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How Does Medicaid View Long Term Care Insurance?

Mary cared for her husband, John, at home.  John had long term care insurance to help pay for a home health aide.  However, over time, keeping John at home simply became impossible and Mary was forced to place him in a nursing facility.  She applied the insurance towards the cost of care there, and spent down their assets to cover the balance until Mary had $100,000 remaining.   Mary then applied for Medicaid and that’s when she ran into a problem, caused, ironically, by the insurance. 

Mary was told that John’s long term care insurance counts as income and, therefore, he had too much income to qualify for Medicaid.  Yet he didn’t have enough to cover the private pay cost of the nursing home.  Mary and John were caught between a rock and a hard place.  How was this possible?

 New Jersey has two Medicaid programs that cover nursing home care.  One program is for applicants who have no more than $2022 per month in gross income.  And when we talk about income, we usually mean Social Security and pension, which can’t be modified as long as you live.  A second program exists for those who have income greater than $2022, but the income limit for that program is the equivalent of the Medicaid reimbursement rate.  That rate is what Medicaid pays the nursing home, usually somewhere between $5000 to $6000, depending on the facility.

 John’s insurance policy benefits were being paid directly to him, not to the nursing home.    For that reason, Medicaid treated the payments as income to him , which pushed his “income” to $6500 per month, making him ineligible.  So was that it?  Was Mary out of luck?  Not necessarily.

 With a slight change John could be made eligible.  By having the insurance company send the benefit check directly to the nursing home, it would not be counted as income and John could qualify for Medicaid.  That’s because under Medicaid regulations third party payments for medical care or services, including room and board, are not counted as income.  If the insurance company, as the third party, pays the nursing home directly, then that “income” disappears.

 Crazy, right?  How can a minor change like that affect Mary’s health and well being so drastically?  That’s because, Medicaid regulations are so complex and arbitrary.  Failing to get the proper guidance can cost literally thousand and hundreds of thousands of dollars.  In Mary’s case, she spent another $25,000 before she sought out the advice of an elder law attorney who helped her fix her application.  Another example of how difficult navigating through the long term care maze can be.