Medicaid is a program offered through the federal and Michigan governments that provides assistance with healthcare costs to people with limited access to income and other resources. It can also provide coverage for services like long-term nursing home care, which is not usually available through Medicare. Medicaid is a means-tested program, meaning that eligibility is based on an individual’s need for services and their ability to meet certain financial and asset requirements. Some marital property counts in determining Michigan Medicaid eligibility, and some does not count. It is important to understand both how Michigan defines “marital property,” and what part of it gets counted by Medicaid.
This raises a question when a married person applies for Medicaid coverage for long-term nursing care: To what extent should marital property, or separate property owned by the other spouse, be considered? Federal and state Medicaid laws set limits on income and assets, along with guidelines for what property to count towards those limits.
The federal government provides part of the funding for Michigan’s Medicaid program, but the Michigan Department of Health and Human Services (MDHHS) administers Medicaid statewide. It determines eligibility based on policies set at both the state and federal levels.
The Medicaid program divides assets into “countable assets,” which are not exempt from consideration in the eligibility determination, and “non-countable assets,” which are exempt.
Liquid or non-essential assets are usually considered countable. This includes cash, other financial instruments that can easily be converted to cash, certain life insurance policies, retirement and investment accounts, and luxury assets like vacation homes or additional vehicles.
Non-countable assets include the marital home. Households items like clothing, appliances, and furniture are also considered non-countable, along with the minimum number of indispensable automobiles. Property held in certain kinds of trusts or annuities are also non-countable.
Michigan’s Medicaid program sets a maximum limit of $2,000 in countable assets for the applicant in order to be eligible. As mentioned earlier, the marital home is a non-countable asset, but it is subject to limits for long-term care eligibility. The home equity limit in Michigan in 2019 is $585,000.
When one spouse is applying for Medicaid benefits to pay for long-term nursing care, Medicaid rules do not require that both spouses expend nearly all of their resources to pay for care. Under the federal government’s “spousal impoverishment” standards, the spouse who is not going into care, known as the “community spouse,” is allowed to keep a certain amount of assets which is governed by a minimum and maximum, known as the “Community Spouse Resource Allowance” (CSRA).
In order to determine if a couple’s assets are within the CSRA, they must take the total value of their countable assets on the day in which the applicant spent at least 30 days in a hospital or rehabilitation center, and divide it by two. That amount cannot exceed the “maximum resource standard,” which is set at $126,420 for 2019. The minimum resource standard is $25,284. Most states, including Michigan, use the federal numbers.
Medicaid has extensive rules regarding the transfer of assets in an attempt to meet the resource requirements for eligibility. For example, if a married couple owns more assets than the Medicaid resource limit allows and they gift or sell some of those assets, like a car or an investment account, to someone else — like their child or grandchild — for less than fair market value, this will likely result in a penalty. If the transfer was done while the couple was applying for Medicaid, or within 5 years before they applied, Medicaid officials will want further details. If it is determined that the purpose of the transfer was to lower the total value of the applicant’s assets, they may penalize the applicant by making them ineligible for a period of time.
Medicaid-compliant annuities, however, allow a couple to transfer cash to an annuity company. That company then pays an income stream to the spouse who is not going into care. Another exception to the asset-transfer rules involves transfers for the sole benefit of the applicant’s spouse. This has led to the creation of “Solely for the Benefit” (SBO) trusts, created in part to transfer assets out of the name of the spouse seeking Medicaid eligibility.
In May 2019, the Supreme Court of Michigan issued a ruling in Hegadorn v. Department of Human Services Director that will be helpful to married people who hope to qualify for Medicaid while making sure their spouses are able to keep essential assets. The MDHHS denied the three plaintiffs’ Medicaid applications, based on its findings that assets in irrevocable SBO trusts should be included in their countable assets. The court disagreed, finding that assets in SBO trusts should not be counted as long as they are only available to the community spouse, not the institutionalized spouse.
A good long-term care planning attorney can help you qualify for Medicaid in Michigan by evaluating your assets, identifying marital property and countable assets, and advising you on the best way to manage those assets.
Estate planning and elder law attorney Rebecca J. Braun practices with Mobile Legal Services, PLLC, in Southeast Michigan. She can assist you with questions about estate planning and Medicaid eligibility. She will travel to clients, free of charge, in Monroe, Oakland, Washtenaw, Wayne, and Southern Macomb Counties. To schedule an initial assessment, please contact us today.