Recently, the state of New Jersey increased the amount of money that a Medicaid beneficiary can retain from his income when he is living in a nursing home.  Medicaid is a health payment program for needy individuals.  In order to qualify for Medicaid, an individual must have very limited assets (less than $2,000) and must have insufficient income with which to pay for the cost of his care.

If a person resides in a nursing home and qualifies for Medicaid, Medicaid will pay for most of the costs associated with his care.  I say “most” because the Medicaid beneficiary has a cost share that he must pay.  The cost share comes from his income.

A Medicaid beneficiary must pay his income to the nursing home every month with certain exceptions.  This is the Medicaid beneficiary’s cost share.  The cost share reduces the amount of money that the Medicaid program pays to the nursing home.  It works as follows:

A private-pay nursing home resident pays, on average, $12,000 a month to the nursing home.  When a person qualifies for Medicaid, the Medicaid program pays the same nursing home for the same care about $6,500 per month.  (And, yes, a nursing home cannot discriminate against a Medicaid beneficiary and must provide him with the same level of care as if he were a privately paying resident.  From personal experience, I can tell you that nursing homes do not discriminate against Medicaid beneficiaries.)

The Medicaid beneficiary’s income reduces the amount Medicaid pays (about $6,500 per month) with certain exceptions.  Assume that Mr. Smith qualifies for Medicaid and that his monthly income is $2,500 per month from Social Security and a pension.  Let’s further assume that Mr. Smith has a wife who continues to reside at home and his health insurance costs him $200 a month.

Mrs. Smith may be able to retain up to $3,000 per month of Mr. Smith’s income.  The amount that Mrs. Smith can retain from Mr. Smith’s income is reduced by the amount of her income.  For instance, if Mrs. Smith has $1,800 in monthly income from Social Security and a pension, then the amount she can retain gets reduced by $1,800.  Let’s assume that Mrs. Smith can retain $1,000 of Mr. Smith’s income.

Let’s further assume that Mr. Smith has private health insurance and his monthly premium is $200.  The Medicaid program wants Mr. Smith to retain his health insurance because if Mr. Smith visits a doctor or is sent to the hospital from the nursing home, then Medicare (not Medicaid) and his private health insurance will probably foot most, if not all, of the bills associated with these types of visits.

So, in this example, Mr. Smith has monthly income of $2,500.  His monthly income is reduced by the $1,000 that Mrs. Smith gets to retain.  His monthly income is further reduced by the $200 monthly health insurance premium.  Mr. Smith now has $1,300 [$2,500 – ($200 + $1,000) = $1,300] of his income available.

The final reduction to Mr. Smith’s income is Mr. Smith’s personal needs allowance.  This is the amount of money that Mr. Smith can retain each month to pay for his own personal items for which the Medicaid program does not pay, such as clothing, haircuts, and entertainment.  For many years, the personal needs allowance for a nursing home resident in New Jersey was $35.  So, Mr. Smith could retain $35 a month from his income to pay for his haircuts, clothing, entertainment, and any other non-covered items he might need.

As of July 1, 2017, the person needs allowance was increased from $35 to $50.  Still not much, but as a percentage increase, it’s a 42% increase in the allowance.  Not bad.

Mr. Smith’s remaining income, $1,250 ($1,300 – $50 = $1,250) is payable to the nursing home.  This reduces the amount the Medicaid program pays the nursing home from $6,500 to $5,250 ($6,500 – $1,250 = $5,250).