Florida Medicaid Planning Guide

Qualifying for Florida Long-Term Care Medicaid

In Florida, a long-term care Medicaid applicant must pass an income test and an asset test. 

Income Test:

Those who earn more than $2,349.00 (as of 2020, this amount changes every year) in gross income, from nearly all sources combined, will not qualify (without additional planning).

Asset Test:

Single individuals, who have more than $2,000.00 in what Florida Medicaid considers to be a countable asset (not all assets are countable), will not qualify (without additional planning). If a married couple is applying, and both are seeking Florida Medicaid long-term care benefits, then the couple can have up to $3,000.00 in countable assets. If one spouse does not need Medicaid (referred to as the “community spouse,” then the community spouse is allowed to retain up to the Community Spousal Resource Allowance (CSRA). The CSRA changes every year as well and, as of 2020, is $128,640.00.

Medicaid Planning is the process of legally and ethically protecting income and assets so that my client’s do not have to go broke before they naturally qualify for one of the Florida Medicaid Long Term Care Programs described below.

My typical clients may or may not own their home (sometimes with a second property) and on top of that have between $20,000.00 and $750,000.00 in other liquid or countable assets. Their typical incomes are between $850.00 and $4,500.00 per month.

Medicaid planning utilizes Florida and Federal laws to convert these assets into an exempt or non-countable form without triggering the five-year gift penalty that allow my clients to qualify and get additional assistance right now.

Overview of Florida Medicaid Long Term Care Programs

It’s important for my (potential) Medicaid-Planning clients to understand that “Medicaid” is an umbrella term used for multiple programs. In a long-term care context, there are three basic Medicaid programs that our firm works with in Florida: Medicaid ICP; Medicaid Waiver for senior citizens age 65 or older, or disabled; and QMB/MEDS-AD.

Medicaid ICP and Waiver programs require applicants to have less than $2,000.00 in total countable assets and receive less than $2,349.00 (gross, not net) from all income-sources combined.

Our Medicaid planning service is centered around assisting those with excess assets or income.

Medicaid Institutional Care Program (ICP)

This long-term care Medicaid program is for those who require skilled-nursing / rehab / nursing home level of care only. There is no wait-list for this program and approval will be granted in the same month the ICP applicant is financially qualified, medically qualified, AND submits a Medicaid application. 

Once approved, the Medicaid recipient will pay their “patient responsibility” or “patient share of cost” (essentially all of their income, only keeping $130.00 per month for incidentals) and Medicaid will pay the entire difference for a semi-private room in a nursing home. All nursing homes must accept Medicaid, so this program can help pay for the very best nursing homes in Florida.

If the Medicaid recipient is married to a non-Medicaid recipient (known as the Community Spouse), the Community Spouse may be entitled to a portion of the Medicaid recipient’s income as part of Medicaid’s anti-spousal impoverishment policy.  

Medicaid Waiver for Home & Community-Based Services (SMMC-LTC)

Statewide Medicaid Managed Care Long Term Care (SMMC-LTC) / Medicaid Waiver / Home & Community Based Medicaid are all different names for the same program.

This long-term care Medicaid program is for those who only require Assisted Living Facility (ALF) level of care OR are able to reside at home and would benefit from some home-health care. There is a wait-list for this program.  

The Medicaid Waiver wait-list gives priority to those who need services the most. But the wait-list can be quite long. Part of our service, if hired to do so, is coaching you on ethical ways to obtain a higher priority score to minimize time on the waitlist. The Medicaid waiver application is not submitted until the client is called off the waitlist. Once the application is submitted (and the client is otherwise eligible), Medicaid waiver services can begin on the first day of the following month. 

Once approved for waiver benefits, the Medicaid recipient keeps 100% of their income (although a portion may need to be diverted into an income trust, which can still be used to pay expenses). 

If in an ALF: Medicaid contributes approximately $1,350.00 toward their ALF bill.

If at home: Medicaid will typically pay for between 15 - 40 hours of home health care (directly to a Medicaid-approved agency) depending on amount of care that is needed. 

Cash and Health Insurance Benefits Associated with Medicaid Long-Term Care Programs

Some other tangential benefits that are included in these Medicaid programs (primarily benefiting those who apply for Medicaid Waiver) are:

1. More cash available to the Medicaid recipient. Medicaid will pay the Medicare Part B premium cost (currently automatically deducted from social security income). In 2020, that will result in most Medicaid beneficiaries receiving an extra $144.60 per month in their bank account. 
2. More cash available to the Medicaid recipient because Medicaid will pay for most co-pays and deductibles. 
3. Potentially more cash available to the Medicaid recipient when they choose their Medicaid-Managed Plan (Florida Medicaid has contracted with marquee names such as AETNA, United, Sunshine Health, Humana, etc.…). Once enrolled in one of these Medicaid plans, the Medicaid recipient has the option to discontinue paying for their Medicare Advantage or Medicare Supplement (they also have the ability to keep their current Medicare plan if they so choose).
4. Long-Term Care Medicaid also pays for: medical equipment, incontinence supplies, home accessibility adaptations, speech therapy, occupational therapy, physical therapy, respiratory therapy, chiropractic services, hearing services, dental services, podiatric services and more.  

Qualified Medicare Beneficiary (QMB) and Medicaid for the Aged or Disabled (MEDS-AD)

These programs are for our clients who are interested in home care or ALF care, and are on a waitlist – or those who are in need of assistance paying for medical bills and prescriptions. 

QMB and MEDS-AD are programs that (a) have different income/asset requirements than the programs described above; (b) have no waitlist; and (c) will pay for Medicare premiums, co-pays, deductibles, etc.… We often apply for QMB in conjunction with long-term care waiver benefits, so our clients can receive some financial assistance while waiting for home-care or ALF benefits to begin.

This summary is just a brief overview of what would be discussed during a consultation. The bulk of the consultation will discuss legal and ethical methods of qualifying you or your loved one for one or more of these Medicaid long-term care programs in a way that does not trigger the five-year lookback period so you can obtain the services needed with as little delay as possible.  

Certainly, many people attempt to apply for Medicaid’s ICP or home and community-based waiver program on their own.

Below are some of the most common mistakes I see being made: 

Most Common Florida Medicaid Application Mistakes

1. Relying on poorly drafted or outdated durable powers of attorney or other estate planning documents.

It is important to realize that many free internet forms fail to meet Florida statutory requirements or address each of the scenarios that commonly arise for individuals requiring long-term care or applying for Medicaid. Many people will execute a durable power of attorney, only to fail to include the specific authority to create trusts. Another common mistake is failing to include the specific power to enter into a personal service contract with the holder of the power of attorney. Subsequently entering into any of these contracts without the requisite authority will cause the Department of Children and Families (DCF) to deny the Medicaid application. Many actions that would otherwise require a more expensive and time-consuming guardianship proceeding could be avoided by simply having a well-drafted power of attorney. Looking to cut costs by using an internet form or a form intended for use in some other state may be costly on the backend when you’re looking to apply for Medicaid.  

‍2. Making gifts or gifting money to reduce countable assets.

If you gift assets within five years of applying for Medicaid, the Department of Children and Families (DCF) will delay your qualification for benefits for a period of time. This period of ineligibility depends on the value of the assets you gave away. That value is divided by a figure known as the penalty divisor, which is tied to the average monthly nursing home cost in the state of Florida during the prior year. One common mistake people make is assuming that gifts below a certain dollar threshold or below $15,000 do not count simply because the IRS considers these transaction to be exempt. DCF and the IRS each have their own rules and the IRS’ treatment of the gift is irrelevant for Medicaid purposes. This penalty described above potentially applies to any gift or transfer of assets for below fair market value. ‍

3. Not creating or improperly maintaining a Qualified Income Trust (QIT) or Miller Trust.

Even if your income exceeds the Medicaid gross income limit which is $2,349 per month in Florida (for 2020), you may still be able to qualify for Medicaid by using a QIT or Miller Trust. The trust is then funded with any income you have in excess of the income limit. As long as you meet the asset test, you typically will then qualify for Medicaid. However, like many things relating to Medicaid planning, implementation is critical. You must use a properly drafted trust and fund the trust during the month in which you submit your Medicaid application, as well as each successive month. Otherwise, DCF will likely deem you ineligible for Medicaid. 

‍4. Using a Qualified Income Trust, instead of a Pooled Special Needs Trust, when seeking Medicaid Home Health Care Services. 

As discussed above, when a Medicaid applicant’s gross income exceeds the income cap, something must be done. A Qualified Income Trust will satisfy the income cap problem. However, the QIT has limits on how its funds can be spent. Mainly, they are limited to health, wellness and medical-related expenses. When one of our Medicaid-applicant clients is living in a nursing home or ALF, we know it will be easy to spend any funds placed within the QIT on medical, wellness or health related issues (the ALF or nursing home bill itself will cover this). However, many of my clients are living at home. If Medicaid is covering their home health care and other medical expenses, sometimes there are no additional medical or health related expenses that are not already being covered by Medicaid. 

In this situation, a Pooled Special Needs Trust (PSNT) is a better tool for the job at hand. A PSNT can hold both assets and income. Similar to a QIT, those who receive income in excess of the income-cap can place excess funds with a PSNT. In other words, a PSNT can serve the same exact function as a QIT, if needed. The benefits to a PSNT is twofold (1) a professional trustee is utilized to manage and pay expenses on behalf of the Medicaid beneficiary. This is particularly useful for those Medicaid recipients who do not have a friend or family member that they trust to oversee a QIT. In addition, (2) a PSNT does not have the same spending restrictions as a QIT. Funds held by a PSNT can be used for medical, health, wellness expenses as well as the QIT; but the PSNT can also pay for nearly any other expense related to other needs (e.g. paying for internet, home repairs) or wants (e.g. entertainment expenses, a new TV or computer) that is not already being paid for by Medicaid.  

PSNTs have their own quirks and limitations and you should speak with an elder law attorney before deciding whether a QIT or PSNT is needed. For more information on the distinction between QIT’s and PSNT’s, see the video in item number 3 above.

‍5. Failing to take required minimum distributions (RMD's) from qualified retirement accounts such as IRA's, 401k's or SEP's.  

Qualified retirement accounts (e.g. IRAs, 401ks, SEPs) receive preferential treatment by the IRS and are generally sheltered from your creditors. Similarly, in many cases these accounts are not a countable asset for purposes of determining whether you satisfy the Medicaid asset test. Nevertheless, under Florida law specific steps must be taken in order to prevent these accounts from disqualifying you from receiving Medicaid. The most critical step is to take regular distributions (or required minimum distributions) if you are eligible to take them. However, remember that the distributions are counted as income, which may push you over the income limit discussed above. If this is the case, you may need to create a qualified income trust or miller trust to receive any excess income. 

An often overlooked aspect of this rule is that each and every qualified retirement account you own must make its own regular distributions. Any account not making such distributions will be considered a countable asset. Once again, if you are looking only at the IRS’ rules governing this accounts, you are going to miss this issue. Always remember that Medicaid has its own unique rules.

‍6. Failing to liquidate certain annuities or life insurance policies with cash surrender value.

While life insurance policies without cash surrender value (including term life insurance) are not countable assets for purposes of the Medicaid asset test, other types of life insurance and annuities are often counted. The cash surrender value of any life insurance policy with a death benefit of more than $2,500.00 is a countable asset. This will include almost any universal or whole life insurance policy, as these policies have a cash value accumulation component. Prior to submitting a Medicaid application, these policies must either be completely liquidated or borrowed against.  

Regular annuities should either be cashed out or converted into a Medicaid-qualified annuity. However, non-qualified annuities may have cash value similar to the life insurance policies described above. These types of annuities are a countable asset. 

‍7. Failing to consider Medicaid estate recovery.

Some Medicaid planning attorneys will rely solely on the pooled special needs trusts described above. This may allow you to qualify for Medicaid, but it still subjects the assets in the trust to Medicaid estate recovery. This is the process that allows the Department of Children and Families (DCF) to seek reimbursement after your death for long-term care costs paid on your behalf while you were living. Overlooking estate recovery is lazy planning. A more sophisticated approach focuses not only on Medicaid eligibility, but also on retaining a large portion of your assets for your heirs after you pass away. An example of estate recovery planning is discussed in the next paragraph.

8. Failing to plan around non-homestead real estate.

Under Florida law, Medicaid estate recovery does not apply to your personal residence if it qualifies as homestead property. However, that does not stop Medicaid from recovering against second homes or rental properties you own. After you pass away, Medicaid will seek reimbursement against any non-homestead real estate. Fortunately, there are also planning tools available to those who own multiple pieces of real estate. In many cases, these tools may prevent Medicaid from seizing the real estate after you pass away. The most common of these tools is recording a Florida lady bird deed (also known as an enhanced life estate deed).  

9. Failing to make a funeral contract irrevocable before applying for Medicaid.

For Medicaid purposes, refundable funeral contracts are countable assets. If this pushes your assets over the $2,000 asset limit, the Department of Children and Families will deny your Medicaid application. You can avoid this outcome by simply asking for an irrevocability rider, which prevents funds from being refunded. Alternatively, you and your spouse can each designate separate bank accounts (with less than $2,500) for funeral expenses and such accounts will not be deemed countable assets for Medicaid purposes. The advantage of an irrevocable pre-paid funeral contract is that there is that it can exceed this $2,500 limit. These irrevocable contracts are never countable assets.

10. Failing to disclose assets or income sources to the Department of Children and Families.‍

In order to apply for Medicaid in Florida, you are required to sign a financial release. This enables Medicaid to access copies of your tax returns, write to financial institutions where you hold accounts and investigate your bank accounts, brokerage accounts and other assets. Failing to disclose assets to Medicaid is a serious crime. These disclosure requirements continue after you file your Medicaid application. You are required to report changes in assets or income to the Department of Children and Families within 10 days of any change in circumstances.

‍11. Failing to plan for the possibility of the community spouse predeceasing the institutionalized spouse receiving long-term care Medicaid benefits.

Caring for an aging spouse or other relative can be very stressful and take a toll on the caregiver. Sadly, this results in many caregivers forgetting to care for themselves. In fact, some sources suggest roughly 30% of caregivers will die before the person they are caring for^[1]. This is tragic in its own right, but it can also create major complications for Medicaid beneficiaries. Since estate planning typically provides for a spouse to leave his or her assets to the surviving spouse, the death of a spouse could have the effect of undoing earlier Medicaid planning and disqualifying the institutional spouse from receiving benefits. A testamentary special needs trust (or qualifying special needs trust) can be used to prevent these assets from disqualifying the surviving spouse from receiving Medicaid benefits.

‍‍12. Don’t forget to apply for other benefits you are eligible to receive.

Medicaid is a "payor of last resort". This requires you to seek other benefits for which you are eligible in order to pay as much of your long-term care costs as possible. For example, if you are under age 65 and you require assisted living or nursing home care, you likely qualify for social security disability benefits^[2]. If this is the case, you are required to apply for these benefits, even if qualifying would push you over the income limit for Medicaid. Similarly, if you qualify for Veterans Administration (VA) Aid and Attendance benefits, you are required to apply for those as well. After all, if Social Security or the VA are paying for a portion of your long-term care, these are funds Medicaid doesn’t need to contribute. 

Remember that any additional income received can be addressed with some of the planning methods described above. As an aside, please remember that VA benefits planning and Medicaid planning are not the same thing. Many of the planning strategies used for Medicaid do not help to qualify you for VA benefits.