When Do Medicaid Spend-Down Rules Come into Play?
The high cost of nursing homes or in-home care can be overwhelming to families. Medicaid spend-down rules come into play when Medicaid eligibility is needed for long-term care. Medicaid can provide essential assistance for individuals who meet specific financial requirements. This is where Medicaid spend-down rules apply.
What Does Medicaid Spend-Down Mean?
Medicaid is a joint federal and state program designed to help individuals with low income and limited resources pay for medical treatment and long-term care costs. A person’s income and assets must fall below certain thresholds to qualify for Medicaid in Ohio. If income or assets exceed those limits, spending down those resources to a level that qualifies for Medicaid assistance becomes necessary, known as “Medicaid spend-down.” The Ohio Department of Medicaid provides information about Medicaid programs and who qualifies.
What Are the Income Limits for Medicaid in Ohio?
According to the American Council on Aging, the following income and asset limits apply for Medicaid assistance with nursing home care or home and community-based services in Ohio for 2024:
- Single: Income limit $2,829 per month; asset limit $2,000.
- Married (both spouses applying): Income limit $5,658 per month; asset limit $3,000.
- Married (one spouse applying): Income limit $2,829 per month; asset limits $2,000 for the applicant and $154,140 for a non-applicant.
What Can You Do If You Have Too Much Income to Qualify for Medicaid?
If an individual’s income exceeds the above limits, they may still qualify for Medicaid by setting up a Qualified Income Trust (QIT). Also known as a Miller Trust, these irrevocable trusts are designed to legally divert income and exclude it to determine eligibility for nursing home Medicaid and home and community-based services. A QIT must be irrevocable, contain only your income, and name the State of Ohio as the beneficiary to be valid in Ohio. Any money left in the trust when you die goes to the State, up to the amount Medicaid paid for your care.
In Ohio, the money in a QIT can be used to pay for:
- Incurred medical expenses
- Monthly personal or maintenance needs (for assisted living or nursing home residents)
- Bank fees associated with the maintenance of the QIT
- Participant liability, if applicable
What Can You Do If Your Assets Exceed the Medicaid Limits?
Medicaid imposes strict limits on assets as well as income. However, not all assets count toward the limit. Assets that are considered “exempt” or “non-countable” include:
- Primary residence: Your home is exempt, provided you or your spouse, a child under 21, or a disabled person lives there, or you are planning to return if the equity value is less than $688,000.
- Personal belongings: Clothing, jewelry, household goods, and other personal items are typically exempt.
- Vehicle: An individual is allowed one vehicle that does not count toward the asset limit.
- Burial funds and prepaid funeral plans: Funds set aside for burial expenses are exempt, within certain limits.
- Life insurance policies: Provided the total face value of the policy is less than $1,500, life insurance is also non-countable.
Cash, stocks, bonds, additional real estate, and retirement accounts are all non-exempt assets. If they total more than $2,000, you will need to spend them down to meet Ohio Medicaid eligibility requirements.
How Does Medicaid Spend-Down Work?
Medicaid spend-down involves reducing excess income and countable assets to qualify for Medicaid assistance. This process must be carefully planned, as improper handling of assets could lead to delays in eligibility or penalties.
Income Spend-Down for Medical Expenses
Excess income is commonly spent on medical expenses. The spending may include nursing home care, home health care, medical equipment, and other out-of-pocket healthcare costs. An individual may become eligible for Medicaid once medical expenses exceed income.
Assets Spend-Down
Countable assets that exceed the Medicaid limit may need to be spent down. Common spend-down strategies include:
- Paying off debts: Paying down car loans, a mortgage, or credit card debt can reduce countable assets while helping the individual’s financial situation.
- Making home improvements: Investing in necessary home repairs or modifications, such as upgrading bathrooms or installing wheelchair ramps, can be a legitimate way to spend down assets.
- Purchasing exempt assets: Certain assets, such as a more expensive vehicle or a burial plan, are exempt for the purposes of Medicaid eligibility. Using excess funds to purchase exempt items is one spend-down strategy.
Is Gifting a Valid Spend-Down Strategy?
Be very cautious about gifting money or property to family members. Ohio Medicaid has a five-year Look-Back Period to see if applicants gave their money or other assets away to get under eligibility limits. State officials review financial documents the applicant is required to provide for any asset transfers made for less than fair market value. The burden of proof is on the applicant to show that Look-Back Period rules have not been violated. If Medicaid finds that assets were transferred improperly, it may impose a penalty period during which the individual is ineligible for benefits.
It can be challenging to navigate Medicaid spend-down rules and ensure eligibility. Mistakes can lead to penalties, delays, or disqualification. For these reasons, it is crucial to seek professional assistance. At Lawrence Law Office, our family law attorneys are skilled and effective advocates for our clients. If you are dealing with the complexities of Medicaid spend-down rules, contact us at 614-363-1273 to schedule a free consultation.
