Q: I understand that there are two tests to qualify for Medicaid – income and asset. Would you review both? The more I read, the more confused I become.
A: You are not alone. Although much has been written, I am asked this same general question dozens of times every month.
The following are the general rules for a single person. For the entire year of 1999, to qualify for Medicaid, the amount of monthly income of an applicant must be less than $1500 (including retirement pay and benefits, social security, interest and dividends, etc.) If monthly income is above the deemed monthly cost of a nursing home ($3510 for northern Colorado and $3662 for metro Denver), then Medicaid is not available. If monthly income is between $1500 and the deemed monthly nursing home monthly rate, Medicaid is available but all of the income must be paid into a special trust called various names such as Utah or Miller, which in turn distributes the money as required by law.
For the asset ownership test, the rules become confusing. Basically, except for medical equipment, an applicant can not have cash, assets, and personal property exceeding $2000 and an automobile worth more than $4500, unless the vehicle is used for work, to obtain medical care, or is handicapped equipped. A burial insurance policy can be obtained but can not exceed $1500 and life insurance may be owned but for a face amount of $1500 or less.
Finally, a person can own a home and the equity in it will not disqualify the owner for Medicaid benefits but only if the applicant actually lived in the home as his or her principal dwelling prior to institutionalization. The applicant must be institutionalized and sign a document that he or she intends to return (even if physically impossible). Finally, a spouse or dependent relative must also live there as his or her principal residence.
But remember that unlike the other exempt assets, even though the home is not counted to determine eligibility for Medicaid, Colorado can lien the house to recover expenditures made by the Department of Social Services through the Medicaid program.
In a future column, I will go through these issues from a couple's point of view.
Q: Should I tap social security as early as I can or should I wait for maximum payments?
A: There are as many answers as there are people being asked. Using figures found in Kiplinger's Retirement Planning Guide, September 19, 1999 and based upon a $1000 a month figure at 65, if benefits are received at 62 (80% of the amount received at 65), for those three years between 62 and 65, roughly $30,000 would be received. It would take 12 years to catch up if one waited until 65 and received full benefits. Considering inflation, this may not be worth it. But if you wait until after 65 to receive benefits, the government will increase the age 65 benefits by 1% a month up to a maximum of 6% a year.
Before you decide, run the numbers with your CPA and take in to account your state of health, are you planning on working, life expectancy, and the odds that social security with the current eligibility and payment amounts will be around.