What is Medicaid and how can I be eligible?

Medicaid is government health insurance for those who are disabled, blind, or below the poverty line. Because the average senior over the age of 65 spends upwards of $11,000 annually on medical related care costs, receiving Medicaid benefits can often become the only way a senior living on a fixed income can afford health care. Medicaid is designed for those disadvantaged or poor, so the problem for most is that although they can not afford the rising costs of healthcare, they do have some assets accrued over life and wish to keep those for themselves and their family. To qualify for Medicaid in the State of Maryland, you must meet the following;

The Maryland Medicaid Look Back Period

The Medicaid look back period applies to those who are looking to get rid of those assets by gifting, transferring, or selling assets in a bid to become eligible. In Maryland, the state looks back at the last 5 years prior to your application, and will apply to all transfers and gifts of countable assets to your asset calculation at the time.

Sheltering Assets for Medicaid Eligibility

As you can see above, Maryland has a $2500 limit on assets held unless it is a married couple jointly applying, at which point both could keep up to $3,000 each in assets. There are two main methods used in order to reduce your assets so that you can fall in with these requirements.

1. Spend Down; This is exactly how it sounds, spending your money down to the eligibility requirement. By purchasing certain assets such as; Buying a primary residence, Personal possessions (including clothing, furniture, and household items), One vehicle, and Burial Plots. These are purchases that can be made in which the asset, and all value tied to that asset, are not counted towards your Medicaid asset calculation.

2. Transfers; Transfers differ from “spend down” methods because there are no tangible goods being purchased. The money is placed into a contract that follows strict Medicaid Guidelines that allows the original value of the principal to be maintained, and in many cases grown.

   Medicaid Compliant Trust: These are Irrevocable trusts that comply with Medicaid Guidelines allowing you to transfer your money into a legal entity that you no longer own, but get to set up and direct how to be used. This vehicle preserves the money and can be directed and accessed for certain medically related expenditures. Unfortunately most states will consider this a gift and will include the transfer in the look back period.

   Term Life Insurance and Burial Plots: Term life insurance and prepaid burial plots can be purchased and kept without violating asset limits for Medicaid. This is a generational transfer of your wealth that is NOT considered a gift. By purchasing term life insurance you are able to transfer your cash into an immediately payable, tax-free, lump sum upon your death that avoids any gift look back or recoupment by the state.

   Medicaid Indexed Immediate Annuity

   Finally we arrive at one of the greatest solutions available to anyone who has or recently received a large lump sum of money that exceeds the $2500 or $3000 asset limit. The Medicaid compliant annuity is a fully insured financial product that gives an annual interest rate credited on the indices of the stock market. Of all the methods available, it is one of few vehicles that not only avoids being included in the asset calculation, but offers guaranteed fixed income while being eligible for Medicaid. There are no stipulations on what the income generated from the annuity has to be spent on, as long as it complies with the income limits of Medicaid for your state (in Maryland the highest amount of income allowed is $2,289 monthly). These types of annuities do require some specialized skill and knowledge on Medicaid by the advisor implementing because of the tight guidelines and terms the annuity must follow to be eligible. At Bay Life Brokerage we consider are ourselves a great resource to help retain your money, take income, and still be eligible for Medicaid benefits.