Policy Decisions Affect Medicaid Rules

Policy Decisions Affect Medicaid Rules

Clients often feel that the Medicaid rules or certain rules are unfair. The purpose of this article is to discuss what I believe are the policy decisions behind certain rules.

1. Life Insurance Issues – As discussed in Post 3, the cash value of a life insurance policy or policies in excess of $1,500 constitutes a resource. The rationale behind such rule is that if such value were not counted, an applicant or a spouse could use substantial funds to obtain life insurance policies with large cash values that would not be considered for Medicaid purposes.

2. Spousal IRA’s – In Mistrick v. Division of Medical Assistance and Health Services 154 NJ 158 (1998), the Court held that the IRA’s of a spouse are a countable resource. This was a change from the prior law in which a spousal IRA was exempt.

The basis of this decision again was policy so that a spouse would not establish an IRA or would not rollover a retirement distribution to an IRA without limit. Under prior law, an individual could have an unlimited amount in an IRA and this would not preclude Medicaid eligibility.

3. 90-Day Rule – Post 10 discusses the significance of the 90-day rule. As an administrative decision, New Jersey has allowed eligibility if the total amount of resources held by the applicant and the community spouse equal the computed amounts whether they are held by the applicant, community spouse or jointly at the date of eligibility. However, within 90 days, the applicant must meet his or her requirement ($2,000 or $4,000) and the community spouse resource allowance amount must be in the sole name of the community spouse. The policy behind this decision is that if a couple inadvertently have not severed a joint account at the date eligibility is sought, they are not to be penalized. This makes sense in that most adults keep accounts with a spouse held jointly and should not be penalized.

4. Checks Written and Not Cashed – Post 4 discusses the significance of payment of debts and expenses. Examples in this post indicate that if a check is written before the date sought for eligibility, it is irrelevant whether or not such check has been negotiated. The policy reason for such a rule is that an applicant should not be penalized for the inaction of a payee (i.e. negotiating a check).

5. Real Property Owned Jointly With Other Than Spouse – In Post 35, the relevant regulation indicates that real estate owned jointly with a person other than a spouse is an “inaccessible” resource. Therefore, it is not a countable resource for Medicaid purposes unless the other person consents. The rationale behind this rule is that, if the property were treated as a countable resource, such decision would affect an interest in property held by someone not involved in the Medicaid proceeding (i.e. the co-owner).

The above constitutes a very brief summary of some policy positions taken by Medicaid in administering its eligibility decisions. Obviously, the number of examples is infinite.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© July 2009, Post 49

Effect of Inheritance by Medicaid REcipient on Eligibility

Effect of Inheritance by Medicaid Recipient on Eligibility

A. Medicaid Recipient Becomes Beneficiary of an Estate

1. As previously indicated (see Post 27), property in probate is treated as an inaccessible resource. Therefore, merely acquiring the status of beneficiary would not render a Medicaid recipient ineligible.

2. Distribution of the inheritance would render the individual ineligible until the resource requirement was again met.

3. If the distribution is not made to the individual and the individual dies while receiving Medicaid benefits, the prospective inheritance becomes subject to the Medicaid lien as a probate asset.

4. A disclaimer by the potential Medicaid recipient is treated as a transfer and will result in ineligibility.

B. Inheritance by a Recipient of an Inaccessible Resource

1. One type of excludable resource is an inaccessible resource - N.J.A.C. 10:71-4.4(b) (6). Examples set forth in the regulations include “real property that cannot be sold because of the refusal of a co-owner to liquidate.”

2. Therefore, if upon the death of another, a Medicaid recipient becomes a co-tenant in a joint tenancy with right of survivorship or a tenancy in common, the property interest will not result in disqualification if the co-tenant refuses to liquidate. However, upon the death of the Medicaid recipient, the property will be subject to the lien to the extent of his “interest” at date of death.



Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© April 2009, Post #28

Effect of Inheritance by the Community Spouse on Eligibility

Effect of Inheritance by the Community Spouse on Eligibility

The determination of spousal resources is made at the date of institutionalization (the “snapshot”) while resources at the date of application determine eligibility (see “Marital Issues in the Eligibility Process” herein). Suppose a community spouse is a beneficiary under the will of a parent and the parent has recently died. Under what circumstances is this inheritance part of the spousal pot for Medicaid eligibility purposes?

A. Death of parent of community spouse after eligibility

An inheritance by the community spouse after institutionalized spouse becomes eligible for Medicaid is not an available resource and does not result in disqualification. That is, after the date of determination of eligibility for Medicaid, no resources of the community spouse are deemed available to the institutionalized spouse.

B. Death of parent of community spouse prior to eligibility date

1. Suppose the parent of the community spouse dies two weeks before the anticipated date of eligibility. Does the prospective inheritance of the community spouse delay the eligibility date?

N.J.A.C. 10:71-4.4(b) 6. treats property in probate as an inaccessible resource. Therefore, the parent’s death should have no immediate effect on eligibility.

2. Suppose the parent dies six months before the anticipated eligibility date and distribution has not been made to the community spouse.

Query: To what extent can probate be delayed beyond Medicaid eligibility? That is, should you communicate with the executor of decedent’s estate so that distribution is delayed until the applicant receives Medicaid?

C. Distribution of inheritance to community spouse prior to application

1. Probably, such inheritance would be treated as a resource as of the date of application for Medicaid.

2. If you are presented with this situation, the argument could be made that since the statute is silent with respect to resources acquired by the community spouse between the dates of institutionalization and application that such resources are not part of the “spousal pot.”


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© April 2009, Post #27

Additional Benefits for a Single Individual Owning Home Jointly with a Protected Transferee

Additional Benefits for a Single Individual Owning Home
Jointly with a Protected Transferee

Medicaid planning must consider three interrelated goals: to establish Medicaid eligibility, to avoid disqualification after eligibility and to avoid the Medicaid lien after the death of a recipient of benefits. The discussion in Post 6 relating to a child who “resided” in the home for at least two years prior to institutionalization and provided care which permitted the individual to reside at home rather than go in a nursing home addresses mainly the issue of Medicaid eligibility. The prior post involved related to the transfer of the home to a “protected transferee” and that addressed mainly the issue of Medicaid eligibility. However, the planning issues involved when there is joint ownership by the parent and the child relate to the disqualification of Medicaid after eligibility and avoiding the Medicaid lien. For purposes of this discussion, joint ownership shall refer to a joint tenancy with right of survivorship (i.e., property passes to the survivor upon the death of the first of parent or child).

A. Assuming the requirements of eligibility are met, joint ownership of applicant’s residence with a child who is a protected transferee (or even a child who is not a protected transferee) will not preclude eligibility. N.J.A.C. 10:71-4.4(b)6. treats real property which cannot be sold because of the refusal of a co-owner to liquidate as an inaccessible resource.

B. However, disqualification from eligibility and the Medicaid lien are avoided by a transfer of applicant’s joint interest to a “protected transferee” child.

1. The Medicaid lien is avoided by terminating ownership, and, thereby removing the property from a Medicaid recipient’s “estate.” That is, assets that are part of one’s estate after the individual dies and receives Medicaid are subject to the Medicaid lien. It is noted that the lien statute expressly applies to joint tenancies.

2. Assuming the child disinherits the transferor parent, the problem of inadvertent disqualification is eliminated (joint ownership, child dies first and property passes to parent by operation of law).

3. If both individuals are alive and joint ownership were not terminated and the parent had qualified for Medicaid, a sale of the property would result in one-half the net proceeds being allocated to the parent with subsequent loss of eligibility.

Note: Another category of protected transferee is a (i) sibling who has an equity interest in the home; and (ii) who was residing in the home for at least one year prior to the date of institutionalization. The situation usually arises when sibling is joint owner of a two-family dwelling. The need to avoid the Medicaid lien is not as compelling in this situation as in the circumstances of joint ownership with a child.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© April 2009, Post #23

Community Spouse Not Limited to Community Spouse Resource Allowance After Date of Eligibility of Applicant

Community Spouse Not Limited to Community Spouse Resource Allowance
After Date of Eligibility of Applicant

Previously, it has been discussed (see Post 11) that after the applicant’s receives Medicaid, the community spouse is not limited by the Community Spouse Resource Allowance. Relevant administrative regulations are included for reference.

For example: (see Post 11, one of the reasons for transferring the house to the community spouse is that a sale by the community spouse of the primary residence after the applicant receives eligibility, would result in proceeds not subject to the Medicaid computations. Proceeds of a sale before the date of eligibility would be treated as part of the “pot” and, therefore, preclude current Medicaid eligibility.

Another common situation is an inheritance by the community spouse. N.J.A.C. 10:71-4.4(b)6. indicates that property in probate is an inaccessible resource. Therefore, if the community spouse is a beneficiary of the estate, his or her share of assets of the estate does not enter into the “pot” until distributed. If distribution occurs after the applicant receives Medicaid, the resources received are free without encumbrance. However, if distribution is made prior to eligibility, the resources become part of the “pot.”


Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.


© March 2009, Post #13