towards the asset limit, which includes the couple’s home and vehicle.
The same functional requirement applies as in the other marital situations; the applicants must require a nursing home level of care. Unfortunately, a diagnosis of Alzheimer’s disease or related dementia does not automatically mean that the level of care need has been met. As previously stated, not all regular long-term care state Medicaid programs will require this level of care, although the applicants will still need to demonstrate a need for care.
Being over the financial eligibility requirement(s) does not mean a person with dementia cannot become Medicaid eligible. There are many exceptions to the rules above. This is because there are alternative pathways to eligibility, as well as planning strategies to help applicants gain eligibility who do not immediately qualify, but cannot afford their care costs.
Some of these strategies are complicated, and if not done correctly, can violate Medicaid’s look-back rule. Essentially, the look-back rule is a period of time in which Medicaid looks back at all past asset transfers to ensure assets were not given away or sold under fair market value in order to meet Medicaid’s asset limit. (The look back period is 60 months in all states but California, which is 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 the states and not all planning strategies are available in all states. Therefore, it is highly suggested that persons with dementia who are over Medicaid’s financial requirements, contact a professional Medicaid planner for assistance in gaining financial eligibility.
Medically Needy Pathway
Some states allow for a medically needy pathway to eligibility, which is sometimes 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, 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 is eligible for Medicaid for the remainder of the spend down period. The medically needy income limit is often lower than the income limits for other pathways to eligibility. The medically needy pathway is not an option in all states.
Qualified Income Trusts
Qualified Income Trusts (QITs), also called Miller Trusts, allow another way 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 cancelled) 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 very specific purposes, such as contributing towards the cost of care of the person with dementia. Any remaining funds after the death of the Medicaid recipient must be paid to the state; up to the amount the state paid for long-term care. While not an option in all states, approximately half of the states allow applicants to create QITs.
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 the disease progresses. 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 includes paying off debt, installing a new roof, and purchasing medical equipment, such as 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 an annuity is another option to lower a Medicaid applicant’s countable assets. The way this works is that a lump sum of cash (countable assets) are converted into a stream of income, no longer counting towards the asset limit. That said, an annuity payment is counted towards Medicaid’s income limit, which in some cases, 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 a HCBS Medicaid waiver or institutional Medicaid, an annuity can be a particularly good option. This is because the income stream can be paid to the non-applicant spouse and his or her income is not used in calculating the applicant spouse’s eligibility.
Prior to implementing any planning strategy to lower countable income and / or assets, it is highly suggested that persons over the limit(s) contact a professional Medicaid planner for assistance. Medicaid planners are knowledgeable about planning techniques available in the state in which one resides. In addition, they can assist in properly implementing planning techniques without violating Medicaid’s look-back rule, avoiding any unnecessary period of Medicaid ineligibility. To find a professional Medicaid planner, click here.