To qualify for Medicaid, applicants must pass some fairly strict tests on the amount of assets they can keep. That means you either qualify for Medicaid on a particular date or you do not. What I mean by that is when the caseworker at the Department of Human Services reviews your application, they cannot qualify you for Medicaid if they think that would be fair, if you paid a lot in taxes, or if you have already spent a lot of your money on your own care. Under Michigan's Medicaid rules, all of that is irrelevant. It's not like a divorce case where a judge divides up the couple's assets based on what the judge thinks is fair. The caseworker does not have any discretion; the caseworker can only approve your application if you meet the strict asset and income tests. That means you should never apply for Medicaid until you know you qualify. You should not submit the application to "see what happens." If you do not qualify when you submit the application, what will happen is your application will be denied.
Therefore, to understand how Medicaid works in Michigan, we first need to review what are known as exempt assets, non-exempt (or countable) assets, and unavailable assets. Exempt assets are those which Medicaid will not take into account (at least for the time being). In general, the following are the primary exempt assets:
- the nursing home resident may have a total of $2,000 in cash or money in the bank.
- the Home, as long as the equity in the home is below $500,000. This limit does not apply if the spouse or a minor or disabled child lives in the home. However, as of July 1, 2011, Michigan will have estate recovery, which I will discuss soon in another post.
- Personal belongings and household goods. Essentially, the rule allows for a person's normal clothing, furnishings, and living utensils to be excluded.
- One vehicle of any value. It does not matter whether the applicant is licensed to drive. The vehicle may be a car, truck, motorcycle, motor home, or boat. When an applicant owns more than one vehicle, the vehicle with the highest equity value is excluded.
- A small amount of life insurance may be excluded. The rule regarding the exclusion of life insurance is somewhat confusing and requires looking first at the policy's face value, i.e., what it says on the cover of the policy. The exclusion rule is that, for a policy or policies to be excluded, the total combined face value of all policies owned on the life of a single insured must be $1,500 or less. If any life insurance policies are not excluded based on their face value, their countable value is then a function of the cash surrender values.
- Life Insurance–Funded Funeral Exclusion. Individuals may purchase life insurance on themselves and assign ownership of the insurance to a funeral director. When the individual dies, the funeral director will receive the funds and use them to pay for the funeral services. If such an arrangement is entered into and the insurance policy is irrevocably assigned to the funeral director, the value of the insurance is excluded and the transfer of the policy to the funeral director will not be treated as a divestment provided the amount of insurance does not exceed the value of services and goods purchased.
- Irrevocable prepaid funeral contract for the nursing home resident. Another method of prepaying for funeral services is to simply pay for the services ahead of time. This is done by entering into a Michigan irrevocable funeral contract with the funeral director and paying for those services in advance. The value may not exceed $11,393. An “Irrevocable Funeral Contract Certification” form must be completed.
- Burial Fund Exclusion. Up to $1,500 of a segregated and “clearly designated” fund may be set aside to pay for burial expenses, and this fund, plus all the interest earned on it, will be excluded.
- Burial Space Exclusion. An individual's “burial space” is excluded as well as burial space owned by the individual and intended for use by certain family members, spouse; parents; siblings; and children. Burial space includes a grave site, crypt, mausoleum, casket, urn, vault, headstone, costs of opening and closing a grave site, and costs for maintaining the grave site.
All other assets are generally non-exempt, and are countable.