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Medicaid 101

Long Term Custodial Care (also known as "Institutional Care")

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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 like the kind you get in a hospital is not required. This kind of care is known in Medicaid-speak as "custodial care" (also known as "institutionalized care").  

Custodial care is the care needed to accomplish the basic activities of daily life. Care becomes Custodial Care when a person is likely to need such care for at least 30 days.

Custodial care can be given in different settings.

The key is the type of care, and length of time -- not the setting in which the care is given. Custodial care can be provided in a skilled nursing home, hospice, or an intermedicate care facility (ICF). Except in a very few states, an Assisted Living Facility, Board and Care home, a Retirement Home, Respite Care or an Adult Day Care Facility are not covered by Medicaid. 

  • To learn about care in an assisted living facility or at home, including eligibility rules and what is covered, see: Medicaid Aged & Disabled Medicaid Waiver Program
  • To find out if your state includes Medicaid Aged & Disabled Medicaid Waiver Program, or find the contact information for your state Medicaid office click here offsite link 

The requirements for qualification for Medicaid-funded custodial care are similar to those for basic Medicaid. Higher incomes are allowed because there are special rules for institutional coverage that make it more accessible to people with higher incomes.

There are also special rules for people who have a spouse who does not need custodial care and continues to live in the community. The spouse who does not need custodial care is referred to as the "community" spouse. If you have a spouse:

If you have assets that you want to protect, and you want to plan in case you need institutionalized long term care, there are steps that can be taken. Planning needs to be done with care. A mistake can be very costly.

Techniques which have been used to qualify for Medicaid and Long Term care are:

  • Transfer assets for a reason other than to be eligible for Medicaid. (You must be able to prove the existence of the reason).
  • Transfer assets. Medicaid has special transfer rules for long term custodial care. There may be penalties for transfers to qualify for custodial care.
  • Invest in your home up to the legal limit.
  • Transfer your home and keep a life estate.
  • Make a loan.
  • Make a payment to a Continuing Care Retirement Community.
  • Purchase items that Medicaid doesn't count.
  • Make an exempt transfer.
  • Set Up A Supplemental Needs Trust or another Trust.
  • Purchase an annuity.
  • Reduce equity in your home.
  • Get a divorce.

No one can predict what will happen if you take advantage of a planning alternative, spend the money you have left on care, and have no money left to pay bills during a penalty period during which you can't obtain Medicaid. States can set their own criteria that can help in this situation ("waiver"), but there is no certainty.

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." For help finding a lawyer who specializes in elder care, see: offsite link.

NOTE: If you have assets or income greater than qualify for Medicaid long term care, one way to get long term care without having to worry about a "look back" period is to call the service something else. For example, Medicaid may pay for the services of a home care aide if you pay for the custodial care.

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