Disposition of Assets on Nursing Home Entry

You asked what happens to seniors' assets when they enter a nursing home. You also asked what the Medicaid rules on transfer of assets, income, and community spouses are for people in nursing homes.

The Office of Legislative Research does not give legal opinions and the following should not be considered one.

When senior citizens who have assets beyond the limits to qualify for Medicaid enter a nursing home, these assets and their income are considered available to pay the nursing home bills. Medicare and Medigap insurance pays for only short-term stays, up to 90 days for medically necessary care following a hospitalization. Medicare does not pay for long-term custodial care for such illnesses as Alzheimer's, where patients may spend years in a nursing home. When they have spent down their assets low enough to qualify, they apply to the Department of Social Services (DSS) and Medicaid pays the amount on nursing home bills that their monthly income does not cover.

To be eligible for Medicaid, an individual living in a nursing home cannot have more than $1,600 in “countable” assets. Certain assets are not considered “countable,” for instance, personal effects, a needed motor vehicle, burial plots, funeral funds or pre-need funeral contracts, certain life insurance contracts, and a couple's home if the spouse remains there. In addition, married couples where one spouse is in a nursing home and the other remains in the community can protect a portion of their combined assets for the community spouse's use. The protected amount is half their combined assets, but it cannot be more than $80,760 as of January 1, 1998. If half the combined assets are less than $16,152, the community spouse can keep up to that amount. The couple does not have to use the excess (unprotected) assets to pay for the nursing home costs. As long as fair market value is received, the excess assets can be spent in any way the couple wishes, but they cannot be given away.

Joint accounts with children are considered available to the patient, unless the children prove what portion of the account actually belongs to them. On the other hand, if a home is owned together with children, the ownership is presumed proportional to the number of people named on the deed. The children will not have to sell the house, but the state may put a lien on the patient's portion and can recoup what it has paid for the nursing home out of the patient's share of the proceeds when the house is sold.

Seniors who have transferred their home or other assets to someone else for less than fair market value within 36 months, or placed assets in a trust within five years, before entering the nursing home or applying for Medicaid become ineligible for assistance for a certain penalty period, with some exceptions. The penalty period is related to the value of the assets transferred. Federal law has recently made it a criminal act subject to prison terms to counsel or assist an individual, for a fee, in making such transfers in order to qualify for Medicaid.

One new way for people to protect some of their assets is to buy special long-term care insurance approved by the state.

The enclosed Department of Social Services (DSS) publication provides more details on treatment of assets and income for Medicaid purposes.

To qualify for Medicaid in a nursing home, an individual's assets cannot generally exceed $1,600, except that certain assets are not counted for Medicaid purposes, as indicated below. The patient's counted income must be no more than the private nursing home rate for the nursing home he is in, or, if it is more, other medical expenses can be counted to bring the income below that level. The patient must pay all his own income to the nursing home, except for:

The following assets do not have to be applied to nursing home costs or counted as assets for purposes of Medicaid eligibility.

1. A married couple's principal residence, if one goes into a nursing home and the other remains in the community. (But if the patient is single and will not return to their home, it must be sold and the money applied to the nursing home costs, with some exceptions indicated below.)

2. Essential household items.

3. Personal effects.

4. Burial plots.

5. Burial funds and arrangements up to $1,500 for each spouse where one is in a nursing home and the other lives in the community and $1,200 for others, including interest that accumulates and becomes part of the burial fund. (These amounts are reduced by the amount that the individual has in an irrevocable burial contract with a funeral home and by the face value of the applicant's or community spouse's life insurance policies if the cash surrender value of such policies is excluded.)

6. Irrevocable burial contracts up to $5,400 each for the patient and his spouse (changed from $4,800 as of July 1, 1997).

7. Non-home real property, only as long as a written agreement is made to sell it and any offer close to fair market value is not refused. A lien may be placed on the property. (A primary residence becomes non-home property when a patient enters a nursing home, cannot reasonably be expected to return home, and there is no one of acceptable relationship living there.)

8. One motor vehicle, if the applicant or his spouse (a) needs it for employment or for medical treatment of a specific or ongoing medical problem or (b) has modified the motor vehicle for operation by or transportation of a handicapped person. For an applicant with a community spouse, one motor vehicle owned by either person is excluded. If no motor vehicle is totally excluded, up to $4,500 of one vehicle's fair market value is excluded.

9. The cash surrender value of life insurance policies for each spouse, if the total face value of all such policies, excluding term insurance and irrevocable burial contracts, does not exceed $1,500.

There is a 36-month “look-back period” for transfers of assets that an individual or his spouse makes to be eligible for Medicaid. An individual who has given away his assets or transferred them to someone else for less than fair market value during the preceding 36 months is subject to a penalty period. Medicaid will not pay for the nursing home costs during this penalty period, basically equivalent to the time for which the transferred assets would have paid. The penalty period applies to transfers that occurred during the 36 months (1) before the date the patient enters the nursing home, if he is determined eligible for or is actually receiving Medicaid on that date; (2) before the date the patient applies for Medicaid while in the nursing home; (3) after the individual applies but before the first month of Medicaid eligibility has ended; or (4) at any time after Medicaid eligibility is established.

For transfers to and payments from trusts, the look-back period can be either three or five years depending on the type and structure of the trust. DSS will look back to see if the individual has established a trust on or after August 11, 1993.

The following types of transfers are not subject to the look-back period and do not result in a penalty:

1. A primary residence to a spouse, a child under 21, a blind or disabled child of any age, a sibling who owns part of the home and has lived there at least one year before the patient entered the nursing home, or a child who lived in the home for at least two years before the parent entered the nursing home and provided care to the parent which delayed nursing home entry for that time period.

2. Any assets to a community spouse or to a third party for the benefit of the community spouse.

3. Any assets to a blind or disabled child.

Federal law allows spouses of institutionalized Medicaid patients to keep a certain level of assets in order to maintain their homes and a minimal living standard while their spouse is in a nursing home. When one spouse goes into a nursing home for a continuous period, he or she can request DSS to assess the couple's combined assets and determine a spouse's share of the assets. Half of the combined total is considered the “spousal share.” The amount that the community spouse can actually keep (the Community Spouse Protected Amount, known as the CSPA), set by federal law, is the greatest of the following amounts:

1. $16,152 (adjusted January 1 annually),

2. the lesser of:

a. the spousal share calculated in the assessment of spousal assets or

b. $80,760 (adjusted January 1 annually),

3. the amount established through a fair hearing decision, or

4. the amount established through a court order.

While the state looks at both spouses' assets when it determines Medicaid eligibility, it may not look at the community spouse's income until the institutionalized spouse is determined eligible for Medicaid.

The “community spouse allowance” (CSA) is an income deduction from the nursing home patient's income (which otherwise has to be spent on the nursing home costs) to provide for the community spouse's needs. The CSA is determined by subtracting the community spouse's monthly income from his or her “minimum monthly needs allowance (MMNA),” which is calculated by a formula that takes into account the spouse's monthly housing-related costs. The MMNA cannot be more than $2,019 unless a subsequent DSS “fair hearing” requested by either spouse determines that the community spouse needs more monthly income because of exceptional circumstances that result in significant financial duress. The minimum MMNA is $1,326.25.

If the community spouse's income is above the MMNA as determined by DSS or the actual monthly needs allowance as determined by the commissioner through a fair hearing or court proceeding, DSS can require the community spouse, as a legally liable relative, to use a portion of the excess income to contribute to the patient's nursing home bills (CGS § 17b-81 (c)).

Congress added a provision to the Health Insurance Portability and Accountability Act of 1996 (P.L.104-191) which made fraudulent asset transfers for the purpose of achieving Medicaid eligibility a criminal offense, punishable by a fine up to $25,000, up to five years in jail, or both. Attorneys and other advisors who act on behalf of the Medicaid applicant, including adult children who assist their parents also could face a fine of up to $10,000, up to one year in jail, or both. The law became effective January 1, 1997.

But subsequently, the Balanced Budget Act of 1997 only made it a crime to “for a fee, counsel or assist an individual” to make asset transfers to become eligible for Medicaid if the transfer resulted in the imposition of a period of ineligibility, effective August 5, 1997.

Nursing home patients have an opportunity to shelter assets under certain qualified long-term care insurance plans. Someone who owns a pre-certified long-term care insurance policy which has paid benefits for long-term care services can, under the Connecticut Partnership for Long-Term Care program (CGS §§ 17b-253, 254), exclude additional assets from the Medicaid calculations equal to the lesser of the amount of payments made by the policy or the actual cost of the services. For instance, if the insurance has paid out $100,000 for covered services (and the services do not cost less than that), the patient can exclude an additional $100,000 from counted assets when he applies for Medicaid.