Medicaid is a health insurance program for needy individuals. Unlike most policies of health insurance, Medicaid will pay for long-term care, such as care in a nursing home. In order to qualify for Medicaid, an applicant must have limited resources and insufficient income to pay for her care.
Typically, an applicant for Medicaid can have no more than $2,000 in countable resources. Countable resources are all resources the person owns and that can be used to pay for his support and maintenance with the exception of certain resources that are deemed to be non-countable.
Non-countable resources are the house, a car, personal goods and household effects, and certain small policies of life insurance; however, a house only retains its non-countable status if the applicant, his spouse, or a family dependent is living in the house. If the applicant is a single individual who is residing in a nursing home and no family dependent is living in the home, then the home has to be sold.
Until the house is sold, the applicant can receive Medicaid benefits contingent upon his listing his house for sale. Once the house sells, the proceeds are countable resources that have to be spent down in order to re-qualify the person for Medicaid benefits.
If a spouse is living in the home, then the home remains a non-countable resource. It is irrelevant how much the house is worth. Theoretically, a million-dollar home would be a non-countable resource if the well-spouse were residing in the home.
One technique people use in order to qualify for Medicaid benefits involves converting countable resources (such as bank accounts, stocks, bonds, annuities) into non-countable resources (such as a home, a car, or personal good and household effects). I often counsel clients to purchase items that would be considered non-resources if they need those items.
For instance, if the wife is in a nursing home and the husband needs a new car, then the husband, in my opinion, should purchase a new car now and not put off the purchase off to a later date. By purchasing the car, the husband can convert a substantial amount of countable resources into a non-countable resource.
Perhaps the husband needs to make home improvements that he’s been putting off. His house may need a new kitchen or a new bathroom or the home may need new carpeting and paint. In my opinion, it is best if the husband purchases those items as part of his “Medicaid spend down” as opposed to putting those repairs/renovations off to a later date.
The husband may wish to purchase some new furniture or a new computer. Those items would be non-countable personal effects and household goods. So, he should do that sooner rather than later.
What I do not recommend is that a person needlessly spend his money on items he does not want. Cars and personal goods are not good investments. They frequently lose their value quite quickly, so purchasing expensive, unwanted items is not part of a well thought out plan to qualify for Medicaid.
While other options to preserve money, which typically involving gifting, may be viewed as more aggressive by the Medicaid office, techniques involving gifting have proven themselves viable for years now. So, while a “Medicaid spend down” is part of a good a Medicaid planning, it is in no way the be-all and end-all of Medicaid planning.
The spend down process is often viewed as a financial obstacle, but it is really a set of rules that determine when assistance becomes available. Families who understand those rules early usually have more planning opportunities and fewer unpleasant surprises than those who wait until a crisis occurs.