Medicaid is a health payment plan for needy individuals.  Medicaid will pay for most of the costs associated with long-term care, such as care in a nursing home or assisted living residence.  Medicaid will even pay for long-term care at home, such as a home health aide or adult day care facility.

Long-term care costs are exceptionally high.  A nursing home in our area costs between $10,000 and $13,000 per month.  An assisted living residence costs between $5,000 and $9,500, depending upon the level of care that the resident requires.  A home health aide costs about $25 per hour or about $200 per day for a live-in aide.  An adult day care center costs anywhere from $90 to $150 per day.

Few people could afford to pay these costs for an extended period of time without completely depleting their life’s savings.  Many of the people who come to me in order for me to assist them with qualifying for Medicaid have between $50,000 and $700,000 in life’s savings.  They hope to save a portion of their assets for their benefit or the benefit of their family members.

Inevitably, potential clients will tell me what they believe the Medicaid program will permit them to retain in assets in order to qualify for Medicaid.  Many people tend to believe that if they are a member of a married couple, the well-spouse (called the “community spouse” in Medicaid parlance) can retain half the couple’s assets.  Or, the potential client believes she can retain all the assets in her name and that only the assets in the ill-spouse’s name (called the “institutionalized spouse” in Medicaid parlance) must be expended on his long-term care costs.

The truth is, the community spouse can retain certain non-countable assets and a certain amount of the countable assets.  Non-countable assets are the home, a car, and personal goods (such as clothes and furnishings).  Countable assets are everything else—bank accounts, stocks, bonds, mutual funds, most annuities, IRAs, 401(k)s, etc.

It is irrelevant which member of the couple owns the assets.  The community spouse is entitled to retain up to a maximum of $120,900 in countable assets.  That is a new maximum for the year 2017.  Whether or not the community spouse can retain the maximum depends upon the value of the assets owned by the couple when the institutionalized spouse first entered the nursing home.

For instance, if the couple owned $242,000 in countable assets when the institutionalized spouse first entered a nursing home, then the community spouse can retain the maximum amount of countable assets, or $120,900.  If the couple owned $200,000 of countable assets, then the community spouse can retain $100,000 of the countable resources, or half.  If the couple owned $100,000, then the community spouse can retain $50,000 in countable assets.  If the couple owned $50,000 in countable assets, then the community spouse can retain $25,000.

And if the couple only owned $25,000 in countable assets when the institutionalized spouse first entered the nursing home, then the community spouse can retain the minimum amount of countable resources, which is $24,180.

The $120,900 figure is a maximum, so if a married couple owned $1,000,000 in countable assets, the community spouse would still only be entitled to retain $120,900.  Moreover, it is irrelevant which spouse owns the assets.  All assets are pooled for purposed of determining the institutionalized spouse’s eligibility for Medicaid.

All of the assets could be held in the community spouse’s retirement plan.  Clearly, these assets would be owned only by the community spouse.  For purposes of Medicaid, the entire amount of the retirement account would count against the institutionalized spouse’s eligibility with the exception of the $120,900 maximum amount that the community spouse could retain.

One of the most common misconceptions about Medicaid is that applicants must spend every dollar before qualifying. The reality is often more nuanced, with exemptions, allowances, and planning opportunities that many families never realize exist.