Update on Hawaii MEDQuest (Medicaid) for 2007

The Federal Center for Medicare and Medicaid Services personnel have published updated amounts for important numbers that apply to the Medicaid system for 2007.

If one spouse needs to qualify for Medicaid, the amount of countable assets that the at-home spouse can keep will increase on January 1, 2007 from $99,540 to $101,640. Countable assets for a single person qualifying for Medicaid, or of an ill spouse qualifying for Medicaid, will continue to be limited to $2000.

Exempt assets include the personal residence, subject to limitations discussed below, automobiles, burial plots, bone fide burial plans, wedding and engagement rings, and life insurance with no cash value. A more comprehensive and detailed list of exempt assets is available from the Medicaid office or from a professional who regularly makes applications to Medicaid.

There are more changes: Announced for January 1, 2007 and effective July 1, 2007, the monthly maintenance needs allowance for a community spouse will be increased from $2,488.50 to $2,541.00 per month. When the at-home spouse’s own income is less than $2,541.00, the at-home spouse is allowed to keep enough of the nursing home spouse’s income so the at-home spouse has income up to $2,541.00 per month. Certain deductions and adjustments apply, so make sure you find out before you make an application for nursing home Medicaid.

Since the Deficit Reduction Act of 2006 (DRA) was signed into law on February 8, 2006, many people have been uncertain how it will be applied in Hawaii. Currently, applications for Medicaid are being handled under the rules that were in place prior to the DRA. We do not expect the new law to be in place in Hawaii until July of 2007 at the earliest, so current applications are being handled under the older, more favorable law and rules.

Of particular concern to Hawaii homeowners is a change to the way residences will be handled under the DRA. The DRA restricts the exempt equity in a residence to $500,000. The state may increase this amount to up to $750,000 and there is a yearly inflation adjustment that the state may apply to the home equity limit. The equity limit will not apply if there is a spouse residing in the home, or if a blind or disabled child or a child under the age of 21 is residing in the home.

Here is an example of how the equity limit will be applied. If a person needing nursing home care is single and his only asset is his residence worth $550,000 and there is no mortgage on the residence, that person will be denied help through the Medicaid system when the DRA is fully implemented in Hawaii because he has and excess of $50,000 of equity in his home.

When implemented in Hawaii, the new law will also severely restrict gifting options. However, caregiver contracts will be usable in Medicaid planning as well as Medicaid qualifying annuities and strategic gifting can still be planned. Advanced planning will be critical.

If it is likely that you or a person you are concerned about wants to seek Medicaid help in the next few months, you can still do Medicaid planning under the old more liberal views to preserve and protect assets and help qualify for Medicaid when costs of care are or will be overwhelming.