What Is PEME?

Medicaid is a government health payment plan for needy individuals.  If an individual qualifies for Medicaid benefits, Medicaid will pay for many of the costs associated with long-term care.

If an individual qualifies for Medicaid benefits, Medicaid will pay for care in a nursing home, an assisted living residence, or at home.  At home, Medicaid will pay for a home health aide or an adult day care center.

When you apply for Medicaid benefits, you can elect to receive benefits up to three months prior to the date of your application; however, in order to receive benefits during this three-month retroactive period (the period of time three months prior the date of your application for benefits), you must have been eligible for Medicaid during those three months.

In other words, in order to qualify for Medicaid, an individual must have less than $2,000 in assets.  If he seeks benefits during the three-month retroactive period, then he must have had less than $2,000 in assets during those three months.  If he had, say, $10,000 in assets during the three-month retroactive period, then he will not qualify for retroactive benefits because his assets were over the limit during that period of time.

In addition, a person can only qualify for retroactive benefits if he were residing in a nursing home or an assisted living residence.  There are no retroactive benefits for people seeking Medicaid at home; Medicaid will only pay for benefits on a prospective basis for those individuals who reside at home.

If an applicant resides in a nursing home or assisted living residence and was ineligible during the three-month retroactive period and if he has unpaid bills during that three-month period of time, he might still qualify for another program that will enable him to pay his unpaid nursing home bills.  The program is called “pre-eligibility medical expenses” or PEME.

When a Medicaid beneficiary resides in a nursing facility, all of his income less certain deductions is payable to the facility as his cost share.  For instance, if Mr. Smith resides in a nursing home and has $2,250 a month in income, he can retain $50 as a personal needs allowance.  If his health insurance premium were $200, then Medicaid would permit him to pay the monthly premium from his income.  The remainder of his income, or $2,000 in this example, would be payable to the nursing home.

The $2,000 that Mr. Smith pays to the nursing home reduces what Medicaid pays the nursing home.  So, if Medicaid would have paid the nursing home $6,800 a month, which is a typically Medicaid reimbursement rate for a nursing home, then Medicaid would only pay $4,800, and Mr. Smith would pay $2,000.

If Mr. Smith owes the nursing home for the three months prior to the date of his application but was otherwise ineligible for Medicaid benefits, for instance because he owned too many assets, then the Medicaid office will permit Mr. Smith to use his $2,000 of available income to pay the nursing home for the bill he owes; however, the bill can only be paid at the Medicaid rate, not the private-pay rate, and the diversion of income can only occur if Mr. Smith did not give away any assets during the Medicaid five-year lookback period.

The request for PEME is typically filed by the nursing home or assisted living residence in which Mr. Smith resides.  The ability to make a PEME request is an important tool that an applicant should bear in mind, as applicants frequently have unpaid medical bills.

Prepaid Funerals and Medicaid

Many of my clients seek to qualify for Medicaid benefits.  Medicaid is a federal and state government health plan for needy individuals.  There are many different programs of Medicaid in any given state.  The program of Medicaid that I work with on behalf of my clients is for Medicaid that pays for institutional level services.

Institutional level services are services such as nursing homes, assisted living residences, and home aides.  Institutional level services, commonly known as long-term care services, can be quite expensive.  A nursing home can cost up to $14,000 a month.  An assisted living residence can cost upwards of $10,000 a month, and a home health aide can cost upwards of $7,500 a month.

Most of my clients never thought they would ever have to qualify for Medicaid.  In fact, they probably never wanted to qualify for Medicaid.  But when you are faced with costs that might last for years at the rate of $14,000 a month, you seek alternative methods of paying those costs.  When it comes to long-term care costs, Medicaid is, by far, the most frequent payor of long-term care services being provided in the United States, paying for over 50% of care that is being provided in nursing homes.

In order to qualify for Medicaid benefits, an individual must have insufficient income to pay for his care, and he must have limited assets, which are called “resources” in Medicaid parlance.  In order to qualify for Medicaid, an applicant must have no more than $2,000 in countable resources.

Countable resources include most every type of asset that has monetary value with the exception of a limited number of excluded resources.  Excluded resources include the home (if the individual is residing in the home), a car, personal goods and household effects, and certain funeral arrangements.

Recently, the state agency that administers New Jersey’s Medicaid program published a notice that clarifies the nature of the funeral arrangement exemption.  A burial space for the applicant, his spouse, and other immediate family members is excluded as long as the burial space is of reasonable value.  (I don’t know what type of burial space is of unreasonable value, but I’ve never encountered a burial space with unreasonable value.)  “Burial space” includes the gravesite, the casket, the urn, the vault, and the fee for opening the grave.

Also excluded are irrevocable prepaid funeral contracts for burial goods and services.  You can contract with a funeral home for the prepayment of your funeral.  If the contract that you enter with the funeral is irrevocable, meaning that you cannot surrender the contract and receive the money you paid towards the funeral back, then the burial contract is an excluded resource.  The burial contract must also name the state of New Jersey as remainder beneficiary for any funds remaining after the payment of the burial goods and services; in other words, if the money isn’t used for the funeral, then the money is paid to the state.

The burial contact cannot include the payment of certain goods and services.  The recent communication from the state makes it clear that you cannot prepay for such items as flowers, transportation for family members, and food for family members (such as the prepayment of a repast—the meal families typically have after the funeral).

Prepaying for a funeral is a typical planning technique when seeking to qualify for Medicaid benefits.  The recent communication from the state makes it clear what goods and services and individual can and cannot include in their prepaid funeral.

The Medicaid Premium

Medicaid is a health payment plan for needy individuals.  In order to qualify for Medicaid benefits, an individual must have limited assets and insufficient income to pay for the cost of her care.

If a person qualifies for Medicaid benefits, Medicaid will help pay for the costs of long-term care. Medicaid assists with paying for a nursing home, an assisted living residence, or long-term care at home, such as a home health aide or an adult day care.   Many of the people I help qualify for Medicaid benefits are people who never thought they would need to qualify for Medicaid benefits, who never wanted to qualify for Medicaid benefits.

But these same individuals never thought they would be faced with long-term care costs that range from $5,000 per month to $14,000 per month. Few people could afford to pay such care costs for a long period of time, yet that is exactly what people who are faced with long-term care costs must address.

Whether an individual qualifies for Medicaid benefits is, in large part, a question of financial eligibility (though there is a clinical eligibility component for long-term care costs). As mentioned, an individual must have limited assets in order to qualify for Medicaid benefits.  “Limited assets,” in New Jersey, means that the individual must have $2,000 or less in assets.  This is a hard-and-fast issue.  While there are exclusions from what is and is not a countable asset, the $2,000 figure is a relatively simple concept to understand.

An individual must also have insufficient income to pay for the cost of her care.  Insufficient income to pay for the cost of one’s care is a more complicated issue than limited assets.  You can’t receive Medicaid benefits if your income is sufficient to pay for the cost of your care.  For instance, if you are residing in a nursing home that costs $12,000 a month and your income is $14,000 a month, then your income is more than sufficient to pay for the cost of your care, and you would not qualify for Medicaid benefits.  You simply have more than enough income to pay for the cost of your care.

If an individual is living at home and qualifies for Medicaid benefits, Medicaid will pay for items such as a home health aide or adult day care services.  What is “too much income” is more difficult to understand.

When an individual qualifies for Medicaid at home, she can retain a certain amount of her income to pay for living expenses (shelter costs, food costs, clothing, and other daily expenses).  The maximum amount of income that she can retain for these expenses is $2,313 per month.

If the Medicaid beneficiary is married, her spouse might be able to retain some of her income, if the spouse’s income is insufficient to meet his needs.  Finally, certain medical expenses can be deducted from the Medicaid beneficiary’s income, such as her health insurance premium.

Sometimes, with married couples, the Medicaid beneficiary is the spouse who has the higher income.  For instance, the Medicaid beneficiary might have fixed monthly income (Social Security and a pension) of $3,500 and her spouse might have fixed monthly income of $500 a month.

Under the standard spousal income allowance, her spouse might be entitled to a spousal income allowance of $500.  Under the income rules, the wife (the Medicaid beneficiary) would be entitled to retain the maximum amount of income, $2,313, and her spouse would be entitled to retain his spousal income allowance, $500.

Finally, let’s assume that this same Medicaid beneficiary has a monthly health insurance premium of $200 per month.  In this case, the Medicaid beneficiary would be entitled to retain her $2,313, her spouse would be entitled to retain his spousal income allowance, $500, and the beneficiary could pay her health insurance premium of $200.

Her remaining income [$3,500 – ($2,313 + 500 + 200) = $487] would have to be paid to the state of New Jersey every month if she wanted to qualify for Medicaid benefits at home.  So, in essence, the Medicaid beneficiary would be paying a premium of $487 per month for the benefit of receiving Medicaid benefits.