Medicaid: An Estate Planning Opportunity? by Wendy McMahon

Often people hear the terms Medicare and Medicaid and think the two are the same, when they are actually quite different. Both are government-funded programs, but one is insurance (Medicare) and one is not (Medicaid). When considering either, it is easy to quickly become overwhelmed by all the information available and by unanswered questions that remain after reviewing literature on the subject. In order to gain a solid basic understanding of programs such as Medicare or Medicaid, a broad overview of what is offered and how to meet the requirements is extremely helpful. This article is intended to provide a brief summary of both what Medicaid is and how it may be applicable to you or your loved ones.

Medicaid is a federal and state entitlement program that provides medical benefits to low-income individuals who have no or inadequate health insurance coverage. Medicaid guarantees coverage for basic health and long-term care services based upon income and/or resources. Although Medicaid is federally regulated, the program is administered at the state level. Because Medicaid is a needs-based program, in order to benefit from the program an individual must both meet financial eligibility requirements and qualify under one of the following five categories:

Children under 19,

Adults with children under 18,

Pregnant women,

Aged (Individuals aged 65 or older), or

Blind or Disabled.

Although Medicaid is a highly regulated and complex area of law, it can essentially be broken down into two main areas of services – Long-Term Care and Short-Term Services.

Long-Term Care

When considering Medicaid, it is usually because an individual is in need of long-term care. Long-term care, as defined by the Medicaid eligibility rules, is “institutional care services, or extended at-home care for someone whose condition is severe enough to justify institutional care.” Two common examples of services allowed through Medicaid are nursing homes and home health care for someone who is home-bound.

The option of receiving Medicaid for home health care may be a new idea to you, but it is an idea that adds some flexibility to a difficult situation. In Medicaid terms, this option is called the ADvantage Waiver, and provides in-home services to adults who meet the medical requirements for nursing facility services. The cost of in-home services is limited by the cost of comparable services at a nursing facility.

Because Medicaid is a needs-based program, you should be aware that certain financial criteria must be met in order to receive aid for long-term care. Limits have been set on an individual’s annual income and the value of assets an individual may own and still qualify for benefits. These limits are adjusted annually and, in order to avoid delays in coverage and receipt of benefits, should be verified before applying for Medicaid.

Income: Income consists of an individual’s gross income, and includes income from all sources , such as salary and/or wages earned, retirement benefits, mineral royalties, interest and dividends, etc. In 2004, the maximum monthly income allowed for a single individual is $1,692. However, there is some planning available to still qualify with monthly income up to $2,500.

Resources: In 2004, the maximum amount of available resources a single individual may have is $2,000. There are some exceptions to this limit, however, including the individual’s home and a vehicle used for medical purposes, among others. Because there are exceptions to the resource limits, there are some obvious planning opportunities in this area to enable an individual to meet the Medicaid requirements.

The income and resource rules for married individuals are more complex; an explanation and illustrative calculation will be provided in a future issue of Of Counsel .

Short-Term Care

Short-term care services are defined for Medicare purposes as “all services that are not related to long-term medical care services.” However, the services available depend on where the individual resides. Oklahoma is moving toward a managed care system where Medicaid makes a payment to a provider each month for services whether or not the individual uses them. In urban areas such as Oklahoma City, the managed care system is an HMO program called SoonerCare. The rural areas of Oklahoma have access to SoonerCare Choice, in which a primary care physician acts as a gatekeeper for medical services.

As with long-term care services, financial eligibility requirements must be met to qualify for short-term care services. Income and resource limits apply and the limits fluctuate each year.

Income: In 2004, the income limit for a single individual for the basic service is $776 per month. The income rules for married individuals are more complex and require a more detailed explanation.

Resources: In 2004, the resource limit for a single individual for the most basic service is $4,000. The same resource considerations apply for Short-Term Care as with the Long-Term Care services mentioned above, including the exclusion of your home and vehicle, and planning opportunities exist to enable individuals and married couples to meet the Medicaid requirements for coverage and benefits.

I have heard the phrase “Medicaid is more complex than the tax code.” After reading this “brief” overview, you may agree with that description. Although Medicaid services require a thorough understanding to determine whether they apply to your particular situation, it is certainly prudent to have a basic understanding of Medicaid, so when you encounter circumstances that require these short-term or long-term care services, you will be able to properly plan for meeting the eligibility requirements. If you have any questions regarding Medicaid services, or how to include Medicaid planning in your estate plan, please give us a call.