Basic Rules of MassHealth Eligibility

The Asset Rules
The Transfer Penalty
Estate Recovery
Treatment of Income
Spousal Protections
The Medicaid Application

For all practical purposes, in the United States the only "insurance" plan for long-term institutional care is Medicaid. Medicare only pays for approximately 7 percent of skilled nursing care in the United States. Private insurance pays for even less. The result is that most people pay out of their own pockets for long-term care until they become eligible for Medicaid. While Medicare is an entitlement program, Medicaid is a form of welfare -- or at least that's how it began. So to be eligible, you must become "impoverished" under the program's guidelines.

Despite the costs, there are advantages to paying privately for nursing home care. The foremost is that by paying privately an individual is more likely to gain entrance to a better quality facility. The obvious disadvantage is the expense; in Massachusetts, nursing home fees can be as high as $7,000 a month. Without proper planning, nursing home residents can lose the bulk of their savings.

For most individuals, the object of long-term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done within the following rules of Medicaid eligibility.

In Massachusetts, Medicaid is administered by the Division of Medical Assistance (the "DMA"). However, in order to qualify for federal reimbursement, the state program must comply with applicable federal statutes and regulations. So the following explanation includes both Massachusetts and federal law as applicable.

The Asset Rules

The basic rule of nursing home Medicaid eligibility is that an applicant, whether single or married, may have no more than $2,000 in "countable" assets in his or her name. "Countable" assets generally include all belongings except for (1) personal possessions, such as clothing, furniture, and jewelry, (2) one motor vehicle (valued up to $4,500 for unmarried recipients and of any value for community spouses), (3) the applicant's principal residence (if it is in Massachusetts), and (4) assets that are considered inaccessible for one reason or another.

The Home

The home will not be considered a countable asset and, therefore, will not be counted against the asset limits for Medicaid eligibility purposes as long as the nursing home resident intends to return home or his or her spouse or another dependent relative lives there. It does not matter if it does not appear likely that the nursing home resident will ever be able to return home; the intent to return home by itself preserves the property's character as the person's principal place of residence and thus as a noncountable resource. As a result, for all practical purposes nursing home residents do not have to sell their homes in order to qualify for Medicaid.

The Transfer Penalty

The other major rule of Medicaid eligibility is the penalty for transferring assets. If an applicant (or his or her spouse) transfers assets, he or she will be ineligible for Medicaid for a period of time beginning on the first day of the month of the transfer. The actual number of months of ineligibility is determined by dividing the amount transferred by $5,010. For instance, if an applicant made gifts totaling $90,000, he or she would be ineligible for Medicaid for 18 months ($90,000 ÷ $5,010 = 18). Another way to look at this is that for every $5,010 transferred, an applicant will be ineligible for nursing home Medicaid benefits for one month.

There is no cap on the period of ineligibility. So, for instance, the period of ineligibility for the transfer of property worth $315,000 is 63 months ($315,000 ÷ $5,010 = 63). However, the DMA may only consider transfers made during the 36-month period (60 months in the case of some trusts) preceding an application for Medicaid, the "look back" period. Effectively, then, there is a 36-month cap on periods of ineligibility resulting from transfers. People who make large transfers have to be careful not to apply for Medicaid before the 36-month look-back period passes.

Exceptions to the Transfer Penalty

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include:

1. A spouse (or anyone else for the spouse's benefit);


2. A blind or disabled child;


3. A trust for the benefit of a blind or disabled child; or


4. A trust for the benefit of a disabled individual under age 65 (even for the benefit of the applicant under certain circumstances).

Special rules apply with respect to the transfer of a home. In addition to being able to make the transfers without penalty to one's spouse or blind or disabled child, or into trust for other disabled beneficiaries, the applicant may freely transfer his or her home to:

1. A child under age 21;


2. A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home; or


3. A "caretaker child", who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided such care that the applicant did not need to move to a nursing home.

A transfer can be cured by the return of the transferred asset either partially or in its entirety.

Estate Recovery

The state has the right to recover whatever benefits it paid for the care of the Medicaid recipient from his or her probate estate. Given the rules for Medicaid eligibility, the only property of substantial value that a Medicaid recipient is likely to own at death is his or her home. Under current law, the state may make a claim against the decedent's home only if it is in his or her probate estate. Property that is jointly owned, in a life estate, or in a trust, is not included in the probate

estate and thus escapes estate recovery. Congress has given the states the right to seek estate recovery against such non-probate property; so far, Massachusetts has not acted on this provision.

Massachusetts does not seek recovery against the estates of those decedents who owned long-term care insurance when they entered the nursing home, provided the policy was an individual policy approved by the Division of Insurance. This exemption from estate recovery applies only if the applicant for Medicaid checks the correct box on his or her application.