FAQ on Qualifying for Alabama Medicaid Without Going Broke
In this article we want to go through many of the “frequently asked questions” or FAQs on using Alabama Medicaid to pay for long term nursing home care without the family having to go broke in the process. There is so much “mis” information out there and we wanted to give you good information as you begin your journey to understand your options.
What is Alabama Medicaid?
Alabama Medicaid is a government program that pays for long term care (nursing home) for Alabama residents who qualify.
What is the difference in Medicare and Alabama Medicaid?
Medicare is a federal program that pays for certain medical care for eligible people. Medicare does not pay for long term care such as nursing home care. It can pay for temporary care in a rehabilitation/long term nursing home facility but the benefits quickly run out.
Alabama Medicaid, on the other hand, will pay for all of the cost of nursing home for those who qualify as will be discussed below.
How does Alabama Medicaid help pay for long term care?
If you qualify, you will need to contribute some or all of your income to the nursing home but Alabama Medicaid will pay for the rest of the monthly bill. This is tremendously important and valuable as very few of us make the money, when needing nursing home care, or have the resources to pay $5,000 a month for any length of period.
What are the medical requirements to qualify for Alabama Medicaid?
You must be in need of nursing home care. This is normally not an issue as no one goes into a nursing home “voluntarily” — instead we go into nursing homes when this is the last resort. If you are in this position, or your loved one is, then the medical requirement has normally been satisfied.
What are the income requirements to qualify for Medicaid in Alabama?
Basically the person going on Medicaid needs to have an income of around $2000 or less. If the income is higher than this, then what is known as a “Miller Trust” or “Qualified Income Trust” can be set up that puts the excess money (over $2,000) towards the cost of care. This is so someone who makes, for example, $3,000 a month, will still be able to qualify for Alabama Medicaid.
What are the asset requirements to qualify for Alabama Medicaid?
Assets are either considered “available resources” or “exempt.”
Exempt assets don’t count towards the total assets you can have and still qualify for Medicaid in Alabama.
But the other resources do and as a threshold matter, the person going into a nursing home can only have $2,000 in assets.
But there are many exceptions to this rule, particularly if you are married.
Will I be forced to lose my home if I apply for Medicaid?
Normally not. We understand why this question comes up so often — a person’s home is often their most valuable asset and is something that most folks want to pass along to their children. Either literally the house or at least for it to be sold and the proceeds divided among the children.
The house itself is normally exempt or “excluded” from being counted as an asset — sometimes you will see it referred to as an “unavailable asset” which is simply another way of saying Alabama Medicaid can’t count the house when it figures up your available assets.
Now do keep in mind that when Alabama Medicaid pays out money on your behalf that it can often put a lien on the house for the amount of the benefits paid. There are exceptions involved when there is a spouse still living there or a disabled child living there, etc. We will be happy to discuss with you but the main point of this answer is you don’t have to sell your house (and often this is a bad idea as it converts a non countable asset into countable money) and even after you pass away Medicaid may not be able to put a lien or force a sale of your home through what is called “estate recovery.”
I’ve heard that I can give away a certain amount each year ($14,000) to my children or others and this is ok to do. Is this right for Medicaid?
This is perhaps one of the most common mis-conceptions people hold about Medicaid.
It is true that under the Federal tax law that a person can gift away to another person $14,000 and this will not ultimately reduce your tax exempt portion of your estate which is 5.5 million dollars. For 99% of Alabamians this has no meaning as we will never have an estate of over 5.5 million dollars.
If you give away more than $14,000 per year, then a gift return has to be filed but again, as a practical matter this means nothing.
But all of the above has to do with gift taxes under federal law — it has NOTHING to do with how Alabama Medicaid views the situation. Medicaid says that any gift — whether approved by the IRS or anyone else — for any purpose — can create a penalty period if it occurs within the 5 years (60 months) prior to you applying for Alabama Medicaid. Assuming you are otherwise eligible or qualified.
So you have to be sick — in a nursing home — and you have to have your “countable” assets down to the required level ($2,000 for the one applying) when you apply. At that moment, Medicaid looks back the 60 months to look for any gifts.
So is making a gift illegal? Will I or my children go to prison for making or receiving a gift?
No — it is not illegal to make a gift. No one goes to jail for making or receiving a gift unless there was fraud involved.
Where people can go to prison is when they lie to Alabama Medicaid about transferring property and making gifts. When a family applies for Medicaid — asks for the enormous help Medicaid provides — then the family has the legal obligation to be truthful.
Same as your taxes — people get into trouble for lying on their taxes. You need to be just as open and honest with Alabama Medicaid as you are with the IRS.
So if gifting is not illegal, then why have I heard I should be careful about giving away assets to my kids?
If you make a gift within the 60 month “look back period” described above, then you will receive a penalty from Alabama Medicaid.
As a practical matter, here is how the penalty period works.
Medicaid totals up all of your gifts within the last 60 months and this gives us the gift number. Let’s say it is $54,000.
Then Medicaid divides the gift number by $5,400 which is what Alabama Medicaid says is the average amount of a nursing home bill in Alabama. (Note: this is low, which makes the penalty worse).
So in our example of $54,000 divided by $5,400, this gives us 10. But 10 what?
10 months of penalty.
10 months where the family must pay the nursing home bill — even if the bill is $8,000 or $10,000 a month. So that “gift” of $54,000 can cost much more than the original $54,000.
Before you make any gifts, or before you decide when to apply for Medicaid, it is critical to consult with an Alabama elder law lawyer so your family will not have unpleasant surprises but instead can make the best decisions to get the best care and preserved the family resources to the maximum amount allowed under the law.
If I want to know more, what should I do?
You are welcome to contact us through this website or, even easier, pick up the phone and call us at 205-879-2447 and tell the receptionist you have questions about Alabama Medicaid and ask to be connected with either Randi Curb or Carolyn Allcorn who can take down your information and then set up a meeting or phone call with us so we can help you understand your options.