Medical Assistance in Minnesota

The Basics of Planning for Long-Term Care 

By David Rephan, Esq. and Téa Baker, Esq. 

When faced with a client, family member, or friend who needs long-term care, the process of finding care can be overwhelming. Along with seeing a loved one in distress, the financial reality of ensuring they receive the best care possible quickly sets in. The statewide average payment for skilled nursing facility care (also known as the “SAPSNF”), is currently $9,526 each month. But that is not the maximum cost of skilled care. It is not uncommon for nursing home care to cost upwards of $15,000 each month. On top of this long-term care payment, there could also be additional financial considerations, including a family to support, and money is going out the door faster than it is coming in.

This article gives a broad overview of Medical Assistance in Minnesota, including general eligibility requirements for different services, necessary considerations, and examples of asset protection planning strategies. The authors emphasize that each situation is heavily fact specific, the rules and standards regularly change, and there are countless considerations that go along with each asset protection strategy, such as estate recovery and Medicaid liens. 

Medical Assistance: Minnesota’s Implementation of the Federal Medicaid Program

Medicaid is a federal health insurance program that funds healthcare coverage for people with limited means. In Minnesota, this program is called Medical Assistance. Minnesota receives money from the federal government and then distributes that money based on Minnesota’s eligibility requirements. 

Aside from being a Minnesota resident, to qualify for Medical Assistance, applicants are required to meet three main eligibility requirements. An applicant must be: (1) asset eligible, (2) income eligible, and (3) medically eligible for the program they are applying for. 

What Can Planning Look Like? 

Each situation requires a careful analysis of the client’s financial, medical, and familial situation. There are different eligibility rules for married couples, single individuals, families that have children with a disability, and other familial structures and situations. Additionally, there are different considerations for whether, for example, someone seeking coverage for care in an assisted living facility as compared to a nursing home. A big financial planning difference between assisted living facilities and nursing homes is that in a nursing home, the monthly bill is all inclusive. In an assisted living facility, “care costs” and “room and board” costs are separated. Medical Assistance will only provide coverage for “care costs.” This means that for applicants in a nursing home, once eligible, their nursing home costs should be covered by Medical Assistance in their entirety, after they pay any required monthly spenddown. In an assisted living facility, Medical Assistance will only provide coverage for the “care” portion of the expenses. The individual will need other means to pay for the “room and board” portion of the bill. 

Asset Protection Strategies and Planning Considerations

In order for a single person to be asset eligible for Medical Assistance, the current standard is that they may only have $3,000 worth of available assets in their name. For a married person to be asset eligible for Medical Assistance, the current standard is that the spouse receiving Medical Assistance benefits may only have $3,000 of assets in their name, and the asset limit for their spouse is $154,140. This includes, but is not limited to, assets in bank accounts, retirement accounts, health savings accounts, and real estate. 

The above assets are considered assets that are generally “available” to the Medical Assistance applicant and therefore can be used to pay for their care, so they are counted when determining their total assets. That said, there are certain assets that are considered “exempt” for Medical Assistance eligibility purposes. 

Some assets are considered exempt and therefore not counted for determining Medical Assistance eligibility. For example, for a married couple, if one spouse requires care in a facility and the other spouse resides in their homestead, that home is not counted when determining eligibility for Medical Assistance. That said, there are estate recovery considerations. Medical Assistance estate recovery is when the state seeks reimbursement for benefits paid on a Medical Assistance recipient’s behalf after their passing. There are detailed rules for Medical Assistance estate recovery. Another example is that, in general, one car of unlimited value is exempt for determining Medical Assistance eligibility. Again, there are estate recovery considerations. 

Certain assets require additional analysis to determine whether they are considered available assets for purposes of Medical Assistance eligibility. For example, if a Medical Assistance applicant owns real estate jointly with a friend who is not receiving Medical Assistance, this could potentially be considered unavailable for eligibility purposes, but that does not mean the asset is fully protected. For example, Medical Assistance could attach a lien to recover from the Medical Assistance recipient’s ownership interest in the property. 

With those considerations in mind, determining how to properly reduce assets for Medical Assistance eligibility is key. In general, assets cannot simply be gifted away and then the next day Medical Assistance eligibility is obtained. The following are examples of some strategies on how an applicant could reduce excess assets: 

Purchases

Certain purchases may be made in an effort to become asset eligible for Medical Assistance. Examples include, but are not limited to, prearranging for the Medical Assistance applicant’s funeral and burial expenses (as long as the Medical Assistance rules are followed), purchasing household goods and services that would benefit the applicant, and purchasing a new car (as long as it is being used for the applicant). It is also permissible to pay professional expenses – including attorneys’ fees and accounting fees. 

Five-Year Lookback

The five-year lookback is likely the most commonly known planning strategy. For this planning, assets are transferred out of the applicant’s name and into the name of someone else. This transfer is considered a “gift” and can have consequences when used to reduce assets for Medical Assistance eligibility. Because of that, in general, five-years must go by before Medical Assistance leaves those assets out of consideration. It is important to note, for assets transferred on different dates, a new lookback date starts for each transfer. So, it is beneficial to plan ahead when using this strategy. 

Penalty Period

If assets are transferred and five-years have not gone by, Medical Assistance will impose a “penalty period” for the assets transferred before an applicant is eligible to receive Medical Assistance benefits. This means that the person must privately pay for a certain amount of time (the penalty period) before they are eligible for Medical Assistance benefits. In order to get a penalty period started, a Medical Assistance application must be filed, and the applicant must be otherwise eligible except for the transfer. In some situations where there is not five-years to wait and benefits are needed as soon as possible, transferring assets and starting a penalty period can be advantageous. 

Medicaid Compliant Annuity

Another strategy that can be used to help an applicant through the penalty period is a Medicaid compliant annuity. In general, this annuity will help pay for the individual’s care costs during the penalty period. For this planning to work, many calculations are done to determine the appropriate amount of money to “gift” (or transfer) to a trusted individual to hold, and the appropriate amount for the annuity premium. The annuity must be Medicaid compliant – i.e., it must name the State of Minnesota as the preferred remainder beneficiary (with some exceptions), it must pay principal and interest in monthly installments with payments beginning at the earliest date after annuitization, be actuarially sound, be irrevocable and nonassignable, and not allow for deferral or balloon payments. While using a Medicaid compliant annuity can be a prudent planning strategy, it is a dangerous option to consider without proper training and a competent understanding of the rules and implications. 

Conclusion 

Medical Assistance in Minnesota is the implementation of the Federal Medicaid program. It provides healthcare coverage for individuals with limited means and can provide financial support for people needing long-term care. There are specific eligibility criteria for each program and each situation is incredibly fact specific. There are many planning strategies that can help applicants become eligible for Medical Assistance while also ensuring families are still taken care of and some assets are protected in the process. 

Note: The information contained herein is provided as general information but is not legal advice; every situation requires a review of the specific factual circumstances.

Téa Baker, Esq. is an associate attorney at Chestnut Cambronne PA who focuses her practice on elder law, including disability law, special needs trust law, Medicaid law, and estate planning. Téa is a member of the National Academy of Elder Law Attorneys, and the Minnesota State Bar Association Elder Law section.