What are the differences between Medicare, Medicaid and MassHealth?

Medicare is an entitlement program that is funded and administered by the federal government.  Eligibility for the program begins upon reaching the age of 65.  There are four components of the Medicare program, parts A through D, which cover doctor’s visits, hospital stays and prescription drug coverage.  Medicare does not cover long-term care at a nursing home for more than a period of 100 days.

Medicaid is a program funded partly by the federal government, and partly by each state.  Unlike Medicare, in order to qualify for Medicaid, an applicant must meet certain income and asset limits.  In Massachusetts, the Medicaid program is administered through the Department of Health and Human Resources and is referred to as “MassHealth.” There are several different types of MassHealth coverage, including health insurance for individuals living in the community and coverage for individuals in long term care facilities, such as nursing homes.

What are the basic rules of nursing home MassHealth eligibility?

•    Asset limit

A single applicant may have no more than $2,000 in assets. This limit includes retirement and non-retirement assets.  An applicant with a spouse may keep $2,000, and the spouse may keep approximately $117,000 (2014 figure).

•    Income limit

There is no limit on income, for a single applicant or his or her spouse, in order to qualify for the program. However, the bulk of applicant’s income must be paid to the nursing home each month.

•    Disqualifying Asset Transfers and the “lookback” period

MassHealth has the right to review an applicant’s bank statements for a period of 60 months before the date of application.  If an applicant has given away any assets (including cash, an interest in property, etc.) with the intent to qualify for MassHealth, he or she will be deemed ineligible for 1 month for every $9,000 transferred (2014 figure).

•    Primary residence

Owning a primary residence with equity valued under $828,000 (2015 figure) will not prevent an applicant from qualifying for the program. However, the state of Massachusetts will keep track of how much it spends on the individual’s care over the course of his or her life, and will record a MassHealth lien on the home. Upon the applicant’s passing, the state has a right to be reimbursed from the sale proceeds for its expenses.

How do I protect my house from a MassHealth lien?

The state is only able to record a lien on the primary residence if the applicant has a “legal interest” in the home. One planning strategy for ensuring that a lien is not recorded on the home is to transfer it into a properly drafted irrevocable trust. This type of trust, unlike a revocable trust, will prevent the state from placing a lien on the property.

What estate planning instruments should I have?

Generally, there are three estate planning instruments that are “must haves” for every client. These are a health care proxy (for medical decisions) a durable power of attorney (for financial decisions), and a will (to determine who receives assets upon the client’s passing).  Depending on a client’s goals, such as avoiding probate or planning for the possibility of requiring long-term care, there are other instruments, such as trusts, that may be necessary.

How do I avoid probate?

Probate is the court supervised process of determining who receives property after a person passes away, even if the person executed a will during his or her life.  Probate can be a costly, time consuming, and public event. Many clients prefer to structure their estate plans to avoid having to go through this process. One way to avoid probate is with a trust, which holds property during the client’s life and provides instructions to the trustee to distribute the property upon the client’s passing.

What is guardianship and conservatorship?

We often see clients who are no longer able to make medical or financial decisions for themselves. Guardianship is the formal court process of appointing a decision maker for an individual’s health care decisions. Conservatorship is the formal court process of appointing a decision maker for an individual’s financial decisions. It is important to note that the potential for guardianship and conservatorship can usually be avoided through the execution of proper estate planning instruments.

Do I need a supplemental needs trust?

For clients with disabled family members, a supplemental needs trust is often a useful vehicle to protect and manage assets.  Often, disabled individuals qualify for income and other benefits through various state programs, and these programs typically limit eligibility by imposing income and asset limits.  A special needs trust is designed to hold assets for a disabled person so that eligibility for other benefits is not affected.  Similar to revocable and irrevocable trusts, a supplemental needs trust appoints a trustee to manage the assets for the benefit of the disabled individual.