Who Qualifies for Medicaid?

Medicaid is one of the most effective, and most needed, programs when it comes to caring for seniors and our most vulnerable citizens. However, the rules are designed to be extremely complex so that families will tend to throw their hands up in frustration, spend everything they have, and then only have the government pay when they are flat broke. That wasn’t the original intent of Medicaid, but it seems like that is precisely what it has become.

So who exactly qualifies for Medicaid? There are four main tests you must meet in order to get Medicaid to pay the nursing home bill. But before we get into them, there is one HUGE, indelible, overriding rule you must follow:

• DO NOT GO TO THE MEDICAID OFFICE FOR ANSWERS

The Medicaid caseworker is not your friend. They are not there to help you save the most money possible. They work for the government, and it is their job to help you spend every penny you have worked your whole life to save before approving benefits. In one case, a father and son didn’t want to hire me and my team to create a workable Medicaid plan for mom, and instead they went to the Medicaid office to get their “free plan.” More than a year later after following the advice from the Medicaid case worker, they came back to me to ask about a “Medicaid friendly immediate annuity” for mom’s IRA. The case worker had talked them into spending more than a hundred thousand dollars of dad’s money on mom’s care, go into debt taking out a home equity line of credit against the house to pay some of mom’s hospital bills, and now they were going to get an immediate annuity with mom’s IRA money, payable to mom, which would have to go to the nursing home anyway if Medicaid was approved. In the end, they needlessly lost hundreds of thousands of dollars, and even went into debt, because they didn’t want to spend less than ten thousand dollars on professionals to help protect everything. We call this pinching pennies while leaking dollars, and it happens all of the time when you go to the Medicaid office instead of an experienced attorney or Certified Medicaid Planner™ for help.

Having the right knowledge from professionals on your side can help you avoid problems like this. Knowing exactly what the qualification requirements are is a good starting point, so here are the four tests.

Test 1) Age

For the type of long term care Medicaid we are looking at, the general age is 65, although there are so many exceptions for specific illnesses and conditions, that age isn’t that much of a factor. We’re not going to spend more time on this mainly because listing every exception and the qualifiers could take hours, so we’ll move right along to the second test.

Test 2) Medical Need

Long term skilled nursing care Medicaid is specifically to help those who have a demonstrated need based on Activities of Daily Living, often labeled simply as ADLs. When someone needs help with specific, basic living tasks that we generally take for granted, and these needs are certified by a physician, then the medical test can be met.

The five Activities of Daily Living (ADLs) are:

• Eating
• Dressing
• Bathing
• Toileting
• Mobility

Within those ADLs, there has to be certain levels reached in order to qualify in specific numbers of ADLs. To qualify, an individual must have a medical condition, disability or cognitive impairment, and demonstrates unmet needs for:

• Three of the five ADLs with limited hands-on assistance
• Two ADLs, one of which requires extensive assistance
• Two ADLs, one of which requires assistance at the full dependence level

In other words, a person really needs to be in a skilled nursing environment in order for long term care Medicaid to kick in, and it is this framework in conjunction with a doctor’s diagnosis that has an individual meet the Medical Needs test. To boil this all down, a doctor needs to fill out a one-page Form FL2 and have that submitted along with the Medicaid application, and this form can easily be found online if you want to see exactly what’s in it.

Test 3) Income

When it comes to income, you should basically assume all income goes to the nursing home facility first, and then Medicaid picks up the rest. If your income is sufficient to pay the nursing home bill on its own, then there is no need for Medicaid to pay for anything. Some states do have an income limit, but this is largely bypassed by a Special Needs “Miller” Trust (that was created by judicial court settlement). This income rule does allow you to apply income to a few exempt costs:

• You are allowed to keep a “personal needs allowance” each month, but anything you don’t spend accumulates and becomes part of the assets you need to minimize, as we’ll see in the next test. In 2024, North Carolina increased the personal needs allowance from $30 to $60 per month.
• You are allowed to apply income towards any necessary medical expenses that fall outside of what Medicaid pays for, which would include things like deductibles on doctor visits or co-pays on procedures, etc.
• Finally, you are allowed to apply income towards health insurance premiums, including Medicare supplements or Medicare Advantage plans. Just because Medicaid is covering long term care costs doesn’t mean there won’t be any other costs for “rehabilitative” medical care, and the government doesn’t want you to place that full bill on the government because you went broke to pay for nursing home care.

Test 4) Assets

This is the most crippling and misunderstood of the tests because it seems like you have to drain off everything you worked your whole life for just to pay for care before you qualify for Medicaid. It is also among the tests that have the most loopholes and outlets to convert or save money that can be passed along to the family, if done the right way.

Here are some statistics to be aware of:

• The national average stay in a nursing home is 28 months
• The national average monthly cost of staying in a nursing home is $9,733 per month
• This makes the average cost of someone in the U.S. staying in a nursing home $272,524.

I don’t know too many families would want to spend their life savings to pay for that care when there are alternatives. So what do you get to keep and pass along to your family before Medicaid kicks in? It’s actually a pretty small list:

• One primary residence with equity limit (North Carolina has a $713,000 equity limit in 2024)
• One Vehicle
• Liquid assets up to $2,000

That’s it. That’s all you get to keep and the rest needs to be spent before Medicaid kicks in to handle what your income doesn’t cover of the nursing home bill each month. But even that is not truly what you get to pass along to your family. By the time someone qualifies for Medicaid, their largest asset, if they even still have it, is a primary residence. However, Medicaid routinely puts a lien against the house when the person passes on, so even if the house is sold, most or all of the proceeds go back to the state. No one but the government wants that.

If you’ve made it this far, then please make sure that you like and subscribe to the channel and turn on notifications to make sure that you don’t miss any of this important information, and share this video with people who may need to see it.

Like I said, there are a lot of loopholes, techniques, and recharacterizations that can be done to save assets and keep them from being spent or claimed by Medicaid. Please check out the free program we have at www.FreeMedicaidCourse.com and see how much of that more than a quarter million dollars can be saved from the nursing home by planning ahead the right way. And as I always tell my clients, please stay safe, plan ahead, and enjoy life, and whatever you do, make it a great day.