Planning for Long-Term Care Financing with Medicaid


Until recently, most persons needing long-term care had few options besides moving in with relatives or a nursing facility, which may be pretty expensive. The availability of long-term care options means that we routinely advise clients on protecting their assets and ensuring that their surviving spouse is not left destitute. Medicaid, however, ends up being the go-to option for paying for long-term care for the vast majority of people.

Medicaid was adopted in 1965 alongside Medicare to provide low-income individuals, particularly children, access to primary medical care. Medicaid has been considerably expanded over the years, and it currently pays for long-term care in various settings, including nursing homes, assisted living facilities, private residences, and institutional settings. While strict financial requirements exist for enrolling in Medicaid, not all recipients are eligible for all programs due to varying criteria.

It is tough to successfully plan for Medicaid without professional assistance due to the complexity and obscurity of Medicaid eligibility regulations. Thus, the uninformed frequently spend all their assets on nursing facility care, even though most people may protect a portion of their savings and still qualify for Medicaid to support long-term care by working with an elder law attorney.

Despite federal guidelines establishing minimum requirements, states have considerable latitude in tailoring Medicaid services and eligibility conditions. Since Medicaid systems differ by state, individuals receiving long-term care must reapply for Medicaid in their new state of residence. Medicaid planning should be based on the statute of the state providing the care. Because of this, seniors who relocate from Florida or elsewhere to be closer to their children may need to make substantial changes to their Medicaid arrangements, as well as their wills and powers of attorney.

Long-term care can be provided in various settings, each suited to a specific patient’s needs and preferences. Even yet, most people opt for some combination of nursing home, assisted living, or home care. Medicaid, fortunately, covers each of these options.

Access to Care and Medicaid Reimbursement

The public negatively perceives nursing homes because of their clinical appearance and atmosphere. However, they are typically the last resort for those requiring extensive help with everyday life. Assisted living communities provide a middle ground between independent living and nursing home care by giving on-site eating, activities, and caregiving staff. Assisted living communities undoubtedly have better amenities than nursing homes, but they typically won’t accept residents who require extensive assistance due to their smaller staff sizes. Home care is most effective when delivered mainly through families with paid home health aides as a supplement, as round-the-clock professional care is prohibitively expensive and Medicaid coverage is limited.

The State of New Jersey Medicaid pays for long-term care in various settings, including nursing homes, assisted living facilities, and private residences; however, not all states pay for these settings. Long-term and non-long-term care services are the two main types of Medicaid coverage. Diagnostic procedures, preventative medication, surgical procedures, and other treatments are all part of “other care,” which we all require occasionally. Nearly all costs associated with nursing home care, assisted living facility fees, home health aide, and other expenses to enable an individual to remain in their home are covered by Medicaid under its long-term care program. In addition to meeting financial requirements, those applying for long-term care Medicaid coverage must prove they cannot care for themselves.

Conditions for Medicaid Participation

Someone with a medical need for long-term care can qualify for Medicaid if they meet specific financial standards. Care in a nursing home, assisted living facility, or at home can be paid for by Medicaid if the applicant’s assets and income are below the low thresholds set by the program. Money and other assets covering basic living expenses like food and shelter are considered countable income and resources. Income is received throughout the month, while investments are owned at the beginning of the month. Due to the limited nature of Medicaid’s exclusions, even nontaxable income (such as donations, Social Security, and tax-exempt interest), security deposits, and jointly owned property are typically counted.

A single individual can qualify for Medicaid-funded long-term care by spending their assets below the state’s resource limit, usually just a few thousand dollars. However, married couples face additional challenges regarding Medicaid planning because their total countable resources must be considered. If just one spouse requires assistance, the surviving spouse may keep up to half their joint countable assets. The purpose of the community spouse resource allowance (“CSRA”) is to prevent the at-home spouse from falling into poverty; nevertheless, in high-cost states like New Jersey, careful Medicaid planning is necessary to safeguard a spouse’s funds and maintain a comfortable living level. The CSRA ceiling rises with inflation but was $109,560 as of the beginning of the 2011 spring semester.

To qualify for Medicaid to cover nursing facility costs, most couples must spend their assets below the CSRA, leading many to feel they must give up all else if a family member ever needs long-term care. However, this highlights the dangers of making decisions with incomplete information. We offer various options to aid families in preserving their wealth, as surplus monetary resources are not required to be “spent down” on long-term care.

Preparing for Medicaid to Safeguard Finances

Medicaid planning does not involve hiding assets, contrary to popular belief, because doing so would be a criminal offense. Instead, we advise clients on how to keep more of their money by reducing wasteful spending, making the most of their remaining funds, avoiding gifting penalties, and increasing their CSRA and spousal income caps.

Couples can raise their CSRA by taking out a loan (either commercially or from family and friends), but doing so requires careful timing and planning. The community spouse of a Medicaid applicant can keep some of the couple’s other assets by spending less of their own money. Investing in the community spouse by upgrading their home or providing them with a car can be a good idea.

In Medicaid planning, gifts are frequently used strategies. Despite the sixty-month heritage look-back period, Medicaid gift planning might be advantageous even after entering a nursing facility. However, the Deficit Reduction Act of 2005 drastically altered the Medicaid planning landscape, which imposed severe penalties for mistimed donations. Unnecessary Medicaid disqualification might last for years if you give too much or apply for Medicaid too soon after making gifts. The same may be said for little presents, which may unnecessarily prevent people from saving. Regarding Medicaid planning, the technicalities are abundant, but making an eligible gift to a disabled person or a caretaker child does not incur a penalty.

A power of attorney allowing Medicaid gifts must be in place before the donor becomes mentally disabled to assist in gift planning. If the family does not have guardianship, it may be difficult to get Medicaid gifts approved. Although a well-thought-out Medicaid strategy can save a substantial sum, it can all fall apart if the owner’s name isn’t on the deed. Thus, it is vital to ensure that payouts to a Medicaid beneficiary on the death of a community spouse or other loved one are not caused by wills, trusts, beneficiary designations, or default rules. Similarly, many liens due to Medicaid estate recovery can be avoided if action is taken before the death of the Medicaid recipient. Deeds, account registrations, beneficiary designations, wills, and trusts may need to be updated to protect against these pitfalls for the unwary.


Long-term care is increasingly available in various less institutional settings, and receiving it is no longer associated with entering a nursing home. Despite ever-increasing healthcare costs, elder law experts can assist families in qualifying for Medicaid to afford to provide long-term care for a loved one without going bankrupt. However, effective Medicaid planning almost always involves expert counsel due to the complexity and arcana of eligibility regulations.

Lawrence A. Friedman, Esq., 2011.

[This piece was initially published in New Jersey Lawyer on October 10, 2005; the author has now brought it up to date for 2011.]

Former chair of the Elder & Disabilities Law Section of the New Jersey State Bar Association, Lawrence A. Friedman now works as a tax, estate, and disability attorney in Bridgewater. Friedman routinely teaches for ICLE, the National Academy of Elder Law Attorneys, the New Jersey State Bar Foundation, and other organizations, and he is Certified as an Elder Law Attorney by the National Elder Law Foundation, which the American Bar Association recognizes. Visit for additional information about elder law issues.

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