Common Questions about Medicaid Eligibility
When it comes time to pay for a nursing home or long-term care, many seniors apply for Medicaid to help cover the cost. But determining whether or not you meet the income and asset eligibility guidelines can be confusing. We asked Dilane Lofton, Medicaid Specialist for Providence Life Services, to answer some common questions about Medicaid applications.
Does my life insurance policy count towards Medicaid’s asset limit?
It depends on what type of life insurance policy you have. Because a term life insurance policy does not have a cash value, it does not count towards the Medicaid asset limit. But if you have one or more whole life insurance policies (also called permanent life insurance), and the total face value of all those policies is more than $1,500, then it does count towards Medicaid’s $2,000 asset limit. (For more information on this terminology, check out this article from AgingCare.)
In that case, should I cash out my whole life insurance policy?
It is usually not a good idea to terminate your policy early and take the surrender value in cash. Medicaid will still count these funds towards the $2,000 limit, and will take the additional amount to pay for your long-term care, while you may have wanted this money to go towards your funeral expenses or be paid to a beneficiary.
There are ways to carefully “spend-down” the face value of your whole life insurance policy in order to protect your investment. A better solution is to have a family member (often an adult child) purchase your life insurance policy from you at fair market value and keep it in effect by continuing to pay the premiums. Since you no longer own the insurance product, Medicaid will not count it against your personal assets.
What about pre-paying my funeral expenses?
Setting aside money in an irrevocable funeral trust to pay for your burial expenses is one way to shelter your assets from Medicaid. But before you make an investment, bear in mind: an irrevocable fund means it cannot be changed, reversed, or dissolved for any reason – including if you move out of state.
As you work with a funeral home to draw up a contract, keep in mind that Medicaid distinguishes between “burial funds” and “burial space items.” Burial funds are the costs for goods and services provided by a funeral home, such as embalming, preparation of the body, use of limousines, etc. Burial space items are things that are purchased for the burial, such as cemetery plots, vaults, caskets, and headstones. Each state has a limit on how much money can be considered exempt for these expenses. For example, in Illinois an irrevocable trust for burial funds is exempt up to $5,874 per spouse.
What if one spouse is ill and needs nursing home care, but the other spouse plans to stay at home?
Because the healthy spouse may live a lot longer, Medicaid has protections against “spousal impoverishment” to help ensure that they have enough income and resources to support their living expenses. Currently in Illinois, the “community spouse” (the healthy spouse who lives in the community, not in a nursing home) is allowed to keep $119,220 in non-exempt assets. This is called the community spouse resource allowance. They can also receive an income, such as Social Security payments, of up to $2,739 a month.
Who can I talk to if I have more specific questions about my application?
It’s always a wise idea to seek help from an attorney who specializes in elder law. Providence Solutions has a wide network of trustworthy attorneys that we’d be happy to refer you to. Give us a call at (708) 342-8090 or email us at firstname.lastname@example.org and we’ll help point you in the right direction.