Paying for long-term care, and what Medicaid actually does

What Medicaid pays for that Medicare does not

This is the distinction the whole area rests on, and it is where families lose months. Medicare pays for rehabilitation after a hospital stay, for a bounded period, and it does not pay for long-term custodial care at all. Medicaid does — and it is the largest payer of nursing home care in the country.

The federal transfer rules on this page reach three named services: nursing facility services, an equivalent level of care in another institution, and home or community-based services furnished under a waiver. That last one matters — the same rules apply to care at home under a waiver program, not only to a nursing home.

How anyone actually pays for it

Most families arrive at Medicaid last, after discovering in the wrong order that nothing else covers this. It is worth seeing the whole set at once, because the order in which money gets spent is what decides whether Medicaid is a question about next month or about five years from now.

Start from the thing that is not on the list. Medicare does not pay for long-term care — not for help with bathing, dressing, eating or moving, however long it goes on. Medicare says so in its own words on its own coverage page. What it does pay for is a limited stretch of skilled rehabilitation after a hospital stay, and that runs on a hundred-day clock per benefit period, of which only the first twenty are paid in full. Families routinely read those hundred days as the beginning of coverage. They are the end of it.

Spending savings down to the Medicaid limit and then applying is not the same thing as planning five years ahead, and a gift made along the way is the one move that creates a penalty at the exact moment care is needed. If there is any prospect of Medicaid, the look-back section below is the one to read before money moves.

The five years, and when the penalty actually starts

Families arrive knowing there is a five-year rule and believing it works like a statute of limitations: give money away, wait five years, and you are clear. The first half is right. The second half misunderstands the part that does the damage.

1. The state looks back 60 months from the date the person is both in care and has applied, at assets disposed of for less than fair market value.
2. Anything found produces a period of ineligibility, computed by dividing the total uncompensated value transferred by the average monthly private-pay cost of nursing facility care in the state at the time of application.
3. A state may not round that down or disregard a fractional period.
4. And the penalty does not begin on the date of the gift. For transfers on or after 8 February 2006 it begins on the later of the transfer month and the date the person would otherwise be eligible and receiving institutional care but for the penalty.

That last point is the whole difficulty. The penalty runs at the moment the family has neither the gifted money nor Medicaid — which is why an informal gift to a grandchild four years ago can produce months of unpayable nursing home bills, and why undoing a transfer is sometimes better than defending it.

Not every transfer is penalized, and the exceptions are real — transfers to a spouse, to a disabled child, and certain transfers of a home to a caregiving child or a resident sibling among them. Sahvelo has not published the exception list and does not summarize it here; it is the first thing to ask an elder law attorney about.

Medicaid does not only mean a nursing home

The belief that qualifying for Medicaid means moving a parent into a nursing home keeps families out of the system for years, and it is the wrong way round. Federal law lets a state pay for care outside the ordinary Medicaid plan — at home, in the community — for people who would otherwise need institutional care.

These are the home and community-based waivers. A state applies to run one, and what it may cover is deliberately open-ended: case management, homemaker and home health aide services, personal care, adult day health, habilitation, respite for the family — and a catch-all for any other service the federal agency approves as cost effective and necessary to keep somebody out of an institution.

A waiver is an arrangement between one state and the federal agency, so what is covered, who administers it, and whether there is a waiting list are all state facts. Sahvelo will not guess them. The route to the real answer is the state Medicaid agency and the Area Agency on Aging below — and the waiting list is the reason to ask early rather than at the point of crisis.

Whether they will take the house

Two different federal rules are usually merged into this one question, and separating them answers most of it. One is about qualifying while alive. The other is about what happens to the estate afterwards.

On qualifying: equity in the home above a statutory limit disqualifies a person from long-term care assistance. The statute sets a floor which a state may raise to a stated ceiling, and requires both to be increased annually with the consumer price index — so the current figure is higher than the one in the statute and is a state question. The rule does not apply at all where the person's spouse, or their child under 21, or their blind or permanently and totally disabled child, is lawfully residing in the home. The statute also says in terms that nothing prevents using a reverse mortgage or a home equity loan to reduce the equity, and requires a hardship waiver process.

On afterwards: estate recovery is mandatory rather than discretionary. Where the person was 55 or over when they received assistance, the state must seek recovery from the estate for long-term care, home and community-based services and related hospital and prescription costs; a state may go further and recover for other services, and many do. But recovery may be made only after the death of a surviving spouse, and only when there is no surviving child under 21 and no blind or permanently and totally disabled child.

Where recovery would be against a lien on the home, two more people defer it: a sibling who lived in the home for at least a year before the admission, and a son or daughter who lived there for at least two years before the admission and can show that the care they gave kept the person out of an institution — in each case where they have lived there continuously since.

Sahvelo does not publish what counts as the estate for this purpose, and it is not the same everywhere: some states recover only from what passes through probate, and some reach further. That is a state question and it changes the answer materially.

The spouse who is still at home

The belief that a healthy husband or wife must be reduced to nothing before the other can get help is false, and it is false because Congress legislated against exactly that outcome in 1988. The protection is a statute, not a concession, and it has three parts.

The single most useful thing on this page for a married couple is the assessment. It can be requested at the start of the first continuous period of institutionalization, before anybody applies for anything, and it fixes the number the rest of the calculation runs on.

Every figure in these rules — the protected resource allowance, the minimum monthly maintenance needs allowance, the personal needs allowance — is set annually and varies by state. Sahvelo does not print any of them, because a page carrying last year's number is worse than one carrying none.

Whose money it was decides what happens to it

The Medicaid trust rules are read as being about trusts. They are about ownership, and reading them the other way is what produces the expensive version of this mistake.

The statute applies to a trust established by the individual, and it defines that phrase by the source of the money rather than by who signed the document: a person is treated as having established a trust if their own assets formed all or part of it, and it was set up by them, their spouse, or someone acting on their behalf. Move your own money into a trust and it is your trust, whoever is named on it.

The practical consequence runs backwards from the person who needs care to the person writing a will. A parent leaving money to a child who is already frail, or who may need care, has a choice available to them that the child will not have once the money arrives.

Free help exists before any of this, and it is easy to miss

Nearly everything written about paying for care is written by somebody who is paid when a family buys something — a placement service, a Medicaid planning firm, an agency, an insurer. That is not a conspiracy, it is an economic fact, and its effect is that the free public routes go unmentioned by the results a family actually reads.

They are real, federally funded, and organized so that one local office is the way in. Rides, in-home support, senior centers and legal advice for older people are one federally funded category with one local administrator — the Area Agency on Aging covering that address. The Eldercare Locator is the national directory of them.

A complicated estate, a contested application, a denial, or a transfer already made inside the look-back are all situations where an elder law attorney earns their fee. The point is not that paid help is wrong. It is that a family should reach it having already used the free routes, rather than instead of them.

What Sahvelo cannot tell you here

This page is the federal framework and nothing else. That is a deliberate limit rather than an unfinished one, and saying where it stops is more useful than implying it does not.

• Whether a particular person qualifies. Income and resource limits are set by each state, change every year, and differ between programs within the same state.
• How to apply. That is a state agency's process, and the agency is the right source for it.
• Home and community-based services waivers — what your state's covers, who runs it and how long its waiting list is.
• The exceptions to the transfer penalty, which are real and are the first thing to ask a specialist about.
• What counts as the estate for recovery purposes in your state, which changes the answer to the question families care most about.
• Whether any planning step is a good idea. That is legal advice about a specific family's assets, and Sahvelo does not give it.

Two free routes exist before a paid one. The State Health Insurance Assistance Program gives one-to-one counseling in every state. The Area Agency on Aging can say what the local application process actually involves. Neither sells anything.