Medicaid Eligibility: Who Qualifies & How To Plan Ahead

Aug 2, 2023 | Elder Law

Medicaid eligibility is an extremely complex concept to understand. It’s no secret that the government isn’t exactly known for their clarity and transparency, but it can be even more frustrating to live in a state of uncertainty when your access to healthcare is on the line. Many older Americans rely on Medicaid to cover their nursing home or other long-term care costs. With so much at stake, you deserve to be fully informed when it comes to knowing who qualifies for eligibility and why. In this blog, we will discuss the most important aspects of Medicaid eligibility and discuss your options when it comes to planning ahead to ensure your own eligibility in the future.

What Is Medicaid?

Medicaid is a public healthcare program that was created in 1965. The goal of the program is to provide low-income families and individuals like children, pregnant women, seniors, and individuals with disabilities with access to medical care. Medicaid is a collaboration of the state and federal government, as the state has the authority to establish their own eligibility requirements and administer their own benefits within the federal guidelines. Medicaid and Medicare are often confused with each other, but Medicare is quite different as it is federally funded and federally administered for people 65 and over with disabilities. As of 2023, there were 94 million Americans enrolled in Medicaid, with roughly 40% being children, 12% being the blind and disabled, and 8% being seniors. 

Federal law mandates that each state’s Medicaid benefits cover a few basic services, such as inpatient and outpatient hospital visits, home health services, physician services, X-rays, and labs. The state of Alabama has the ultimate say on what other services are covered under Medicaid benefits in addition to these. However, many seniors use Medicaid benefits to cover the costs of long-term care, which are already high and rapidly rising. 

Who Qualifies For Medicaid?

As already stated, each state is responsible for setting their own guidelines when it comes to eligibility. However, there are a few mandatory populations that each state must agree to cover in order to receive funding from the federal government. Those populations include:

  • Children under 18 in families with income below 138% of the federal poverty line
  • Women who are pregnant and have income below 138% of the federal poverty line
  • Certain parents or caretakers with low income
  • Most seniors and individuals with disabilities who receive assistance through the SSI program

The eligibility requirements for residents of Alabama are specific to Alabama, and may differ from surrounding states such as that of Georgia, Florida, Mississippi. It is also important to note that eligibility changes based on whether you are applying as a single person, a married couple, or alone as a married spouse. To be eligible for Medicaid in Alabama, you must:

  • Be a resident of Alabama
  • Be a U.S. citizen or be in satisfactory immigration status
  • Meet certain medical criteria
  • Be below the set monthly income limit
  • Be below the set asset limit

What Do Income And Assets Consist Of?

When it comes to both the income and asset limits, not every source is “countable”; some are exempt. Nearly all income is counted toward the Medicaid income limit, including employment wages, alimony, railroad retirement pensions, Social Security Disability Income, Social Security Income, IRA withdrawals, and stock dividends. Holocaust restitution payments are exempt, and therefore not countable toward the income limit. 

Some examples of countable assets include cash, stocks, bonds, investments, promissory notes, bank accounts, and real estate that is not the primary residence of the applicant. Life insurance policies are exempt up to $5,000, as are prepaid burial contracts and funds. Other asset exemptions include personal belongings such as clothing, furniture, cars, and a primary home in which the applicant’s equity interest is below a set amount. 

Why Do Some People “Plan” For Medicaid?

In some cases, a person will need to plan ahead in order to be able to qualify for Medicaid benefits because they exceed the income or asset limits. You might be thinking that the solution to this problem is obvious: give your loved ones an early inheritance and get rid of your excess money! But it’s not quite that simple. 

When someone applies for Medicaid, the federal government completes an analysis of their finances from the last 5 years. This is often referred to as the 5-year “look-back” period. Any of your major financial transactions – such as gifts, donations, or major spending – will be taken into account before determining your eligibility. This is why “planning” for Medicaid is necessary, and why you have the best chance at being successful if you start sooner, rather than later. 

It is estimated that a stay in a nursing home costs more than $3,500 a month in Alabama, or more than $40,000 a year. Many seniors don’t have family members who can provide them the level of care and attention they need, and are also on a fixed income. Therefore, qualifying for Medicaid benefits is the only chance they have at being able to afford the medical care they need. This is why many people make the time and put in the effort to plan now to qualify later. 

How Can An Attorney Help You “Plan” To Qualify?

Seeking the services of an experienced and knowledgeable Medicaid planning attorney is crucial to your potential eligibility. There are many tools that can be utilized in an effort to restructure your finances so that you qualify for benefits. After reviewing your financial situation, your attorney will be able to recommend the route that will allow you to become eligible for Medicaid while protecting your hard-earned wealth. Some of these tools include:

  • Qualified Income Trusts (QTI) – an irrevocable trust which you deposit your income into and grant a trustee the ability to control it
  • Pooled Income Trusts – an irrevocable trust which you can deposit surplus income to
  • Asset Protection Trusts – a trust which you transfer your assets to, thereby removing them from your estate completely
  • Spousal Transfer – the transfer of your assets to the name of your spouse

The Ladd Firm Is Dedicated To Helping People Qualify For Medicaid Through Strategic Planning And Beneficial Tools

If you’re still feeling a little lost when it comes to Medicaid eligibility and why planning to qualify is so necessary, we can fill in the gaps. Our lead attorneys have over 50 years of combined legal experience and are passionate about assisting seniors with their legal needs. We are here to help you protect your legacy and gain confidence in your future. Call today to find out how you can speak to our attorneys in a free phone consultation and learn more!

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