Medicaid and Long-Term Care in Texas: Demystifying the System

A primary concern of many elderly clients is planning for long-term care.? Our population is living longer, increasing the likelihood we will require some type of assistance in our elder years. According to the 2023 Genworth Cost of Care Survey, the world’s population is aging at a faster rate than ever before. Every day until 2030, 10,000 Baby Boomers will turn 65,?and 7 out of 10 people will require?long term care?in their lifetime.?

Medicare will only pay for 100% of nursing home care for the first 20 days and will require a co-pay of $204 per day for nursing home care for days 21 -100.? After the first 100 days of nursing home care, Medicare will not cover long term care.? The average monthly cost of care in the Austin, Texas region in 2023 was $6,035 for assisted living, $7,245 for in-home care, $6,433 for a semi-private room in a nursing home facility, and $7,878 for a private room in a nursing home facility.? As a result, planning for how to pay for long-term care is a key component to planning for our welfare as we age.

If an individual does not have the means to pay for in-home or nursing home care, the individual may qualify for Medicaid benefits to cover the costs of care.? There are over 109 different Medicaid programs in the state of Texas, and eligibility is generally based on an individual’s age, disability, income and resources.? In most cases, in-home care for the elderly is covered under the Star + Plus Waiver program in Texas, and benefits can include in-home care, assisted living in some circumstances, environmental adaptive aids, home modifications, medical care and supplies, personal care, physical and occupational therapy, and respite care.? To qualify, an individual (1) must have a medical necessity, (2) may not have more than a maximum gross income of $2,829 per month (in 2024), and (3) may not have more than a maximum amount of $2,000 in available resources.? The same income and resource limitations apply in order to receive nursing home benefits.

I.?????? Medical Necessity

An applicant must have a medical need for Medicaid long-term care. For Nursing Home Medicaid and the Star + Plus Waiver program, a?Nursing Facility Level of Care?(NFLOC) is required.?The term “Nursing Facility Level of Care” is not easily definable, however the following four areas are commonly considered when Texas determines a person’s level of care need.

A.??????? Physical Functional Ability

One’s ability (or inability) to complete day to day activities, called?Activities of Daily Living?(ADLs), are commonly considered. These are basic activities that a person must complete on a daily basis to take care of oneself. These activities include bathing and personal hygiene, dressing and undressing oneself, using the toilet and cleaning up after oneself, mobility/transferring (walking from one room to another and getting out of bed and into a chair), and eating.?Instrumental Activities of Daily Living?(IADLs) may also be taken into account. These activities do not necessarily need to be done on a daily basis but are necessary to live independently. Examples include shopping for groceries and other essentials, meal preparation, housecleaning, laundry, medication management, and paying the bills.

B.??????? Health Issues / Medical Needs

An individual’s health, or medical needs, are also frequently considered when determining if a senior meets a Nursing Facility Level of Care. Examples include needing assistance with injections, catheter care, and intravenous medications.

C.??????? Cognitive Impairment

Cognitive (mental) functioning may also be considered when determining if a senior meets a NFLOC. This area is particularly relevant for persons who have Alzheimer’s disease or a related dementia, such as dementia from Parkinson’s disease or Lewy body dementia. Seniors with impaired judgment may not be able to make appropriate and/or safe decisions, putting themselves in danger if living independently without supervision and assistance.

D.??????? Behavioral Problems

Behavioral issues, also commonly seen in persons with dementia, particularly in the mid-late stage of the disease, may also be taken into account when determining if an individual meets a NFLOC. Examples of such behaviors include frequent wandering from the home and becoming lost, impulsiveness, and aggressiveness.

II.??????? Income Limitations

??????????? A.??????? Qualified Income Trusts

Texas residents who need nursing home care and who have monthly income above the special income limit of $2,829 but below the private pay cost of the care, may have insufficient funds to pay for the needed care. To address this problem, in 1993, Congress amended Section 1917 of the Social Security Act to permit the use of a qualified income trust, or QIT (see 42 USC Section 1396p(d)(4)(B)). The proper use of a QIT allows a person to legally divert the individual's income into a trust, after which the income is not counted for purposes of the institutional and home and community-based waiver special income limit.? As a result, income should never prevent someone from qualifying for Medicaid.

Only income may be placed in a QIT. An applicant's resources may not be put into this type of trust. An individual may divert all their income into a QIT, or if they have income from multiple sources, only the income from certain sources. However, income from any given source must go entirely into the QIT, or not at all.? The trust must be irrevocable, and it must have a reversion clause stating that at the death of the trust beneficiary, the trustee must pay to the state of Texas any funds still in the trust account, up to the full amount of Medicaid assistance that was given to the beneficiary and not otherwise repaid.

A QIT instrument must also require that the trustee pay (i) a monthly personal needs allowance to the beneficiary; (ii) court-ordered guardianship fees; (iii) a sum sufficient to give a minimum monthly maintenance needs allowance to the spouse (if any) of the beneficiary; and (iv) the cost of medical assistance given to the beneficiary not previously paid.

The income must be deposited into the trust account in the month it is received, and the trustee must make distributions from the trust account by the last day of the following month.

In addition to a completed, signed, and dated trust instrument that meets the QIT requirements as determined by HHSC, there must also be a bank account established for the QIT. This bank account must be used only to deposit the Medicaid applicant’s income from the sources listed in the QIT instrument.? Any deposits made to the QIT bank account from other resources the applicant owns could result in the bank account becoming a countable resource. Any deposits to the QIT bank account from another person may be countable income and result in all deposits to the account being countable income and the bank account becoming a countable resource.

??????????? B.??????? Monthly Maintenance Needs Allowance for Married Couples

When only one spouse of a married couple applies for Medicaid for nursing home care (the “institutionalized spouse”), only the income of the institutionalized spouse is counted. This means the income of the non-applicant spouse (the “community spouse”) is disregarded and does not impact the income eligibility of the institutionalized spouse.

In addition, the community spouse may be entitled to a?Monthly Maintenance Needs Allowance?(“MMNA”) from the institutionalized spouse to prevent spousal impoverishment. In 2024, the MMNA in Texas is $3,853.50 per month.? As a result, if a community spouse has income less than $3,853.50 per month, income can be transferred from the institutionalized spouse to the community spouse in order to raise the community spouse’s income to the MMNA amount. A community spouse who already has an income of $3,853.50 per month or more is not entitled to MMNA.

III.????? Resource Limitations

??????????? A.??????? Exempt Resources

As discussed above, an individual cannot have more than $2,000 in “available resources” in order to qualify for Medicaid benefits.? Resources are valued as of 12:01 a.m. on the first day of the calendar month; however, not all assets are counted as available resources.? In Texas, exempt assets that do not count as available resources include:

(1) An individual’s home which is serving as the principal place of residence, including the land on which the home stands and other buildings on that land;

(2) Funds from the sale of a home that are reinvested in a replacement home;

(3) A burial space or lot of any value and certain prepaid burial contracts not to exceed $1500;

(4) An automobile;

(5) Household goods and other effects;

(6) Life insurance with a total face value not to exceed $1500;

(7) Livestock maintained as part of a trade or business;

(8) Jointly owned property that cannot be sold without undue hardship due to loss of housing to the other owners;

(9) Property essential for self-support;

(10) Certain types of retirement accounts, such as IRAs for 401(k)s where the owner is taking the Required Minimum Distributions (RMDs); and

(11) Certain types of annuities.

Frequently, an individual applying for Medicaid benefits can spend down resources by purchasing exempt assets, such as a prepaid funeral, with non-exempt resources such as cash.? If the individual owns a home, funds can be used to make improvements to the home or to pay down the mortgage in order to reduce an applicant’s available resources.

B.??????? Community Spouse Resource Allowance

If an individual is married, all assets of both spouses are considered jointly owned, even if they are the separate property of the community spouse.? The community spouse is allowed to keep one-half of the couple’s available resources not to exceed $154,140 (called the community spouse resource allowance or CSRA). ?If the community spouse’s CSRA is under $30,828, 100% of the assets can be retained by the community spouse.? In addition, if the institutionalized spouse does not have sufficient income to raise the community spouse’s income to the MMNA amount of $3,853.50, the community spouse can often expand his or her CSRA to include additional assets.

??????????? C.??????? Transfers of Assets

When someone applies for Medicaid, a transfer penalty is imposed on any gifts made by the applicant in the past 5 years, which is called the “look-back period.”? As a result, assets can only be transferred to children or trusts for the benefit of children if they are done more than 5 years before the individual needs long-term care.? However, when done timely and in an appropriate manner, these strategies can preserve assets for children and/or set aside assets that the children can then use on the parent’s care later to supplement any Medicaid benefits they are receiving.

IV.?????? Conclusion

These are just a few of the complex issues that frequently come up for elderly clients, and there are a variety of planning alternatives depending on how far in advance planning is done, the type of assets owned, the type of care anticipated to be needed, etc.? Each individual’s goals, wishes, and financial circumstances differ.? However, we are here to help walk you through all of your options to help you decide what works best for you and your family.? To schedule an individual consultation to discuss structuring a plan that meets the individual needs of you and your family, you can schedule a consultation with us on our website at www.AustinSpecialNeedsPlanning.com.

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