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, which means a Medicaid applicant might be denied Medicaid eligibility in one state, but would be approved for coverage in another state. This could be for a variety of reasons such as:
– an applicant’s monthly income level may be too high or a neighboring state may have different rules regarding qualifying income trusts
– the value of his / her countable assets could exceed one state’s limit but not another (compare your spend down amount by state)
– their functional level of care need may qualify them in one state but not another
– they may have gifted assets within a specific timeframe prior to applying for Medicaid
– the rules governing a non-applicant spouse’s assets, and income may allow for a better lifestyle
– the applicant may have adult children living out of state to whom they want to live closer
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. To be clear, 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, it does not cover extensive and costly long term care services. Furthermore, spousal impoverishment rules, which will be covered below, do not apply to non-applicant spouses of those applying for ABD 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 many different scenarios.
– The senior lives close to the border of two states.
– The eligibility criteria is more lenient in a nearby state.
– There is a waitlist 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. This means waitlists are common.)
– The senior cannot live independently and is moving in with his / her adult child in another state.
– An applicant / non-applicant spouse’s IRA is exempt (not counted) towards Medicaid asset limit in a neighboring state.
When considering if applying for long-term care Medicaid out of state might be a good option, persons should consider the following:
For All Applicants
Both States’ Income and Asset Limits
While all states have income and asset limits in order to receive long term care Medicaid, these limits are not consistent across states. Take for instance, Illinois, a state with a very low income limit, and Indiana, its neighboring state, which has a standard income limit. In 2020, the difference in allowable monthly income is well over a $1,000 / month, which might make it worthwhile for some applicants to move across state lines. When it comes to asset limits, New York allows an applicant to keep up to $15,750 in assets (in 2020), while Connecticut, right next door, only allows an applicant to retain $1,600 in assets (in 2020). Like with the difference in monthly income, a large difference in the amount of assets a Medicaid applicant can retain might make a move desirable. Readers can see state-by-state income and asset limits here.
Treatment of an Applicant’s IRA or 401(k)
A good number of states count an applicant’s IRA towards Medicaid’s asset limit. However, there are some states that don’t count it as long as it is paying out. These states are California, Florida, Georgia, Idaho, Mississippi, New York, North Dakota, Rhode Island, South Carolina, Texas, and Vermont. Kentucky and Washington DC also exempt an applicant’s IRA, and even better, it does not have to be in payout status to be exempt. Depending on the value of one’s IRA, moving to a state that exempts an applicant’s IRA can preserve a lot of assets. However, it should be noted that any payouts from retirement accounts do count as income for Medicaid eligibility purposes. Learn more about Medicaid and retirement savings accounts here.
Treatment of Excess Income
Being over the income limit is not automatic cause for Medicaid disqualification. However, states fall into one of two categories when it comes to how excess income is treated: categorically needy states, also called income cap states, and medically needy states, also known as spend down states.
In income cap states, applicants are able to 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. To be clear, the funds in a QIT can only be used for very specific purposes, such as a personal needs allowance, paying a spousal income allowance, and contributing towards the Medicaid beneficiary’s cost of care.
In medically needy states, Medicaid applicants are able to “spend down” their “excess” income (the income over Medicaid’s income limit) on medical and care expenses in order to qualify for benefits. One’s spend down can be thought of as a deductible.
While some applicants may want to move to a medically needy state because the HCBS Medicaid benefits are more vast 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 in order to access waiver benefits.
To find out if a specific state is an income cap state or a spend down state, click here and then click on the specific state in question.
Functional Care Need
In order 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 not all do. 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. One can 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 his / her 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. (California has only a 30-month look back period, and New York, beginning October 1, 2020, will have a 30-month look back period for Community Medicaid, the program that provides the state’s long-term home and community based services. To be clear, the look back period in NY for nursing home Medicaid will continue to be 60-months). If an applicant (or his / her spouse) has violated the look back period, the applicant will be penalized and will not be eligible for Medicaid for an established period of time. 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 his / her current state, but not in CA.
Waitlist for HCBS Medicaid Waivers
HCBS Medicaid Waivers are not entitlement programs, which means that meeting eligibility criteria does not mean one will automatically receive program benefits. Instead, some states and waiver programs have waitlists that extend for years. Other states do not have a waitlist, which means a senior might be able to receive benefits, such as in-home personal care assistance, respite care, adult day care, home health 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.
As of 2020, most states will let a community spouse keep as much as $128,640 of the couple’s joint assets. That said, two states are more restrictive, which is Illinois ($109,560) 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 joint assets up to the maximum CSRA or 100% of the couple’s assets up to the maximum CSRA. At the time of this writing, approximately 36 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 $128,640. Therefore, it could potentially benefit the non-applicant spouse if his / her 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 $128,640, and Louisiana, which borders Texas, is a 100% state that allows a CSRA of up to $128,640. Therefore, the applicant spouse applying for long term Medicaid care in the neighboring state could potentially preserve a greater amount of assets for the non-applicant spouse. (To see state-by-state CSRAs and if a state is a 50% state or a 100% state, click here).
Treatment of a Non-Applicant Spouse’s IRA
Remember, the assets of a married couple are considered jointly owned even when only one spouse is an applicant for long term care Medicaid. However, some states do 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. In other words, the non-applicant is able to keep it without worries of the applicant asset limit or the community spouse resource asset limit.
At the time of this writing, it is believed that the following states exempt a community spouse’s IRA: Alaska, California, Delaware, Georgia, Idaho, Indiana, Kansas, Kentucky, North Dakota, Pennsylvania, Utah, West Virginia, Wisconsin, and Wyoming. Additional states do allow for the exemption of the non-applicant spouse’s IRA, but the non-applicant owner must be taking the required minimum distribution. It is believed that these states are Florida, Mississippi, New York, South Carolina, Texas, Vermont, Rhode Island, and Washington DC. Therefore, based on the value of a non-applicant’s IRA, it may be worthwhile for his / her 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 2020, most states allow up to $3,216 / 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, in 2020, Alabama only allows up to $2,155 / month to be transferred to a non-applicant spouse, North Dakota limits the transfer to $2,550 / month, and Illinois limits the transfer to $2,739 / month. For persons residing in these 3 states, a move to a state with a higher maximum monthly maintenance needs allowance might be beneficial for a non-applicant spouse. (To see state specific spousal income allowance amounts, click here).
As a side note, 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 he / she wants to apply for long term care Medicaid.
This means that the senior must physically reside in the state in which he / she is a Medicaid applicant. To be clear, using a family address, prior to moving, to apply for Medicaid is considered fraud. Fortunately, states do not delay Medicaid covered based on the number of days an applicant has residency in the state. This means that a senior could move from his / her original state into a nursing home, the home of an adult child, or a home of his / her own within the new state and immediately apply for Medicaid benefits.
A single applicant’s home in his / her original state likely won’t be exempt from the asset limit in the new state.
While Medicaid has an asset limit, there are several higher valued assets that are often considered exempt (not counted). For single applicants, one’s primary home is exempt from the asset limit as long as the applicant either lives in the home or has “intent” to return to the home and his / her equity interest (the value of the home in which the applicant owns) in the home is under a specific value. (This value differs based on the state, but in 2020, is generally $595,000 or $893,000. To see equity interest limits by state, click here.)
That said, another criteria of Medicaid eligibility is that the applicant is a resident in the state of application. This means that an applicant cannot reside in his / her 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 his / her home in another state. For these reasons, it is likely that an out of state home would be counted towards Medicaid’s asset limit. However, a single applicant could sell his / her home in the current state, buy one in the new state, move into the home, and then apply for Medicaid.
To be clear, if an applicant is married and his / her spouse lives in the home in the original state, the home is exempt regardless of where the applicant spouse lives and his / her equity interest in the home.
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. As one can see, there are a lot of moving parts when deciding if applying for out of state Medicaid might be a good option. These 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 he / she is 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 here.