A person’s home can represent many things. More than just a place to live, a home provides security, comfort and potentially even a legacy that the owner can leave to loved ones. A person’s home is also frequently the person’s most valuable asset. While many people spend a significant amount of time and resources maintaining and protecting the home against wear and tear, it is becoming increasingly important to consider how a person’s long-term care (“LTC”) may impact the person’s home.
Long-term care is assistance relating to chronic conditions that impact an individual’s everyday life. While some LTC is medical in nature, much of the care relates to assistance with activities of daily living, such as eating or grooming. The cost of LTC, and the probability that anyone will require LTC are increasing. It is not uncommon for LTC costs to exceed $10,000 a month. There are three basic ways to pay for LTC, including private resources, insurance, and government benefits.
Privately paying for LTC is becoming more difficult due to the rising costs of care. If an individual wants to privately pay for LTC, a person may consider selling his or her home or taking out a loan against the property. This can be a difficult decision and may have endless ramifications for the individual, including the need to replace shelter. Obtaining insurance can also be an important way to finance LTC. While not a viable option for everyone, it is an important tool in planning for the costs of LTC.
Government benefits, especially Medicaid, are the largest funding sources for LTC services and supports. Medicaid is authorized and partially funded by federal law and administered and partially funded by State rules and regulations. In Hawai`i, the Medicaid program is known as “Med-Quest” and is administered by the Department of Human Services. To qualify for the Medicaid long-term care benefit, an individual must demonstrate a medical need, and meet certain financial requirements.
Medicaid determines a person’s medical need with a “Level of Care (LOC) and At Risk Evaluation” form referred to as the DHS Form 1147. The assessment covers a wide range of functional and health conditions, including vision/hearing/speech, communication, memory, mental status/behavior, feeding, transferring, mobility/ambulation, bowel function/continence, bladder function, bathing, dressing and personal grooming. If an individual requires the level of care that can be covered by the Medicaid program, the individual’s financial eligibility can be assessed.
Financial eligibility for Hawai`i Medicaid-financed long-term care services requires an evaluation of both income and assets. The general rule relating to income is that the income of household members shall be considered available to an applicant. Although specific and complicated income rules apply, due to the high costs of LTC, an applicant whose income is insufficient to cover the LTC costs will generally satisfy the income test based on being “medically needy”. Individuals who are medically needy will essentially use their income to pay for their share of LTC bills, leaving Medicaid to pay the remaining balance. Once eligible for LTC Medicaid, the individual will keep a personal needs allowance of $50 of income each month, and may contribute certain amounts of income to a community spouse. The rest of the individual’s income will be considered a “cost share” and will be applied to the individual’s LTC bill. Individuals seeking assistance for LTC Medicaid must also be eligible on the basis of their assets.
Asset eligibility for LTC Medicaid may not be as detailed as income eligibility, but a complicated transfer of asset rules may apply. Generally, an individual may be eligible for LTC Medicaid as long as countable assets do not exceed the value of $2,000.00 as of the first moment of the month. The value of certain assets do not count towards this limit, and certain assets are exempt from being considered. Notably, an individual’s principal place of residence is an exempt asset, unless it is placed in a trust. An individual’s community spouse who is not applying for or receiving Medicaid benefits is also allowed to retain funds, known as a “resource allowance”, that will not impact the institutionalized spouse’s LTC Medicaid eligibility. Transferring assets for less than fair market value within the five-year period immediately prior to applying for LTC Medicaid may result in a “penalty period” during which an applicant will not receive assistance for coverage for LTC services. Given the complexity of the Medicaid eligibility rules and the high costs of LTC, it may be critically important for individuals to plan early enough to maximize flexibility and cost savings. While certain assets may be exempt for eligibility purposes, Medicaid has a right to recover LTC benefits paid from an individual’s estate through a process referred to as “medical assistance recovery”.
Medicaid has the authority to recover medical care payments from recipients. Recovery may be from a deceased recipient’s estate or upon the sale of a property to which the State of Hawai`i has attached a lien. The State may place a lien on an individual’s home after a determination by the Department of Human Services that the individual cannot reasonably be expected to be discharged and return home. The State may not place a lien on the home property if the individual has a spouse residing in the home, dependent child residing in the home, or sibling who has an equity interest the home and who was residing the home for a period of at least one year prior to the individual’s admission. If the State is able to place a lien, the State may not initiate recovery from the lien as long as the individual has a surviving spouse or surviving dependent child, or in certain circumstances in which a sibling or non-dependent child resides on the property continuously from the individual’s date of admission. The estate recovery concept and the process can be confusing and should be an important element in analyzing an individual’s long-term care plan.