The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.
Issue link: https://kentuckybenchandbar.epubxp.com/i/132126
FEATURE: KENTUCKY'S ELDER LAW What is income for Medicaid purposes? All money received by the Medicaid applicant is income. Do not confuse concepts of taxable income with Medicaid income; they are distinct. Social Security (gross), pensions (gross), IRA distributions (both traditional and Roth), wages or selfemployment income, annuity income (gross), rental income (net income after expenses), interest, and dividends are included as Medicaid income. Also included in the Medicaid income definition are gifts, inheritances and irregular payments such a tobacco quotas and oil royalties. All count as income in the month of receipt, and if not spent, as a resource beginning in the following month. Month indicates calendar month. Medicaid does not consider as income proceeds acquired by indebtedness of the applicant such as equity loan proceeds, reverse mortgage payments and credit card cash advances. But to the extent that these funds are not spent in the month received, they become countable resources in the following month. 10 Current Medicaid policy is to consider available credit lines on equity loans and reverse mortgages as available resources, and there is some interesting math in certain circumstances. If a nursing home resident owns a home that is worth $100,000, Medicaid will claim he has $100,000 of assets. If he then takes out a $60,000 equity line (but does not actually use any of it), Medicaid will claim he has $160,000 of assets. It is important to be aware of these nuances when representing your client. B&B; • 05.13 all rules. Such person would be penalized for having worked. When contrasted with citizens who never worked, never paid taxes and are now Medicaid eligible, the system would be building in a negative incentive to work.11 Technically, however, any applicant whose income is in excess of $2,130/month (2013) is ineligible for Medicaid benefits. This situation can be remedied by the use of a Qualified Income Trust (QIT), also known as a Miller Trust. The QIT is an irrevocable trust that has the specific purpose of diverting an applicant's income so he becomes technically income-eligible for Medicaid benefits. If the applicant has income exceeding $2,130/ month, sufficient income should be put into the QIT to bring gross income below that amount.12 This amount is generally increased every January. TREATMENT OF INCOME ONCE ON MEDICAID-SINGLE APPLICANT Medicaid considers anyone who has never married or who is divorced or widowed to be a single applicant. If both spouses are in a nursing home, each is considered single for Medicaid eligibility purposes. All of a single applicant's remaining income, after allowable deductions, is paid to the nursing home except for a monthly $40 personal needs allowance. The single individual may receive deductions for verified, paid health insurance premiums, such as the Medicare Part B premium (the state may pay this premium for low-income individuals,), Part D Rx, Medicare supplement policy, etc. Medicaid then pays the remaining nursing home charges. The resident is not allowed to spend money on any home, life insurance premium, cat or other expense. Medicaid may – at its discretion – grant an offset to pay prior unpaid medical or nursing home expenses in some cases. This is commonly called a "deviation." TREATMENT OF INCOME ONCE ON MEDICAID —MARRIED APPLICANT The non-institutionalized spouse of a Medicaid applicant is known as a Community Spouse (CS). The law provides some measure of economic protection to the CS. The CS may keep all of her income. In addition, to the extent such monthly income is less than $1,892 (gross), the CS may keep enough of the institutionalized spouse's (IS) available income to bring total income to $1,892 (2012-13), indexed every July 1st. This is known as the Community Spouse Income Allowance or CSIA, and also known as the Minimum Monthly Maintenance Needs Allowance. THE RESOURCE REQUIREMENT (ASSETS) To be Medicaid-eligible for nursing home care, the applicant must have very limited economic resources – countable resources of no more than $2,000, a standard that has not changed since 1989. The relevant phrase is "countable resources." The eligibility rules vary in part for a single applicant versus a married applicant with a community spouse. In Medicaid-speak, an asset is called a "resource." Resources are assets that an individual or a couple owns and can apply, either directly or by sale or conversion, to meet basic needs of food, clothing and shelter. Thus, resources are everything an applicant or his spouse owns or has a legal right to assert a claim upon, including an inheritance (upon receipt) and which under Medicaid, cannot be disclaimed for "resource" purposes. Similarly, all assets in a Revocable Living Trust are resources. It does not matter if the asset was held before the marriage, if it is a lawsuit award, if it is an inheritance or in whose name it was held previously. Having defined what resources an applicant has, the next inquiry is which of those resources are "countable resources" for Medicaid eligibility purposes. COUNTABLE RESOURCES FOR A SINGLE MEDICAID APPLICANT For a single applicant, assets that are countable resources consist of all bank accounts, CD's, savings bonds, individual stocks, brokerage accounts, mutual funds, real property and life insurance cash values. Most annuities are also countable resources unless they meet the Deficit Reduction Act (DRA) definition of exempt resources. Unless you specifically purchase a DRA compliant annuity, few annuities are exempt. On the other hand, all "tax-qualified" etirement plans are exempt resources under Kentucky Medicaid regulations, if they are in payout status. This means that IRA's, Roth IRA's, pensions, 401K's, 403b's and similar plans are exempt and do not count as available resources. There is no requirement in federal tax law for any withdrawal on a traditional IRA prior to age 70½ and