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Medicaid is the nation's largest payer of costs for taking long term care of a person when constant medical attention is not required. This kind of care, which can be given in different settings, is known as custodial care. In Medicaid terms, this kind of care is known as "institutionalization." Custodial care can be provided in, a Nursing home, an Assisted Living Facility or a Retirement Home, your home or an Adult Day Care Facility. Custodial care can be provided as: Daily Care, Respite Care, Hospice Care. (To learn more, see: Medicaid: Custodial Care). Since it is generally given in a nursing home, this discussion will refer to nursing homes as the place where the custodial care is given.

The requirements for qualification for custodial care are similar to those for basic Medicaid: you must be a member of an eligible group and have income and resources within certain guidelines. (To learn more about qualifying for non-custodial care, see Medicaid).

There are special rules for custodial care coverage that make it more accessible to people with higher incomes and more resources than for general Medicaid coverage.

There are also special rules for people who have a spouse who does not need custodial care and continues to live in the community (outside the nursing home.) The special rules recognize that when a person who needs custodial care is also married, living expenses aren't necessarily reduced because one spouse is confined in an institution. The other spouse still needs to maintain a home with the expenses involved in living separately.

In order to receive long term custodial care from Medicaid, the basic rule is that patients must pay all of their income to the nursing home or other service provider, minus certain permitted deductions. Permitted deductions include:

  • A personal needs allowance (in the ballpark of $60).
  • Uncovered medical costs including health insurance premiums.
  • In the case of a married applicant, an allowance for the spouse who continues to live at home if he or she needs income support.
  • An allowance for a dependent child living at home.

In some states, known as "income cap" states, eligibility for Medicaid benefits is barred if the nursing home resident's income exceeds a set amount of income per month, unless the excess above this amount is paid into a "(d)(4)(B)" or "Miller" trust. (To learn the income limits in your state, see: offsite link)

Keep in mind that if you depend on the government to pay long-term care costs, you lose the freedom to decide how and where you will receive care. For example, assisted-living facilities seldom accept Medicaid patients. Most nursing homes do accept Medicaid, but you may have to wait months or longer for a bed. You may also find that you will have to accept care in a geographic area other than the one in which you and your friends live.

This article focuses on the special rules that apply when Medicaid is going to be used to pay for Nursing Home and other Custodial Care charges. This article supplements Medicaid: Who Is Eligible For Medicaid? which explains the details of Medicaid eligibility. That article should be read prior to this one.

Planning can be used to hold on to some assets or transfer them to loved ones. Planning must generally be done in advance. To learn about various planning techniques, see: Medicaid: How To Plan For Medicaid Long Term.

Before you take any steps to qualify for Medicaid long term care, it is advisable to consult with a professional familiar with the rules in your state, generally an attorney who specializes in "elder care."


What Is Custodial Care?

Custodial Care is care provided to people who cannot take care of themselves and who are not expected to greatly improve. People receiving custodial care typically require some medical care for maintenance purposes. Custodial care seldom includes aggressive treatment that has the goal of curing or even improving a person's condition.

Custodial care is the care needed to accomplish the basic activities of daily life. Custodial care generally involves personal care including helping a person dress, bathe, eat, go to the bathroom, take medications and carry on other activities of living.

Key to custodial care is the absence of aggressive medical treatment that is curative in nature.

One of the most recognizable examples of Custodial Care is the care required by a person with Alzheimer's Disease.

Where Is Custodial Care Provided?

Custodial Care can be provided in several types of facilities and locations as follows:

Nursing Home (Assisted Living Facility, Retirement Home)

Nursing Home Care is care in a residential facility that provides a place to live, meals, round the clock personal care, and basic medical care. For Medicaid custodial care purposes, Medicaid will only pay for care in facilities which are licensed by the appropriate state agency as a board and care facility. It doesn't matter whether the facility calls itself Assisted Living, Nursing Home, or Retirement Home

It is worth noting that not all nursing homes accept Medicaid patients. However, once a person is in a facility, the facility is prohibited from discharging the person or offering less care if Medicaid starts paying the bills instead of private sources.

Home Care

Home Care is provided in a person's home. It is similar in function and range to the care provided in a Nursing Home

  • Medical and non-medical personnel visit regularly to check on the person's condition and help with activities of daily living ranging from administering medications to physical therapy to laundry and cooking.
  • Services may be utilized that provide meals in the home, such as Meals-On-Wheels.
  • Normally, a family member or roommate is the primary caregiver and coordinates the supervision of the patient with the assistance of the professional personnel.
  • Professional care in the home setting is never full-time care. It is only on a part time basis.

Adult Day Care

  • Adult Day Care provides exactly what it says: adult day care.
  • Adult Day Care is non-medical care at a center when supervision and minimal assistance are needed in a safe environment during the daytime. The staff provides at least one meal and supervises the administration of any needed medications
  • In addition to providing care while the primary caregivers may be working, adult day care also provides some exercise and use of motor skills as well as the chance to socialize with other people experienci

Eligibility For Long Term Care: Member Of A Covered Group

The groups of people that are eligible for Medicaid Custodial Care are the same as the groups that are eligible for the other aspects of Medicaid.

To be eligible, you must be:

  • A U.S. citizen or a member of one of those few immigrant groups that are eligible for Medicaid AND
  • Elderly, age 65 and over OR
  • Disabled as defined for purposes of Social Security Disability Insurance (To learn more, see SSDI) or Supplemental Security Income (see SSI) OR
  • Pregnant OR
  • Blind as defined for purposes of Social Security Disability Insurance (see SSDI) or Supplemental Security Income (see SSI) OR
  • A member of certain families with children

Eligibility For Long Term Care: Income Restrictions

Income limits are set by each state.

If your income exceeds the income requirements in your state you may still qualify for custodial care if your income can be reduced below the limit for maximum eligible income for a single individual to qualify for Medicaid.

You can "Spend down" (becoming "Medically Needy"):

  • "Spending down" is incurring medical expenses on a monthly basis which reduce your income to below the state's income requirements. An includible medical expense is the cost of a nursing home. To learn more, see: Medicaid: Medically Needy.
  • Some 20 states have an "income cap." In those states, if your gross income exceeds the amount of the cap, even by as little as one dollar, there is no eligibility for Medicaid custodial care, regardless of the size of your medical bills or the cost of the nursing home. Income Caps vary from as little as an amount equal to the Supplemental Security Income ("SSI") basic benefit amount for a single individual, to 300% of the SSI benefit. Most states which impose a cap apply the 300% cap.

If you are "disabled," you may be able to transfer your "excess" income to a nonprofit pooled-income trust.

  • Instead of the extra income coming to you or a health care provider, it goes to a pooled-income trust. The trust uses the money to help pay your bills rather than to offset the cost of your care.
  • You give the trust instructions about how the money is to be used • for example, for rent, food, utilities, clothing, etc.
  • Trusts generally charge a nominal service fee which is often determined on a sliding scale.
  • Upon your death, the funds remaining in the account stay with the trust to benefit other disabled individuals. It is likely that the amount left over is very small given the need to utilize the funds each month.
  • The arrangement has to be reviewed by Medicaid before a final determination about eligibility is made.

If you have a spouse:

  • The healthy spouse's income is ignored if the unhealthy spouse is institutionalized. (To learn more, see: Healthy Spouse's Income).
  • If both husband and wife live on the patient's income, a part of the income is not counted. The part eliminated goes by the unwieldy name of the Minimum Monthly Maintenance Needs Allowance and is generally called by its initials: MMMNA. If the actual costs of maintaining the home are higher than the current MMMNA, most states permit a higher allowance based on a complicated formula called Excess Shelter Allowance. (To learn more, see: The Patient's Income • Minimum Monthly Maintenance Needs Allowance (MMMNA).
    • If you have a family member that lives with you at home (or did live with you prior to institutionalization): All states permit a deduction from the patient's income for each such family member. (To learn more, see: Family Member Allowance).

SSI Benefits Reduction: While confined in a facility for more than ninety days, Supplemental Security Income benefits are reduced to $30 per month for "personal needs." A statement by a doctor about your ability and intent to return to your private residence in the near future can usually avoid having the SSI benefit reduced, at least temporarily.

Eligibility For Long Term Care: Asset Restrictions

Like the income rules, in addition to the resources limits for general Medicaid eligibility, special rules relate to institutionalization for custodial care that allow patients to keep more of their assets than they would otherwise be able to keep.

Most states limit assets to the Supplemental Security Income ("SSI") amount, which is $2,000 for an individual and $3,000 for a married couple. See Medicaid

All the assets that are exempt under regular Medicaid are also exempt under the Medicaid custodial care rules. One difference to note:  If you go into a nursing home, in some states, your home will not be considered to be a countable asset for purposes of Medicaid eligibility as long as you intend to return home. In other states, a nursing home resident must prove a likelihood of returning home. In all states, there is no equity limit if the Medicaid applicant's spouse or another dependent relative lives there.

In addition, there are two rules which particularly apply to qualifying for custodial care in a nursing home:

  • Spousal Impoverishment: The healthy spouse is allowed to keep up to 50% of the non-exempt assets, subject to a minimum and a maximum. To learn more, see: Medicaid: Eligibility: Spousal Impoverishment Rules.
  • Transfer of Assets: Another means of qualifying for Medicaid custodial care is to transfer your assets to someone else. To learn more, see  Medicaid: Eligibility: Transfer of Assets. If you're considering transferring assets to qualify, note the provisions concerning the "look back" period and penalties for transfers which occur during that period of time. They recently changed.

How To Combine Long Term Care Insurance And Medicaid

You can combine Long Term Care Insurance with planning for Medicaid. For instance:

  • Under the federal Qualified State Long Term Care Partnership program you can purchase a Long Term Care policy that allows you to protect your assets while qualifying for Medicaid when the Long Term Care policy runs out. Long Term Care insurance policies used for this purpose are known as "Partnership Policies."
    • The federal program offers dollar-for-dollar protection: for every dollar of coverage that your Long Term Care policy provides, you can keep a dollar in assets that normally would have to be spent in order to qualify for Medicaid. For example, let's say a single person is only allowed to keep $2,000 in assets in order to Medicaid to pay for long term care. If you buy a Long Term Care insurance policy under this program that provides $200,000 in benefits, you are allowed to keep $202,000 (the amount of the benefit plus the amount allowed by Medicaid) and still qualify for Medicaid. In some states, the protection is even greater. For instance, in New York, an unlimited amount of assets can be protected.
    • To be eligible for this program, the policies must be approved by the state and meet certain requirements.
  • You can purchase a Long Term Care insurance policy that covers for 5 years (the Medicaid penalty look-back period). If you go into a nursing home, you can transfer your assets at that point, keeping only enough for expenses during the 5 years, and to qualify for Medicaid at the end of the five years.