Medicaid is a broad federal and state program that provides health insurance to certain individuals with limited means. In North Carolina, Medicaid is limited to children, pregnant women, adults with children, the blind, the disabled, and adults over the age of 65.
Most North Carolina Medicaid programs have strict income guidelines that require applicants to have income at or below the federal poverty level as an eligibility requirement. North Carolina has several Medicaid programs intended to assist the blind, disabled, or adults over 65 that have limited resources, but allow income over the federal government’s determination of poverty. For those programs, the applicant’s income must generally be less than the cost of his or her care.
North Carolina has multiple Medicaid waiver programs. A Medicaid waiver program simply means that a state has requested authorization to administer a Medicaid program that differs from the federal Medicaid program rules in one or more ways—hence the “waiver” issued by the federal government. Enrollment in waiver programs is limited to a set number of recipients within certain categories. A few of the waiver programs include: Community Alternatives Program for Disabled Adults (CAP/DA) services for community care and case management for disabled and elderly adults; Innovations Waiver providing community support for individuals with intellectual and developmental disabilities; State and County Assistance (SA) providing payments for assisted living-level care, typically in an adult care facility but for limited applicants in a private home (SA has strict poverty level income requirements in North Carolina. Availability is limited to those with extremely low income.); and, Program for All-Inclusive Care for the Elderly (PACE) providing a managed care alternative to nursing home care. This guide focuses on long-term Medicaid programs that pay for facility care and PACE.
The long-term care Medicaid program covers health care costs for adults who are disabled or age 65 and older who need nursing home care. This program is available for residents of skilled nursing facilities and to applicants who need skilled nursing facility care while living at home in a county with a North Carolina PACE program. Note that skilled nursing care is a higher level of medical need than an adult care home, also known as an assisted living facility, or an independent retirement community. PACE is a Medicaid covered managed care program with the goal of providing the recipient with care at home and at a local PACE facility to prevent the recipient from needing nursing home care.
Medicaid to cover skilled nursing home care in facility and PACE care in the community have three basic eligibility requirements: (1) medical need, (2) income, and (3) assets/resources.
Medicaid requires that the applicant be disabled or age 65 and older and in need of long-term care as certified by a physician. The physician certifies the long-term care need by completing an FL-2 form. The FL-2 form is reviewed and approved by Medicaid and must be dated within 3 months of the application.
The income rules can be complicated for Medicaid programs. There is not an income cap for long-term care Medicaid in North Carolina. Because North Carolina does not have an income cap, certain planning techniques like Miller Trusts are not allowed in North Carolina. Generally, the recipient’s income, less deductions like those for private health insurance premiums, $30 for the personal needs allowance, and community spouse Minimum Monthly Maintenance Needs Allowance, must be less than the private pay cost at the nursing facility or Medicaid payment to the PACE program. The community spouse is allowed to keep a portion of the Medicaid recipient’s income sufficient to bring the community spouse’s income to a minimum level, the Minimum Monthly Maintenance Needs Allowance (MMMNA). The MMMNA is increased annually. For 2021 it is $2,155.00.
The asset or resource cap for long-term care Medicaid applicant is $2,000 for a single individual. If the long-term care resident is married, the assets of the spouse are considered when determining eligibility for the long-term care resident. However, the spouse has separate rules outlining the amount of countable assets he or she can reserve. The spouse not residing in a long-term care facility is known as the community spouse. The community spouse’s resource maximum is $130,380 for 2021.
Medicaid does not count all resources of the applicant and spouse. Resources that are excluded include, but are not limited to, the following:
The primary residence and contiguous property of the applicant or spouse up to a maximum home equity value of $603,000 in 2021. Medicaid will not count the equity of a primary residence even if the applicant is in facility care if a spouse resides in the home or if the applicant’s representative signs a statement that the applicant has a subjective intent to return home if able in the future. It is not a requirement that the applicant be in-fact able to return home in the future.
Life estates (but note, a remainder interest gifted during the lookback period could cause a transfer penalty).
One automobile, if it is used for transportation for the applicant or a member of the applicant’s household.
Personal effects with a no investment value.
The cash surrender value of life insurance policies with a total face value of all policies of $10,000 or less are excluded.
Tenants-in-common real property owned with someone other than the applicant’s spouse.
Burial plots and prepaid funeral contracts.
Medicaid-compliant annuities and certain properly-structured promissory notes receivable.
Certain types of irrevocable trusts.
Retirement plans where the cash value is inaccessible are excluded.
Assets that are countable to the applicant, and the applicant’s spouse (if any), include but are not limited to the following:
Regular bank accounts such as savings, checking, and money market accounts. Generally the full value is counted, even if a child was added as a co-owner for convenience purposes at some point in the past.
Vehicles other than the most valuable vehicle, which is generally an excluded asset as outlined above.
Revocable Trusts accessible by the applicant or the spouse.
Individual Retirement Accounts (IRAs) and other retirement accounts (e.g. 401k, 403(b)) that can be accessed, even with a penalty or tax.
Non-homeplace real property that is owned solely by the applicant and/or the applicant’s spouse.
Most annuities that were created for investment purposes that are not Medicaid-compliant.
Medicaid assesses resources at the beginning of the first continuous period the applicant was in a hospital or long-term care facility or the date of the Medicaid application, whichever occurs first. For a married couple, the applicant’s spouse (the community spouse) may retain half of the couple’s countable assets with a minimum of $26,076 and a maximum of $130,380 in 2021.
Long-term care Medicaid has a 60-month “lookback period.” When applying for benefits, the county agency reviews the applicant’s (and any spouse’s) assets and transactions during the “lookback period” to ensure no assets were given away or transferred for less than fair market value to qualify for Medicaid. Any such gifts or transfers must be disclosed. If assets were given away, then (1) the asset may be returned to the applicant/spouse without any penalty; (2) the recipient may pay the applicant/spouse fair market value for the received asset; or (3) the applicant may be subject to a “penalty period,” where the applicant does not receive Medicaid benefits for a certain period of time, known as the “penalty period.” The penalty period is calculated based on the value of the uncompensated transfer. The penalty divisor in North Carolina is $6,810 for 2020. As with all Medicaid rules, there are some exceptions to such transfer penalties. For example, gifts between spouses or gifts to qualifying disabled adult children are not penalized. Sometimes in crisis planning, transfers of assets can be combined with income-generating purchases like annuities and promissory notes to intentionally trigger a penalty and protect a portion of the applicant’s assets. When planning in advance, meaning more than 60 months prior to a nursing home need, assets can be transferred to an irrevocable trust or other estate planning vehicle to remove assets from being considered countable assets at future eligibility.
To qualify for Medicaid, many people will “spend down” assets to below the countable asset limits. The spend down must occur for the benefit of the applicant or spouse. Some options for spend down are:
Repairs and improvements to the home or excluded real property.
Payment of debt.
Purchasing an essential automobile that can be used as transportation for the applicant or spouse.
Prepaying for funeral expenses.
Purchasing burial plots.
Purchasing life insurance with cash value of $10,000 or less.
Transfers to a blind or disabled adult child or trust for the child’s benefit (beware that assets transferred to a child may impact any benefits the child is receiving).
Purchasing a Medicaid-compliant annuity.
Purchasing a Medicaid-compliant promissory note. and,
Entering into a care agreement with a family caregiver as long as a physician certifies that care is needed to prevent facility care prior to entering into the agreement, the recipient is not already in a facility and the rate is reasonable for the region care is provided.
Achieving Medicaid eligibility is only the first hurdle in a comprehensive Medicaid plan. One must also take precautions to avoid Medicaid estate recovery. North Carolina has an estate recovery program that recovers from the estates of deceased Medicaid recipients. North Carolina Medicaid estate recovery can only recover against assets that are in the Medicaid recipient’s estate and subject to probate or otherwise available to creditors as part of the probate process. While not immediately a probate asset, real property an asset that is available to creditors as part of the probate process unless it is owned as joint tenants with survivorship, owned by a certain type of trust, or the Medicaid recipient has only a life estate in the property. Assets that are subject to probate include assets in the recipient’s sole name like bank accounts or automobiles, and assets that can be brought in to probate to pay debts of the recipient under North Carolina law like joint with right of survivorship bank accounts and revocable trusts. There are exclusions to Medicaid estate recovery if an heir of the Medicaid recipient is a disabled child, the total assets of the Medicaid recipient remaining or the recovery are less than $5,000, and if the recovery would be an “undue hardship” on the heir. Planning to protect an estate from estate recovery can occur with advanced planning or during crisis planning.