There are more than 40 programs under Medicaid in Texas. Discussion is limited to programs commonly used by persons over age 65.
MEDICAID ACRONYMS AND JARGON EXPLAINED
The meanings of the various words or amounts may vary in other states than in Texas. Most of the amounts discussed also vary by year.
CMS Centers for Medicare and Medicaid Services. This is the federal agency that supervises these programs. There is no such thing as a local Medicare office. Sign-ups for Medicare go through the Social Security office initially. After signing up all contact goes through private companies hired by CMS to manage claims.
Medicaid is a joint State-Federal program. CMS signs a contract with each State under which that State administers the various Medicaid programs. The benefits and rules can vary within limits from State to State.
CSRA–Community Spouse Resource Allowance This amount is modified annually for inflation. This is related to the MMMNA.
CS–Community Spouse: the spouse who still lives outside a nursing home
Countable Resources when HHSC is reviewing an application it looks only at those assets that are countable under Federal law. Some assets are excluded and not countable. More detail is included elsewhere, but typically the homestead, burial plots, household furnishings and one vehicle for each spouse are excluded. A nursing home patient is limited to $2,000.00 of countable assets.
HHSC, or Texas Health and Human Services Commission, the State agency that manages Texas Medicaid programs
IS–Institutionalized Spouse: the spouse who requires skilled nursing care in a skilled nursing facility
Income Cap: This is the maximum amount of income permitted in Texas for an applicant for Medicaid
Institutionalized means that a patient has been in a hospital and/or a skilled nursing facility for thirty days.
Personal Needs Allowance The amount allowed to a patient receiving Medicaid services in a skilled nursing facility for personal needs not otherwise provided under Medicaid. Typically this is used to pay for haircuts, clothing, snacks or whatever other item or service that amount can purchase. Currently, this amount is $60.00 for persons in a nursing home. There is also a Personal Needs Allowance for some home care programs.
MMMNA–maximum monthly maintenance needs allowance is also called the spousal monthly allowance. In 2019 this amount is $3,0160.50. If a community spouse has less than this amount of income in his or her name, income from the patient can be allocated to the community spouse after certification.
MAPT–Medicaid Asset Protection Trust, used to protect assets from the forced sale or spend down when a patient enters a nursing home and applies for Medicaid-long term care. It must be created more than sixty months before a Medicaid Application and before age 65. Under federal law, a person may set up a self-funded supplemental needs trust prior to the age of 65. Upon reaching the age of 65 self-funding of an SNT is a disqualifying transfer.
PRA-Protected Resource Amount the amount a community spouse is allowed to protect from spend-down. There are both minimum and maximum amounts. This is a very complicated area of law in which the patient is allowed to set aside more assets or income under certain circumstances.
Snapshot– HHSC determines the eligibility of an applicant based on all countable resources owned by a married couple as of 12:01 on the first day of each month after an applicant has been “institutionalized” for thirty days. This is the snapshot assessment. Part of this computation uses the assets or more correctly “countable resources” owned by a person or married couple as of the first time a patient was institutionalized for thirty days. A second assessment is made on the application as stated above. The first institutionalization could be ten years before the application or whenever it occurred.
SNF–Skilled nursing facility, otherwise known as a nursing home or rehab facility
SNT–special needs trust or supplemental needs trust. A complicated trust created to hold assets so that a person is not disqualified from either disability benefits under Social Security or from Medicaid benefits. There are both self-funded versions and versions funded by someone other than a person needing disability benefits (considered third-party trusts)
Spend down this is the process of spending assets for care until a patient meets the required maximum amount of assets to qualify for Medicaid. Most transfers for less than fair market value are considered to disqualify a patient from Medicaid coverage. There are some transfers that do not disqualify.
Spousal Impoverishment Rules the rules under which the community spouse is forced to spend down assets in order to qualify the patient for Medicaid.
WHEN IS MEDICAID PLANNING HELPFUL?
Really this question should be asked as part of the larger question about how to plan for disability and long-term care costs. The most effective time to begin this process is as early as possible when finances permit. Unfortunately, most Americans are unable or unwilling to afford to purchase disability and/or long-term care insurance. Less than 5 percent of American adults purchase long-term care insurance. Long-term care insurance is an expensive item to purchase, just as the risk it is meant to cover is an incredibly expensive service that is subject to one of the most rapid rates of increases in cost.
Some experts believe that the purchase of long-term care insurance can be most realistically purchased when a person in his or her 50s. The author of a recent article in Kiplingers suggested that most truly wealthy individuals can afford to pay for care out of their income or assets. The cost of care varies greatly based on where a person lives, their age and the complexity of care needed. In Texas, if a person has an estate of about $500,000.00 then he or she can realistically expect to be able to pay for care out of income and assets. If someone has less than $250,000.00 at age 65 he should expect to deplete his estate and need to apply for Medicaid to pay for care.
WHAT IS MEDICAID PLANNING?
A Medicaid Plan or disability care plan considers many factors. Essentially, it is a plan for how assets and income will be allocated for family support and long-term care during the relevant period of time. Among the elements is an estate plan that considers:
Who are the people available to assist the person when unable to care for herself?
What are the income and assets available to pay for care?
What are the willingness and ability to spend income or assets to purchase insurance to pay for various forms of medical care?
How willing is she to accept the risk of sub-standard care under Medicaid if necessary to protect assets for her spouse or family?
Do other members of the family have disabilities that need support out of the planner’s estate?
How long does the person planning have before needing care? Most people create their plan when a crisis hits forcing the patient into a nursing home. Some people have enough assets they can afford to pay for care for at least sixty months before applying for Medicaid.
A Medicaid plan might involve an irrevocable trust created before age 65 into which assets are transferred to be protected from health care costs and State Medicaid recovery programs. It is even more likely to involve gifting assets from one spouse to the other for the community spouse’s support and to spend down the patient’s assets. When done carefully gifting to children for education purposes and to disabled family members can be done without penalty. It is even possible to gift and obtain qualification after a penalty period if done correctly.
WHO SHOULD CONSIDER LONG-TERM CARE COSTS IN THEIR ESTATE PLAN?
Since more than half of persons over 65 will eventually need skilled nursing care, all of us should plan for health care costs of every nature.
The one thing everyone needs to do is to prepare a budget based on known income and assets. We can obtain expected social security income and consider the use of annuities or cash flow out of IRAs, etc. We should absolutely look at the costs of medicare supplement insurance plans and compare the coverage and expense of Medicare Advantage plans. Some few of us will also have health insurance coverage from an employer or TriCare for Life if we retired from the military.
Due to the high cost of long term care insurance comparatively few of us will be able to afford long term care insurance, but that does not mean we should not consider buying a policy at less than full coverage so that we can provide for at home care to put off eventual skilled nursing care. We can purchase a limited policy for the spouse most likely to need care, or possibly plan on how to allocate assets from one spouse to the other depending on circumstances.
Few of us will be able to pay such costs out of savings or cash flow. Most of us will need to apply for Medicaid services. Even so, there is much we can do. There is not a one size plan fits everyone. Even considering our health and exercising appropriately can help.