Applying for Medicaid Long Term Care in a Different State as a Medicaid Planning Strategy

Last updated: February 01, 2024

 

Why Apply for Medicaid Out of State?

The rules governing long-term care Medicaid eligibility are complex and differ based on the state, one’s marital status, and the specific Medicaid program for which one is applying. While all programs have financial and functional criteria, some states are quite restrictive in their criteria, while other states are much more lenient. This means a Medicaid applicant might be denied Medicaid eligibility in one state, but would be approved for coverage in another state. The reasons one might want to apply for Medicaid in another state include the following:

– Their monthly income level is too high or a neighboring state has different rules regarding Qualifying Income Trusts
– The value of their countable assets exceeds one state’s limit, but not another (compare one’s spend down amount by state)
– Their functional level of care need may qualify them in one state, but not another
– They gifted assets and violated Medicaid’s Look-Back Rule prior to applying for Medicaid
– The rules governing a non-applicant spouse’s assets and income may allow for a better lifestyle
– The applicant has adult children living out of state to whom they want to live closer

 Applying for Medicaid long-term services and supports out of state is a Medicaid planning strategy. It is not as simple as filling out an application for Medicaid in a neighboring state.

Medicaid applicants must physically be residing in the state in which they are applying for benefits. This planning technique is most relevant for persons applying for home and community based services (HCBS) Medicaid Waivers and nursing home care. This is because of the high cost of these types of care and the inability of many seniors to pay for it without Medicaid assistance. This Medicaid planning technique would generally not be utilized for seniors applying for Regular Medicaid, often called Aged, Blind and Disabled (ABD) Medicaid. The reason is that with this type of Medicaid, although it will often cover personal care services, extensive and costly long-term care services are not covered. Furthermore, Spousal Impoverishment Rules, which will be covered below, do not apply to non-applicant spouses of those applying for Regular Medicaid.

 

For Who Might Applying Out of State be a Good Option?

Applying for Medicaid in a state other than the one in which a Medicaid applicant currently resides might be a good option in the following scenarios:
– One lives near the border of two states
– The eligibility criteria is more lenient in a neighboring state
– There is a waiting list for benefits via HCBS Medicaid Waivers in one’s current state, but not in a nearby state. Medicaid Waivers are not entitlement programs and only allow a certain number of program participants. Waiting lists are fairly common.
– One cannot live independently and is moving in with their adult child in another state
– An applicant / non-applicant spouse’s IRA is exempt (not counted) towards Medicaid’s asset limit in a neighboring state, but is counted in their current state.

 

Important Considerations

Persons thinking about applying for long-term care Medicaid out of state should consider the following:

For All Applicants

Both States’ Income and Asset Limits
All states, but California, have income and asset limits to receive long-term care Medicaid. While CA has an income limit, effective 1/1/24, CA eliminated their asset limit. This means an applicant can have unlimited assets and still qualify for Medicaid (Medi-Cal). Many of the other states have an asset limit of $2,000. Therefore, someone who has a significant amount of assets might benefit from moving to CA and applying for benefits there. Furthermore, while all of the other states have both income and asset limits, these limits are not consistent across states. In 2024, New York allows an applicant to keep up to $31,175 in assets, while Connecticut, right next door, only allows an applicant to retain $1,600, which might make it worthwhile for some applicants to move across state lines. There can also be large differences in the income limit between states. As an example, take Illinois, a state with a very low income limit, and Indiana, its neighboring state, which has a standard income limit. In 2024, the difference in allowable monthly income is well over $1,000, Like with the difference in assets, a large difference in the monthly income limit might make a move desirable. See state-by-state income and asset limits.

Treatment of an Applicant’s IRA or 401(k)
Approximately 37 states count an applicant’s IRA towards Medicaid’s asset limit, and approximately 11 states will consider it exempt (not counted) as long as it is paying out. This means one is taking their Required Minimum Distribution (RMD). These states are Florida, Georgia, Idaho, Mississippi, New York, North Dakota, Ohio, Rhode Island, South Carolina, Texas, and Vermont. Kentucky and Washington DC also exempt an applicant’s IRA, but it does not have to be paying out for exemption. California has no asset limit, and therefore, an applicant’s IRA is irrelevant. If one lives in a state where their IRA is counted, moving to a state that exempts their IRA can potentially preserve a lot of assets. Note that any payouts from retirement accounts are counted as income for Medicaid eligibility purposes. More about Medicaid and retirement savings accounts.

Treatment of Excess Income
Being over the income limit is not automatic cause for Medicaid disqualification. How excess income is treated varies based on the state. There are Categorically Needy States, also called Income Cap States, and there are Medically Needy States, also known as Spend Down States.

In Income Cap States, applicants deposit their “excess” income into a Qualified Income Trust (QIT), also called a Miller Trust, in which a trustee is named to manage the account. Since the applicant no longer has access to these funds, income deposited into the trust does not count towards Medicaid’s income limit. The funds in a QIT can only be used for very specific purposes, such as a Personal Needs Allowance, paying a Spousal Income Allowance (Monthly Maintenance Needs Allowance), and contributing towards the Medicaid beneficiary’s cost of care.

In Medically Needy States, Medicaid applicants “spend down” their “excess” income (the income over Medicaid’s income limit) on medical and care expenses to qualify for benefits. One’s spend down amount can be thought of as a deductible. It is the difference between one’s monthly income and the state’s Medically Needy Income Limit. More on the Medically Needy Pathway.

While some applicants may want to move to a Medically Needy State because the HCBS Medicaid benefits are vaster or better suited to one’s needs, there is little benefit income-wise to move from an Income Cap State to a Medically Needy State. However, applicants in Medically Needy States may benefit from moving to an Income Cap State and establishing a Miller Trust to access Waiver benefits. Find out if a specific state is an Income Cap State or a Spend Down State. `

Functional Care Need
To qualify for Nursing Home Medicaid, an applicant must require a Nursing Facility Level of Care. Many HCBS Medicaid Waivers also require this level of care need, but some require only that an applicant be at risk of nursing home admission. Therefore, a senior who requires services and supports to remain living independently at home, but does not require the level of care provided in a nursing home may qualify functionally in a state that has more lenient criteria. States may also require different levels of assistance to be eligible for nursing home care. Compare functional need by state here.

Length of Medicaid Look Back Period
All states have a Medicaid Look-Back Rule for long-term care Medicaid eligibility. Essentially, the Medicaid agency scrutinizes all past asset transfers an applicant (and their spouse, if applicable) has made within a specific timeframe immediately preceding one’s Medicaid application date. For nearly all states, this is a period of 60-months in which Medicaid checks to see if assets were given away or sold under fair market value.

With the elimination of California’s asset limit on 1/1/24, the state no longer “looks back” at asset transfers made on or after this date. The state, however, is currently phasing out their previous 30-month Look-Back Period for asset transfers made before this date. See how asset transfers prior to 1/1/24 are being treated. New York is also an exception to the Look-Back Rule. While the state has a 60-month “look back” for Nursing Home Medicaid, there is no “look back” for Community Medicaid, the program that provides the state’s long-term home and community based services. The state plans to implement a 30-month Look-Back Period for this program no earlier sometime in 2025.

If an applicant (or their spouse) has violated the Look-Back Period, the applicant will be penalized with a Penalty Period of Medicaid ineligibility. Therefore, a senior who has gifted a large amount of assets, say to an adult child, might consider relocating to CA if Nursing Home Medicaid is needed and the Look-Back Period is in effect in their current state, but not in CA.

Waiting List for HCBS Medicaid Waivers
HCBS Medicaid Waivers are not entitlement programs. This means that meeting the eligibility criteria does not mean one will automatically receive program benefits. Some states and Waiver programs have waiting lists that extend for years. Other states do not have a waiting list, which means a senior might be able to receive benefits, such as in-home personal care assistance, respite care, adult day care, assisted living / adult foster care services, home modifications, personal emergency response systems, and other supports, immediately upon eligibility being established.

 

For Married Applicants

Treatment of Assets for a Community Spouse
For non-applicant spouses of those applying for a HCBS Medicaid Waiver or Medicaid nursing home care, there is a Community Spouse Resource Allowance (CSRA). This asset allowance is to prevent non-applicant spouses, also called community spouses, from becoming impoverished in order for their applicant spouses to qualify for long-term care Medicaid. When it comes to assets, Medicaid considers the couple’s assets to be jointly owned, so prior to Spousal Impoverishment Rules, like the CSRA, couples would have to deplete their assets to nearly nothing before the applicant spouse could qualify for Medicaid benefits.

In 2024, most states will let a community spouse keep as much as $154,140 of the couple’s assets. Two states are more restrictive: Illinois ($129,084) and South Carolina ($66,480). Furthermore, all states are either a 50% state or a 100% state, meaning that a non-applicant spouse is able to retain either 50% of the couple’s assets up to the maximum CSRA or 100% of the couple’s assets up to the maximum CSRA. Thirty-six states are 50% states. So, take for example, an applicant who lives in South Carolina, a 100% state, with a CSRA of just $66,480. It’s neighboring state, Georgia, is also a 100% state, but allows a CSRA of up to $154,140. This could potentially benefit the non-applicant spouse if their applicant spouse applied for benefits in Georgia rather than South Carolina. As another example, Texas is a 50% state that has a maximum CSRA of $154,140 and Louisiana, which borders Texas, is a 100% state that allows a CSRA of up to $154,140. See state-by-state CSRAs and if a state is a 50% state or a 100% state.

Treatment of a Non-Applicant Spouse’s IRA
While the assets of a married couple are considered jointly owned even when only one spouse is an applicant for long-term care Medicaid, some states allow a community spouse’s IRA to be exempt from Medicaid’s asset limit. This means it is not counted as an asset and the non-applicant spouse is able to retain it in its entirety. California has no asset limit, and therefore, a community spouse’s IRA is not relevant. Of the remaining states, approximately 25% exempt a community spouse’s IRA. This includes Alaska, Delaware, Georgia, Idaho, Indiana, Kansas, Kentucky, Pennsylvania, Washington DC, West Virginia, Wisconsin, and Wyoming. Other states allow a non-applicant spouse’s IRA to be exempt if they are taking the Required Minimum Distribution. These states are Florida, Mississippi, New York, North Dakota, Ohio, Rhode Island, South Carolina, Texas, and Vermont. Therefore, based on the value of a non-applicant’s IRA, it may be worthwhile for their spouse to apply for long-term care Medicaid in a state that exempts the non-applicant spouse’s IRA.

Monthly Maintenance Needs Allowance for a Non-Applicant Spouse
Another Spousal Impoverishment Provision for non-applicant spouses when their spouses apply for Nursing Home Medicaid or long-term services and supports via a HCBS Medicaid Waiver is the Monthly Maintenance Needs Allowance. This Spousal Income Allowance enables applicant spouses to transfer some, or in some cases, all, of their monthly income to their non-applicant spouses. In 2024, most states allow up to $3,853.50 / month to be transferred from applicant spouses to their non-applicant spouses. However, a few states are much more restrictive in the amount of monthly income allowed to be transferred as a spousal allowance. For instance, Alabama only allows up to $2,465 / month to be transferred to a non-applicant spouse and North Dakota limits the transfer to $2,550 / month. For persons residing in these states, a move to a state with a higher Maximum Monthly Maintenance Needs Allowance might be beneficial for a non-applicant spouse. See state specific Spousal Income Allowance amounts.

Note that a non-applicant spouse’s monthly income is not calculated towards the eligibility of the applicant spouse for long-term care Medicaid eligibility.

 

Potential Shortcomings of This Strategy

An applicant must be a resident in the state in which they want to apply for long-term care Medicaid.
One must physically reside in the state in which they are a Medicaid applicant. Using a family address, prior to moving, to apply for Medicaid is considered fraud. Fortunately, states do not delay Medicaid coverage based on the number of days an applicant has residency in a state. This means that a senior could move from their original state into a nursing home, the home of an adult child, or a home of their own within the new state and immediately apply for Medicaid benefits.

A single applicant’s home in their original state likely won’t be exempt from the asset limit in the new state.

While Medicaid has an asset limit (except in CA), there are several higher valued assets that are generally considered exempt (not counted). For single applicants, one’s primary home is exempt from the asset limit as long as they live in their home or have “Intent” to Return, and their home equity interest is under a specific value. Home equity is the value of one’s home minus any outstanding debt against it. Equity interest is the portion of the home equity in which they own. The home equity limit is state-specific, and in 2024, is generally $713,000 or $1,071,000. See equity interest limits by state.

Since an applicant must be a resident in the state of application, an applicant cannot reside in their home in one state and apply for Medicaid in another state. Furthermore, as a resident of a state, it means an individual plans to live there indefinitely, which means one cannot be a resident of one state, but have “Intent” to Return to their home in another state. For these reasons, in nearly all states, an out of state home would be counted towards Medicaid’s asset limit. However, a single applicant could sell their home in the current state, buy one in the new state, move into the home, and then apply for Medicaid. If an applicant is married and their spouse lives in the home in the original state, the home is exempt regardless of where the applicant spouse lives and their equity interest in the home.

There is a Medicaid Estate Recovery Program in Every State
Regardless of the state, a state’s Medicaid agency will attempt reimbursement of long-term care costs for which it paid following a Medicaid beneficiary’s death. This is done through the Medicaid Estate Recovery Program (MERP), which is a mandatory program in each state. Therefore, if one moves to a state with a higher asset limit (or in the case of CA, no asset limit) in order to qualify for Medicaid, the “protected” assets will not automatically be preserved for family as inheritance. While one may be able to initially retain more assets, upon their death, the Medicaid agency may take all of the remaining assets, or in the very least, a portion of them. Note that the Medicaid agency cannot be reimbursed a greater amount than was paid.

 

Is Professional Assistance Needed?

It is highly recommended that one seek the counsel of a Medicaid Planner prior to applying for long-term care Medicaid out of state. There are a lot of moving parts when deciding if applying for out of state Medicaid might be a good option. Medicaid Experts can assist with the process of determining if this strategy might a good option for one’s specific circumstances, as they are familiar with the Medicaid eligibility criteria in varying states. Furthermore, as mentioned previously, one cannot apply for Medicaid in a state until they are physically residing in the state. Professional Medicaid Planners can prepare all of the paperwork in advance and have it ready for submission upon one’s move to the new state. Find a Medicaid Planning Expert.

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