How Will I Pay for Long Term Care?

It is a fact of life that as we grow older and reach advanced ages, many people will need at least some assistance with their care. Some older individuals with care needs may be aided by family members who have resources, both in terms of finances and time, to spend on that person’s care. Others will need skilled nursing care, either at home or in a long term care facility, that is above and beyond what a family member can provide. Conditions requiring extra care may include a long standing physical or mental disability, such as dementia, Parkinson’s, Alzheimer’s, or another degenerative disease that causes cognitive decline. If a person needs long term care from non-family members, there are three general ways that care may be paid for: (1) long term care insurance, (2) self-funding, or (3) Medicaid. For many Americans, long term care insurance is prohibitively expensive and self-funding indefinitely is not an option as the cost of long term care is very expensive. Accordingly, Medicaid eligibility should be considered.

In order to receive Medicaid for long term care, the elderly or disabled person, or that person’s court-appointed Guardian or Agent under Power of Attorney, must make an application with the State and County in which he or she resides. When applying for Medicaid for long term care in New Jersey, the applicant must be a resident of New Jersey and a U.S. citizen or qualified non-citizen, and must meet specific standards. Generally, there are three parameters that are considered when determining a person’s eligibility: the applicant’s medical condition, the applicant’s monthly income, and the applicant’s total principal assets.

Medical Eligibility

To qualify for Medicaid to pay for long term care, the applicant must be either at least 65 years of age, blind, or disabled. The applicant must be examined by a State provided medical professional that will determine whether the applicant’s condition meets the level of care requested by the applicant. For many people with disabilities and those with age-related cognitive impairment, the medical portion of the application process is the most straight-forward.

Income Eligibility

In order to qualify for Medicaid assistance, the State caps how much income the applicant may receive in a single month. The income limit depends on whether the applicant is married or single. For a single person, the income limit in 2022 is $2,523 per month. For a married couple applying together (meaning, both spouses require Medicaid approval), the income limit in 2022 is $5,046 per month, and for a married couple where only one person is applying, the applicant is treated as a single person and the income limit in 2022 is $2,523 per month. Accordingly, if the non-applicant spouse receives monthly income in excess of the income limit, it is not counted against the applicant spouse. Income from any source is taken into consideration, including, but not limited to, income from social security, pensions, annuities, and 401Ks or other investment accounts. If an applicant otherwise qualifies, but his or her income is in excess of the income cap, the applicant must transfer the excess income into a Qualified Income Trust (“QIT”) each month in order to pass the income prong of Medicaid eligibility.
Once a person is approved for Medicaid for long term institutional care, he or she will receive a monthly personal needs allowance (currently in the amount of $50) and the remainder of the applicant’s monthly income will be paid over to the care facility. Any excess income that is transferred to a QIT will also be paid over to the care facility. However, in the case of a married couple in which only one spouse is receiving Medicaid benefits, the non-applicant spouse may be able to retain a portion of the applicant spouse’s monthly income for their support, referred to as the Monthly Maintenance Needs Allowance (“MMNA”). The MMNA is in place to ensure that the non-applicant spouse is not impoverished without the applicant spouse’s income. If the non-applicant spouse has monthly income below $2,288.75 (in 2022), he or she can receive a portion of the applicant spouse’s income to reach that minimum amount. In addition, the non-applicant spouse can receive an additional portion of the applicant spouse’s income, up to the maximum amount of $3,450 a month (in 2022), if the non-applicant spouse can show that his or her housing and utility costs exceed the “shelter standard” of $686.63 per month. These figures are adjusted periodically.

Asset Eligibility
An applicant’s available assets may limit the applicant’s ability to qualify for Medicaid. Not all assets are treated equally by the State, as some are categorized as includable assets and others are exempt assets. Exempt assets are not considered as a part of a person’s total countable resources for eligibility purposes and may include:
  • Personal belongings;
  • Household furnishings;
  • An automobile (if living in the community);
  • A life insurance policy valued at $1,500 or less;
  • Irrevocable burial trusts; and
  • A person’s primary home, if they plan to return to it or if they, their spouse, a child under 21 or a disabled person lives in the residence. Additionally, in 2022, the home’s equity interest must be no greater than $955,000.
All other assets owned by the applicant will be taken into consideration upon his or her application. As with income, the asset limit for Medicaid varies depending on whether the applicant is married or single. For single applicants, assets cannot total more than $2,000. For a married couple applying together, their combined assets cannot total more than $3,000 and for a married couple where only one person is applying, the non-applicant spouse may retain one-half of the couple’s combined assets, not to exceed $137,400 (in 2022). If an applicant has more assets than the applicable limit, the applicant will have to “spend down” his or her non-exempt assets until reaching the asset cap. Once the applicant’s assets are under the applicable cap, he or she will be eligible for Medicaid coverage.

Upon application, the State will also look back five (5) years into the applicant’s financial records to determine if any gifts or transfers of assets for less than market value were made by the applicant. If the State determines that an applicant has made gifts, the State will impose a penalty to determine how long an applicant must self-pay before Medicaid will take effect (the “penalty period”). The penalty period is calculated by taking the total amount of the gift(s) or transfer(s) and dividing it by the “penalty period divisor.” The penalty period divisor is a dollar amount set by the State, based on the average cost of private pay nursing home care in the State. The penalty period divisor in New Jersey was just increased from $361.20 to $374.39 per day in April of 2022. By way of an example, if an applicant is found to have made $50,000 worth of gifts in the past 5 years but is otherwise eligible, the State will divide $50,000 by $374.39 for 133.55, which is then converted into days. The applicant will have to wait 134 days before Medicaid will begin paying for the care facility.

While Medicaid for long term care can be a lifeline for many people, understanding the eligibility requirements and providing the applicable information to the State can be overwhelming and challenging. If you need assistance in determining whether you or a loved one are eligible for Medicaid, or in preparing the application, our Elder Law attorneys at Pashman Stein Walder Hayden, P.C. are here to help you.