Medicaid versus Medicare: Who Covers Nursing Home Costs?

Because a stay in a nursing home may be covered by either Medicare or Medicaid, it can be confusing to determine which program will cover your family member's stay. While both programs may indeed cover at least some portion of a visit to a nursing home, there are important differences to the rules.

Medicare coverage of nursing home costs
In order for Medicare to cover a person's nursing home stay, the person must:

• Have been hospitalized for medically necessary inpatient hospital care for at least three, consecutive days, not counting the date of discharge,
• Be admitted to the nursing home within 30 days after the date of discharge from the hospital,
• Require skilled nursing or rehab care on a daily basis for a condition for which the patient was hospitalized, and
• Receive a physician's order that such care is needed.

The difference between skilled care and custodial care
Skilled care is care that can only be administered by professional (physician or nurse) or technical personnel, and which will prevent further deterioration in the patient's health. Examples include: intravenous feeding, injections, insertion of catheters, application of sterile dressings, treatment of skin ulcers, and therapeutic exercises of various kinds (physical therapy). Less medically-intensive and critical personal care services—even if performed by a nurse—are not considered skilled care.
If the care the patient requires is not considered "skilled care," as defined above, such care is called "custodial care." This is the type of long-term care is typically received in a nursing home. Only Medicaid—not Medicare—covers custodial nursing home care.

The co-pay rule
Medicare will only cover a patient for a maximum of 100 days (per separate spell of illness), if it covers the patient at all. During days one to 20, Medicare will cover the entire cost of the nursing home stay. For days 21 to 100, the patient must pay a co-pay, which is currently set at $152 per day. If care is needed beyond the 100-day limit—or if patient no longer needs skilled or rehab care before 100 days have passed—then the patient must either pay privately, be covered by some form of insurance or qualify for Medicaid.

Medicaid rules for skilled nursing payments
Medicaid is a "needs-based" program, meaning that the patient cannot have more than a certain minimal amount of assets and income in order to be covered. Medicare, on the other hand, is available regardless of the patient's income or assets, if they meet the other requirements. Also, there is no mandate that a patient require skilled or rehab care in order to be covered by Medicaid, as there is for Medicare. To find out the asset and income limits in order to qualify for Medicaid, see "Assets You Can Have to Still Qualify for Medicaid" and "How Can My Elderly Loved One Qualify for Medicaid?"

A note about dual-eligibles
Finally, keep in mind that it is possible to be covered by both Medicare and Medicaid, simultaneously. Such individuals are known as "dual eligibles." For these elders, Medicaid covers those expenses not covered by Medicare, such as paying the Medicare premiums and cost-sharing requirements and paying for long-term custodial care, while Medicare would cover hospitalizations and related medical costs along with skilled care in a nursing home.

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Answers to Questions About Medicaid Paying for Long-Term Care

Seventy percent of people over the age of 65 will need long-term care services. Many people believe that Medicaid will cover all the costs of long-term care. However, while Medicaid does cover some of the costs of long-term care, you must meet many eligibility requirements – and they vary greatly from state to state. To qualify for Medicaid, you must must meet three categories of requirements: eligibility, functional and financial requirements.

This raises many questions among caregivers and their elderly parents regarding the financial requirements necessary to quality for long-term care Medicaid coverage. Here are some of the most common questions and answers regarding Medicaid and long-term care, provided by the National Clearinghouse for Long-Term Care.

How much can I have in assets and still qualify for Medicaid?

Asset levels vary from state to state. States have the option to raise the minimum amount. In most states, you can have only about $2,000 in countable assets (check with the Medicare.gov website for the most up-to-date asset amounts). In most states, married couples can only have about $3,000 in countable assets if they are still living in the same household.

If one spouse lives in a long-term care facility and the other spouse is still living at home, Federal law allows the spouse at home to keep more assets. In general, the spouse who lives at home is allowed to keep half of the married couples' combined assets, subject to both a minimum amount and a maximum amount.

How does Medicaid evaluate assets? Medicaid evaluates all assets to determine whether you meet the state's financial criteria for eligibility. You will be required to provide documentation of all assets.

What if assets exceed the Medicaid-allowed limit?

If your assets exceed the amount allowed by Medicaid, the application will be denied. If denied, Medicaid informs you how much of your assets exceed the allowances. If you feel the asset evaluation is incorrect, you have the right to appeal the state's determination. Or, you can choose to reduce assets to become eligible in the following ways:

• Convert funds to non-countable assets such burial arrangements.
• Pay existing debts such as insurance and taxes.
• Spend the money on medical needs and day-to-day health care maintenance needs.

Under Federal law, a person applying for Medicaid cannot reduce or transfer assets to others (for example, children) for the purpose of qualifying for Medicaid coverage of long-term care services. Doing so may result in a significant penalty period. During that time, even if assets have been totally depleted, you will be unable to receive Medicaid payment for long-term care.

What does Medicaid consider transfer of assets for eligibility?

A transfer of assets is giving away property for less than it is worth in order to qualify for Medicaid coverage of long-term care. If you transfer assets, Medicaid may not pay for your long-term care.

Does Medicad allow asset transfers? Certain asset transfers, such as a transfer to a spouse or a disabled or blind child, are not considered disqualifying transfers.

How far in the past will Medicaid look to see if I have made a transfer?

Medicaid will look at all asset transfers made in the five-year period prior to the Medicaid application. This is referred to as a "lookback period."

How are transfers of assets penalized in the Medicaid eligibility process?

Asset transfers are typically penalized by disqualifying you from becoming eligible for payment for long-term care for a specified period of time. Transferring assets may result in disqualification.
Qualifying for Medicaid to pay for long-term care can be a long, tedious and confusing process. To get help, contact your state's Area Agency on Aging or your State Medical Assistance office.

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"Spending Down" to Medicaid: One Caregiver's Personal Journey

My uncle called me one day and said "Your aunt just got lost again and I can't take it anymore." Thus began my experience with the complexity of Medicaid (Title 19 of the federal Social Security Act), designed to provide medical assistance to those individuals who have minimal assets and inadequate income of their own. Some people have too much income and/or assets to qualify, so they must "spend down" or use up their own money to reach the eligibility levels.

Although I had been a financial planner and advisor for years, I had not come in contact with the Medicaid program personally or through clients, just through reading and seminars. I had learned that planning before acting is VERY important and that eligibility requirements vary by state. Those who specialize in this area, elder law attorneys, medical social workers, and state-employed case workers are your greatest resource to avoid delays and avoid creating periods of ineligibility requiring re-certification. They can keep you from running afoul of the more stringent divestiture rules, including a five-year look-back at transfers/gifts of assets, contained in the Deficit Reduction Act of 2005 passed by congress.

So uncle and I met with an elder law attorney to help map out a game plan. Self reliance and frugality (depression-era traits) had allowed uncle and auntie to save a little nest egg, but it wasn't going to last long at the cost of the care she required…and what about him? The attorney reviewed both the asset and income Medicaid requirements for our state.

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Applying for Medicaid: A Caregiver’s Personal Experience

For those of us who have been through it as caregivers, applying for Medicaid is one of the most arduous tasks that you will ever face. It is a time-consuming, life-altering situation which can literally cause you to put your life on hold while you go through the process.

Having just dealt with this situation due to my mother's heart attack, the best way for me to explain the Medicaid application is for me to tell you my personal story of dealing with the government and the accompanying red tape that comes with applying for Medicaid.

It was a little over a year ago that mom had her heart attack. She pulled through but lost most of her motor skills as well as some cognitive function, so my family had to get her into a quality nursing home. Even more stressful than choosing the right nursing home was figuring out how to pay for it.
For lack of a better word, mom was broke and there was no way that my brother and I could possible pay for a nursing home. That meant that we had to apply for Medicaid. I have to say it was probably the single most difficult things I have ever had to do in my life.

To get mom approved for Medicaid, the government requires a five-year look back period into her personal finances. It is tough enough to accumulate this information under normal circumstances. I had the additional problem of not having a power of attorney to obtain the information. Plus the fact that mom could not be cooperative to help us given her condition made it even more difficult.
As a note to caregivers, it is imperative to sit down with your parents before this type of situation happens to you and make sure that you get a power of attorney ready before they get sick, as well as a health care proxy. I was extremely fortunate that Mom's condition started to clear up to the point where the social worker in the nursing home was willing to notarize a power of attorney so I could accumulate the information I am going to go over. If this didn't happen I would have needed to go for legal guardianship of my mother through the courts, costing me thousands of dollars.

The process for applying for Medicaid
Once I was legally able to begin obtaining the information, I received a list of the required information plus the Medicaid application from the social worker.
Here was the initial list of information that was required:

(Note: because Medicaid is a joint Federal/State program it is possible that the list below may be slightly different than the requirements in your area. Nonetheless, the information will approximate the necessary information required to get on Medicaid)

• Social Security Card or Social Security award letter showing the amount of monthly benefits.
• Marriage information. This can take the form of a divorce decree, separation papers or the death certificate of the ex-spouse.
• For those born outside the USA, proof of legal residency.
• Birth certificate.
• Deed, mortgage and property tax statement if your parent owns his or her residence.
• A copy of the rental agreement if the residence is rented. In either case of renting or owning, a legal address must be established for a period of 5 years.
• All loans owed.
• Child support and/or alimony statements, whether your parent is obligated to pay or is the beneficiary.
• All unpaid medical bills (note: Medicaid will not approve a person unless he or she already has unpaid medical bills…one of the many things that I learned during this process.)
• Health insurance premiums, paperwork and identity cards.
• Military discharge paperwork if applicable.
• Any type of savings and retirement information, including bank statements going back 5 years (Note: I do not know if this applies for all banks but when I requested this information from my mom's bank, they waived the standard $6 a month fee for bank statements due to the fact that it was a Medicaid request, saving me $360)
• All life insurance policies and statements including any cash value accumulated within the policies.
• Any cars owned.
• Pay stubs for the last 6 weeks.
• Any pensions being received.
• Copies of tax returns of the applicant for the last 5 years.

And that's only the first part!

Because after all of that information is accumulated, you then have to submit the information and wait for Medicaid to ask for clarification on any or all of the information submitted.

In my mother's case, most of the clarifying information took the form of any cash deposits she made at the bank that were not part of her regular income, Social Security or alimony.

After I received the initial set of bank statements I sat down with the social worker and looked at every deposit into her account over those five years. Anything that did not fall into mom's regular check, Social Security check or alimony was going to be questioned.

I know that it may seem ridiculous to have to clarify a $38 deposit that was made four years ago, but this is the way it is. There were dozens of them and I had to request from the bank copies of all the deposit slips. These deposit slips are enough for Medicaid to approve these deposits as ‘valid'.
Now, I understand that if the government is going to pay out $14,000 a month for a nursing home (that is what mom's costs) they have the right to question the information and make sure that no fraud is being committed.

What infuriated me was that the U.S. government only gives caregivers a few days to gather this information or you have to start the application process over! Even more infuriating was that fact that most of the information had already been submitted the first time. It's just that the person handling the file couldn't read it right.

So you are going to have to be ready for these types of disruptions in your life. Fortunately, I was able to get all of the required information re-submitted but had to take two "vacation" days from work in order to do it.

The only good thing is that once you gather this second round of information it is normally smooth sailing and you are just waiting for the approval. My approval came for my mother in around 5 months.

Tips on applying for Medicaid
If I was to offer any tips, advice or suggestions to caregivers who may have to face this someday, here is what I would suggest:

• Prepare now. It is imperative to sit down with your parents before a situation like mine happens. Get a power of attorney to manage your parents' finances in an emergency plus a health care proxy in place so you are able to make medical decisions on their behalf if they are not able to.
• Speak to your parents and try and gather as much information as you can now, or at least understand what their filing system is so that you can access all of this information when the time comes. I have things set up much better to handle my father if anything happens. Everything is in one briefcase, all organized. I just need to take the briefcase and start the process again.
• Have you spoken to your loved one about a specific nursing home they would want to go to? I know that can be tough but if you have the chance to take the tour beforehand. Using the Medicare Nursing Home Comparison tool can be a great benefit to you.

Now that I have experienced the extensive process of qualifying for Medicaid on my mother's behalf, I can say without a doubt that I was not ready to initially meet the challenges that awaited me. I hope that sharing my personal story will help other caregivers prepare now so that they will be ready in the future.

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