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The Three Tests for Medicaid
Jan L. Warner & Jan Collins

Question: My mother has dementia, and Dad has been taking care of her for nearly three years. The last several months have been especially difficult for him. We are trying to figure out how Dad will have enough money to live if Mom is admitted to a nursing home. Are there set formulas that specify how much income and assets my father will be able to keep? How does this process work?

Answer: Recognizing that the $4,000 to $9,000 monthly cost of nursing home care would exhaust the lifetime savings of most elderly couples very quickly, Congress passed the Medicare Catastrophic Coverage Act in 1988. Applicable in all 50 states and the District of Columbia, this federal law established what are called "spousal impoverishment rules" that is, specific Medicaid eligibility rules that apply when one married spouse needs nursing home care and the other, in order to remain in the community, must protect his or her income and resources. These rules apply when the spouse in the facility is expected to remain there for at least 30 days. Because the states have flexibility in applying these guidelines, the rules will vary from state to state. Generally, there are three tests involved in the Medicaid eligibility process: the resource test, the income test, and the medical test.

Resources: When the Medicaid application is made, the appropriate state agency will examine the couple's resources that, for the purpose of eligibility, are combined. After exempting certain assets such as the residence, household goods, an automobile, burial funds, and other non-countable assets -- the net result is called the "spousal resource amount." While the federal maximum allowable for 2002 is $89,280, states can vary the amount. So long as the total countable resources are below the state's resource standard, and the nursing home spouse does not hold more than $2,000, the resource eligibility test will be satisfied, and the remaining assets held by the community spouse cannot be appropriated for the expenses of the nursing home spouse.

Income: While the community spouse's income will never be considered "available" to the nursing home spouse, all or part of the nursing home spouse's income may be allocated to bring the community spouse's monthly income up to limits established by each state which cannot exceed the federal maximum, which for 2002 is $2,232. The exact amount will depend on where you live. However, should the community spouse's income exceed the allowable limit established by the state, the community spouse will receive no income allocation from the nursing home spouse.

Whatever remains of the nursing home spouse's income from Social Security, retirement, etc. -- will be used for his or her own care, and the Medicaid program will pay the balance.

Medical Eligibility: Generally, the individual must need help with activities of daily life and/or have severe cognitive or functional deficits. Remember that the resource and income limits are totally irrelevant if the nursing home spouse does not meet the state's medical level-of-care guidelines.

Taking the NextStep: Even assuming the medical guidelines are met, the qualification process can still be extremely complicated because the rules can be unwieldy. Since we cannot cover all the "ins and outs" of the qualification process in this column, we highly recommend that you contact an elder law attorney in your area before taking any action (

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Planning Your Future with 20-20 Vision™

Today, more than 36 million Americans are age 65 or over. There are more than 22 million family-member caregivers. Then there are the Baby Boomers. All are grappling with the major decisions that accompany the latter stages of life. This book is for them. Written by two experts with decades of experience between them, it is a comprehensive guide that instructs readers about how to create a plan to deal with all aspects of aging, helps maximize options and ensure wishes are carried out.

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