Frequently Asked Questions

 *This information is provided for informational purposes only.  By distributing this article, Elder Law Attorney Koren Martin is not rendering any legal or professional advice. This is an area of the law that changes quickly. If legal advice is necessary, the reader should consult an Elder Law Attorney.  Medicaid should not be confused with Medicare benefits.  This FAQ only addresses potential Medicaid eligibility.  

Why might someone want to apply for Medicaid?

The average cost of a semi-private room in a nursing home is $4,940 per month (as per the daily average rate of $162.41 established by Texas Health and Human Services Commission) with costs ranging from about $4,200 per month in small communities to over $6,000 per month in metropolitan areas. However, the cost of round-the-clock in-home care runs about $17-$22 per hour translating to a monthly cost of about $12,500 to $16,000. Thus, unless a person is independently wealthy or has long term care insurance, about the only other method of paying for nursing home costs is through the Medicaid program.  

How does one qualify for Medicaid long-term nursing home benefits ("Medicaid")?

 An applicant must: 

  1. be a U.S. citizen or an alien lawfully living in the U.S AND a Texas resident;
  2. be over 65, disabled or blind; 
  3. have a "medical necessity" requiring skilled nursing care;
  4. meet the income cap which means the applicant cannot make more than $2,205.00 (2017 amount) per month in gross income or the applicant has a Miller Trust (see #7 below) if gross income exceeds 2,205.00 in 2017; and 
  5. have only limited assets.  

What is "medical necessity" that is required for Medicaid eligibility?

In order to qualify for Medicaid nursing home care (and the Star Plus Waiver benefit) the applicant must have a medical condition that requires specialized supervision by a licensed nurse for services ordered by a physician according to a documented medical condition. For example, could an unskilled individual provide sufficient care for the applicant. If so, then the applicant does not meet the medical necessity requirement. Generally, a person suffering from dementia or Alzheimers disease who takes prescription medications will meet the medical necessity requirement.  

If my loved one qualifies for a Medicaid nursing home benefit, could he get into any nursing home?

Not all nursing homes accept Medicaid benefits.  Of those nursing homes that do, the nursing home may only accept a limited number of Medicaid recipients. Additionally, the Medicaid "bed" generally is in a semi-private room.  

Is there an income limitation for the Medicaid nursing home benefit?

A Medicaid applicant must receive an income less than $2,205 in 2017.  The Medicaid Agency only looks at the applicant's income (not the spouse's). The Medicaid Agency looks to the name on the check to determine which spouse to attribute a particular item of income.

Is there a way to qualify for Medicaid long-term care if the applicant's income is above the limit?

If the applicant otherwise qualifies for Medical long-term nursing home benefits, the applicant (or the applicant's spouse or other representative) may create a Qualified Income Trust or "Miller Trust." This trust allows the applicant to transfer his/her income into the trust and then qualify for Medicaid long term nursing home care benefits. 

Among other provisions, the trust must provide that upon the death of the beneficiary/applicant, the State of Texas will be reimbursed for all expenditures made on the applicant's behalf. If the applicant is married, the benefits will be paid out of the trust as follows: 

  1. $60.00 allowance to the beneficiary/applicant and certain court approved guardian fees will be paid; 
  2. an allowance will be paid to the at-home spouse (referred to as the “community spouse”) to bring the community spouse's gross income up to $3,022.50 the 2017. There may be an allowance provided for dependant(s) living at home; 
  3. if there are any "incurred medical expenses" such as supplemental (medigap) medical insurance premiums and costs of medical care not covered but approved by Medicaid, those amounts can be paid out of the applicant’s income. This includes a payment for some medication expenses that are not covered by Medicare Part D drug plan.
  4. “co-payment” previously known as "applied income" will be paid to the nursing home (This is the Medicaid applicant’s share of the nursing home payment.); 
  5. any remaining income can be disbursed for the beneficiary/applicant's medical needs not provided by Medicaid, but, practically speaking, seldom will there be any funds left after payment of the co-payment. If the applicant is not married, the spousal allowance will be eliminated. 

NOTE: The deductions noted above are given to all institutionalized Medicaid recipients when calculating the co-payment to the nursing home. The Miller Trust puts the budget under very careful scrutiny for compliance.  

Can I transfer my assets into a Miller Trust to protect the assets?

No.  A Miller Trust is ONLY used to overcome the income cap issue.  A Miller Trust is NOT a trust used to protect assets (resources).  

How much in assets (resources) can an unmarried applicant keep and still qualify for Medicaid?

To qualify for Medicaid, the applicant's countable assets (resources) cannot exceed $2,000.  

How much in countable assets can a married couple own and both still qualify for Medicaid?

If both spouses are applying for long term care nursing home benefits, then their combined countable resources generally cannot exceed $3,000.00. 

If only one spouse is applying for Medicaid benefits, the community spouse may keep more than $2,000.00 in assets. When the Medicaid application is made, all available non-exempt resources of both spouses will be counted as resources, regardless of whether the property is classified as community or separate property. One-half of the couple's resources will be set aside for the spouse not applying for Medicaid benefits, with a minimum set aside amount of $24,180.00 and $120,900.00 maximum in 2017. (Pre-marital and post-marital agreements are irrelevant to the Medicaid application.) 

There may be ways to increase the maximum amount that can be set aside for the spouse staying at home but the strategies can be complex and should be discussed with attorney Koren Martin.  

What if I am told that I must "spend down" resources before qualifying for Medicaid?

Spending down before or after the application is not the key. The Medicaid Agency gives you credit for all monies spent after you enter a medical facility and ultimately stay for 30 consecutive days or more. For example, Wife has a stroke and goes into the hospital in September 18. On October 4, she is moved into a nursing facility and continues to reside there. Her husband makes application for Medicaid benefits for her in December. 

The Medicaid Agency will determine what their assets were on September 1 and again on December 1 to see if they have already spent funds to meet any spend down. When only one spouse is applying for Medicaid, it is best to "spend down" AFTER a person has spent 30 consecutive days or more in a medical facility. When an individual with no spouse is applying for Medicaid, the applicant can have only $2,000 in countable assets so any spend down should be accomplished after entry into the nursing home but before eligibility.  

Are all of a person's resources or assets counted when determining Medicaid eligibility?

No. The following assets are exempt from being included as a countable resource: 

  1. The principal residence of the Applicant up to a value of about $560,000 for 2017. The value of the home can be an unlimited value if a spouse, or disabled child lives in the home; 
  2. A burial plot held for the Applicant or the Applicant's family; 
  3. Term or burial insurance, if it has no cash value; 
  4. Identifiable burial funds in the amount of $1,500 or a prepaid irrevocable burial contract regardless of the value; 
  5. One automobile is exempt, regardless of value; 
  6. Household goods and personal items; 
  7. Life insurance policies owned by the Applicant with total face values of $1,500 per insured person or less:
  8. Livestock and poultry that are held for business purposes or for consumption; 
  9. Business property essential for self-support (often a working farm or ranch meets this qualification); and
  10. Non-business property valued at up to $6,000, essential for selfsupport (generally small mineral interests). 

Additionally, the Medicaid Agency will also exempt funds held in an IRA, 401k or other similar tax device that are invested in an annuity product. (I do not make investment recommendations. However, I will work with your financial planner to explain the effect your investments might have on a Medicaid application.)  

Can I give away some of my resources (assets) in order to qualify for Medicaid?

Generally, no. 

If a nursing home applicant makes a transfer of resources for less than fair market value (a “gift”) in order to qualify for Medicaid benefits, the applicant will be penalized for the gift by being ineligible for Medicaid nursing home payment for a calculated period of time (the “transfer penalty”)(Currently the gift will disqualify the applicant for the in-home Star Plus Waiver benefit). The Medicaid Agency has determined that the average private pay cost for nursing home care is $162.41 per day (beginning September 1, 2013 through August 31, 2017). To determine the number of months of ineligibility for any gift, the Medicaid Agency will divide the amount of the gift by $162.41. The resulting quotient is the number of days of ineligibility for benefits. 

If a gift is made, the presumption is that it was made in order to qualify for Medicaid benefits. To avoid a penalty, the Applicant would have to prove that the gift was made for a totally different reason, which is a very difficult burden of proof. Under Federal and State law, the Medicaid Agency could "look back" for 60 months to determine if an individual made any gifts.  

Can I transfer all of my assets into a trust and then qualify for Medicaid long-term care benefits?

Congress allows a person who is disabled (according to the Social Security definition of disability) under the age of 65 to transfer assets to a Supplemental Needs Trust or a pooled Trust (e.g. the Arc of Texas, Master Pooled Trust) without transfer penalties. Both of these trusts require that upon the death of the applicant/beneficiary, all Medicaid expenditures are paid back to the State out of the remaining trust funds. These trusts are generally irrevocable. 

When spouses transfer their assets into a living trust, the Medicaid Agency takes the position that so long as the trust is revocable, it is as if the parties still own the assets–because the parties can revoke the trust at any time and get their assets back. There is no transfer penalty so long as the spouses can recover the property from the trust. 

A Medicaid applicant/recipient cannot claim an exemption for the homestead if the homestead is owned in a revocable trust. Additionally, owning assets in a Revocable Trust can result in complications for Medicaid eligibility. When the first spouse dies, if the trust requires that the deceased spouse’s property must pass into a trust for the surviving spouse, such a transfer could result in a Medicaid disqualifying transfer penalty applied against the surviving spouse (even if the decedent’s trust for the surviving spouse had supplemental needs language). 

These rules are complex so before creating a trust with the intent of applying for Medicaid, you should consult with Koren Martin.

Can I put my assets in an annuity to protect those assets from Medicaid scrutiny?

The answer is most often, no. 

An annuity that allows a person to access the cash assets (similar to a savings account) is a countable asset except in the case of an IRA, 401k or other similar investment If the annuity is “annuitized,” the annuity will be paying monthly payments and the fund cannot be cashed out. If your annuity is paying monthly income with no ability to cash out the annuity, then you may have to name the State of Texas as either the secondary beneficiary with a spouse or minor child as the primary beneficiary OR name the State as the primary beneficiary. Upon the death of the annuity owner, the funds must pay to the surviving spouse, a minor child, or reimburse the state for all Medicaid expenditures made on behalf of the annuity owner. 

Because an annuity contract could contain significant surrender penalties (over and above the tax issues), you should contact attorney Koren Martin to determine the pros and cons of investing in annuities.  

How long does the Medicaid application process last?

Once you have supplied me with all of the necessary documentation and any prerequisite spend-down or estate planning strategies have been implemented, I will submit the completed application to the Texas Health and Human Services Commission (the "Medicaid Agency").  The Medicaid Agency has 45 days to complete the Medicaid application review and can obtain a 45 day extension to complete the application review for a total of 90 days. Once a Medicaid Application is filed, the only nursing home payment required is the applicant’s income.    

The Medicaid application is very extensive. What if some information is omitted?

If the application is not complete, the Medicaid Agency can deny eligibility. An application can be supplemented during the application process. If the Medicaid caseworker requests additional information required on Form 1200 (the Medicaid application), it is wise to respond quickly to avoid a denial of benefits. However, if there is a deliberate misrepresentation or willful withholding of information for the purpose of obtaining public assistance, the agency can refer the application to the Office of Inspector General for a fraud investigation.  

Is there any recourse if a Medicaid application is denied?

Absolutely. An applicant can appeal a denial of eligibility within 90 days of the denial date. However, it is wise to appeal as soon as the denial is made if the applicant believes that the denial of eligibility was wrong.  

What is Medicaid Estate Recovery?

While the State will not “take” the homestead as reimbursement for Medicaid payments, when there is no surviving spouse or other exemptions, your executor may have to sell your homestead and your family heirlooms after you die if you accept Medicaid assistance. The following is a brief overview of the Medicaid Estate Recovery rules. 

It is important to note that, effective September 1, 2003, the Texas Legislature passed a law requiring the implementation of a Medicaid estate recovery statute based on the federal requirement to attempt to recover certain State Medicaid expenditures from the estate of a deceased Medicaid recipient. The program is called the Medicaid Estate Recovery Program (“MERP”). The rules were effective as of March 1, 2005. According to the rules, there will be no estate recovery, ever, when the deceased Medicaid recipient has a surviving spouse, minor children, disabled child (of any age). There is an additional exemption when an unmarried adult child lived in the homestead at least one year immediately prior to death. This is not a lien statute so the state will not “take” the homestead. The statute makes the State a creditor just like a doctor or ambulance company and just like any creditor, if there are no exemptions or waivers from collection, the creditor can require the executor to sell estate assets to pay the debt.

  1. Who is subject to MERP? Persons who are over 55 years old. 
  2. Who is exempted from (grandfathered out of) MERP? Those who initially applied for specific Medicaid program benefits prior to March 1, 2005 and subsequently obtained eligibility. So, if the medicaid recipient applied prior to March 1, 2005 and was ultimately found eligible based on the earlier application date, Medicaid Estate Recovery should not apply to that person.
  3. What is the definition of an “estate” that is subject to a claim for recovery? The Medicaid agency will ask to be reimbursed from those assets that pass through a deceased person’s probate estate. That is property that passes at death by a Will or, if no will, then by the laws of intestacy. 
  4. What expenditures will the State recover? All expenditures arising from payments for: nursing home, intermediate care facility for the mentally retarded (referred to as “ICF-IID” and including state schools), Community Living Assistance and Support Services (CLASS), Deaf-Blind/Multiple Disability Waiver (DBMD), Home & Community Based Services (HCS), Texas Home Living (TXHL), Community Waiver Programs (CWP), Star Plus Waiver, Community Attendant Services (1929(b)) and hospital and prescription drug services arising from any of the noted programs. 
  5. Does the State automatically place a lien on the homestead to secure its right to recover? No. MERP IS NOT A LIEN STATUTE. Estate Recovery is a creditor rule that allows the state to make a claim against a decedent’s estate just like the doctor, hospital, ambulance company or any other creditors. 
  6. Are there any exemptions to MERP? Yes. There will be no estate recovery if the Medicaid beneficiary leaves: (1) a surviving spouse; (2) a child under the age of 21 or a child of any age who is blind or disabled; (3) an unmarried adult child residing continuously in the decedent’s homestead for at least one year prior to the time of the Medicaid recipient’s death. 
  7. If there is no exemption from MERP, then are there any other considerations to eliminate MERP? Yes. Certain defined persons can claim that estate recovery would be an undue hardship and ask the State to waive recovery. The following are the types of waivers that can be granted:
    • “The estate property subject to recovery has been the site of the operation of a family business, farm or ranch at that location for at least 12 months prior to the death of the decedent; 
    • is the primary income producing asset of heirs and legatees, and produces 50 percent or more of their livelihood; and recovery by the State would affect the property and result in the heirs or legatees losing their primary source of income.” 
    • “Heirs and legatees would become eligible for public and/or medical assistance if a recovery claim were made.”
    • “Allowing one or more survivors to receive the estate will enable him or her or them to discontinue eligibility for public and/or medical assistance.
    • The Medicaid recipient received medical assistance as the result of a crime, as defined by Texas law, committed against the recipient,” OR
    • “Other compelling reasons."
    • There is an additional waiver for the decedent’s homestead. 

  1.  How can one obtain a waiver from MERP for the decedent’s homestead? The regulations setting out the homestead waiver are complex but essentially a waiver may be granted to heirs or lineal descendants whose gross family income is less than three times the federal poverty rate (see Appendix III). The waiver will allow $100,000 of the fair market value to be exempt from estate recovery for qualified claimants. If multiple heirs do not all meet the financial requirement, then only the qualified heir’s or legatee’s undivided interest can qualify for the undue hardship waiver. It will be interesting to see how the heir with the least income will be able to buy out the more prosperous heirs or legatees in order to preserve the homestead. As written, this rule has created significant obstacles to obtain a hardship waiver for married persons. By basing the hardship waiver on family income, the state is penalizing married persons and encouraging the break up of families to protect a right to inherit. Any person wanting to claim this waiver must provide the Medicaid agency with sufficient documentation within a short period of time immediately following the death of the loved one to prove the family income. There may be heirs or legatees who do not want to reveal confidential information thus subjecting part of the homestead to estate recovery.
  2. Are there any other limitations to obtaining an undue hardship waiver? Yes. (1) The Commission will not grant a waiver just because the person requesting it would lose an inheritance or legacy. (2) The Commission will deny a waiver if “the circumstances giving rise to the hardship were created by, or are the result of estate planning methods under which assets were sheltered or divested contrary to the requirements of Medicaid law in order to avoid estate recovery.” This is a direct quotation from the rule. The meaning of this provision is unclear
  3.  If there are no exemptions and no undue hardship waivers available, are there any deductions from MERP? Yes. There are deductions of direct costs of care that one paid that resulted in keeping the Medicaid recipient out of the nursing home and for maintenance of the homestead. “Necessary and reasonable expenses for maintaining the home include real estate taxes, utility bills, home repairs, and home maintenance expenses such as lawn care.” However, expenditures for taking care of your loved one’s personal needs during the nursing home stay are not allowable deductions. Receipts must be produced to claim the deductions.
  4. Are there any deadlines that will be applied? Yes. Once the Medicaid agency gives notice to whomever it chooses that it intends to recover from the decedent’s estate, then a person has only 60 days to request a waiver and/or deduction, in writing, and provide all required documentation. Exemptions cannot be lost for failure to timely request the exemption.
  5. Can a person avoid MERP by giving away the decedent’s assets prior to death? Remember, if a person intends to apply for or is receiving Medicaid assistance, the Medicaid agency penalizes transfers. For example, under today’s rules, if a person gives away $50,000, that person will be disqualified for Medicaid assistance for over 10 months. The disqualification period is calculated as follows: $50,000 ÷ $162.41 (average cost of nursing home care) = 308 days 
  6. What can a person do to protect assets such as the home or family farm? A person may be able to protect exempt assets such as a homestead, family heirlooms or the family farm but the rules are very complex. I urge you to talk to your Certified Elder Law Attorney with your concerns. 
  7. What should I do if I get a Medicaid Estate Recovery claim demanding payment after the medicaid recipient dies? All creditors must follow rules in order to have a right to payment from a debtor. The Medicaid Agency, as a creditor, must follow strict rules before it has the ability to recover from a Medicaid recipient's estate. 

Before paying Medicaid Estate Recovery, I urge you to have your Certified Elder Law Attorney review the claim to make sure it is a valid claim.  

What estate planning steps should I take if there is a chance of my needing nursing home care?

  1. Check out long term care insurance. 
  2. Investigate Veterans’ pension, aid and attendance and compensation benefits. 
  3. Spouses should revise their Wills to leave assets in a Supplemental Needs Trust for the surviving spouse (or disinherit the surviving spouse?). 
  4. Consider executing a very powerful Power of Attorney that authorizes the agent to take all steps necessary to assist the principal in obtaining Medicaid benefits.  

Can I make gifts in advance of applying for Medicaid for my loved one if I have power of attorney?

First you must determine if the power of attorney authorizes the agent to make gifts. As noted above, gifting can create a period of ineligibility for Medicaid long term care benefit. Elder Law Attorney Koren Martin advises against gifting for a number of reasons, including but not limited to:

  1. The Agent must act solely in the best interest of the loved one. Family members may object to gifting, especially if the Agent is the donee (person receiving the gift). And there are recent cases that required an Agent to return gifts she received from a loved one when the Agent failed to have the loved consult an attorney to make sure the gifts were reasonable.
  2. The loved one cannot demand the return of the money, if needed (it was a gift, so the money is gone);
  3. The gift recipient may intend to keep the money and use it for the loved one but what if the gift recipient: 
    • dies before the loved one, 
    • has creditors who can get the gift in payment of the donee’s debt, 
    • has a spouse who spends the gift, 
    • spends the gift anyway. 

While gifting is difficult, it may be allowable.  Any concerns about gifting should be discussed with an Elder Law Attorney.  

What could happen if I use a power of attorney to make gifts of an elderly person’s funds?

There is a Texas law that says:

“‘Exploitation’ means the illegal or improper act or process of a caretaker, family member, or other individual who has an ongoing relationship with the elderly or disabled person using the resources of an elderly or disabled person for monetary or personal benefit, profit, or gain without the informed consent of the elderly or disabled person.” Texas Human Resources Code §48.002(3) 

If Adult Protective Services (referred to as “APS”) finds that a person used a power of attorney (or any other means) to transfer the Applicant’s money for the benefit, profit or personal gain of someone else (“made a gift”) without the Applicant’s informed consent, then APS could find that the person making the transfer has EXPLOITED the Applicant. APS can refer its findings to the District Attorney. Transfer of funds as small as $500 can result in a state jail felony charge. Therefore, it is imperative that if an elderly person intends to make gifts and may want to use the Medicaid program to help pay for care, then prior to the gifting, the elderly person or his/her family should consult with an Elder Law Attorney. 

How can I learn more details about the Medicaid Program?

The internet is not your friend. Since each state has the ability to promulgate its own regulations for Medicaid program eligibility, any other state or a federal website would not provide accurate information. Additionally, regulations and the policy enforcing those regulations change. Therefore, a 2015 website will probably not have the most current statements of regulation and policy. Even if the website has a 2017 publication date, if the site is being published by a stakeholder that is selling a produce, you may not receive the rest of the story.

Therefore, it is my advice that when trying to create a Medicaid plan, it is best to contact an Elder Law Attorney, like Koren Martin. When asking a legal question about the Medicaid program or any other legal issue, it is imperative that a person obtain advice from a competent attorney.

Texas Law prohibits non-attorneys from advising persons about Medicaid qualification and charging a fee: 

  1. A person who is not licensed to practice law in Texas commits an offense if the person charges a fee for representing or aiding an applicant or recipient in procuring assistance from the Commission [the Texas Health and Human Services Commission’s Medicaid program]. 
  2. A person commits an offense if the person advertises, holds himself or herself out for, or solicits the procurement of assistance from the Commission. 
  3. An offense under this section is a Class A misdemeanor. Section 12.001 of the Texas Human Resources Code.