Medicaid is one of the most essential public benefit programs that is offered to people with disabilities in the United States. Although it is regulated by federal law and partially paid for with federal dollars (about half of the cost), Medicaid is administered by states. Each state must have a federally-approved State Plan in order to receive federal financial participation (“FFP”).
In Massachusetts, the Medicaid program is called MassHealth. It is administered by the Office of Medicaid within the Massachusetts Department of Health and Human Services.
Medicaid is a “means-tested” program, meaning that only those without the financial means to pay for essential health care needs can get help. There are many other criteria for qualifying for Medicaid, far too numerous and complicated to review here, especially since the expansion of Medicaid under the Affordable Care Act (ACA). (The ACA offers Medicaid eligibility and/or subsidies on the basis of income alone, i.e., not limited to those who are disabled. Prior to the ACA, Medicaid benefits were available almost exclusively to persons who were disabled.)
Disability Trust rules and options have been developed in connection with Medicaid for persons who are disabled. These options are important because of the financial limits that persons who are disabled must meet in order to qualify for Medicaid, and the financial vulnerability to which doing so exposes them.
MassHealth Financial Eligibility and Disability Trusts
There are two kinds of resources that may prevent a disabled person from being eligible for MassHealth: (1) monthly income, and (2) savings, investments and other available assets. Income and assets are regulated by separate sections of the law, although they can affect each other under certain circumstances.
Income limits apply to everyone who seeks MassHealth benefits, regardless of age and regardless of the type of benefits that are needed. Very generally (and subject to many exceptions and specific limitations), if the cost of medical care that a person needs is greater than the income that he or she has available to pay for it, that person will be able to meet the income limits to qualify for MassHealth.
Assets are another story. Asset limits are most affected by—
- The applicant’s age; and
- Whether the applicant resides in a nursing home, or is living in the community.
Community settings include not just a home or apartment, but also assisted living, rest homes, and other residences (whether congregate or not) that do not provide skilled nursing care around the clock. As if to prove the rule by exception, however, hospitals are considered community-based care, because they are not long-term placements.
The standard asset limitation is $2,000 for an individual and $3,000 for a couple. If that standard applies, the individual must spend all “countable” assets in excess of the limit before he or she (or they) can qualify for MassHealth benefits.
Countable assets include almost any property of value that the individual could use to pay for medical care, including assets (like a vacation home) that could be sold for cash that could be used for care. There are some important exclusions, like a personal residence, a reasonable automobile allowance, home furnishings and the like. Insurance policies or other investments that have cash value are considered countable.
The asset limit, however, does not always apply. Age is a factor: there is no asset limit for persons under the age of 65, except for certain benefit categories. Taking both factors into account, the rules are a bit tricky:
- Eligibility for nursing home benefits is subject to the asset limit, regardless of the person’s age.
- Eligibility for the Frail Elder Waiver program (discussed below) is subject to the asset limits, regardless of age, even though the person continues to live in the community.
- Eligibility for any benefits for a person age 65 or older, whether institutionalized or in the community, is subject to the asset limits.
The Role of Disability Trusts
It is not unusual for a person to have too many assets to qualify for MassHealth, but not enough to pay privately for the medical care that they need. One example is mentioned above, when the amount of care that would be needed in order to stay at home costs more than the FEW program is able to pay. If the person had savings to supplement the FEW benefits, they could stay at home, perhaps indefinitely. But FEW has the $2,000 asset limit. Thus, savings must be spent before FEW benefits are available.
If a person has excess assets, they cannot be given away, or put into any ordinary trust, so as to qualify for MassHealth. In order to prevent such gifts, MassHealth imposes a “penalty,” or a period of disqualification, on the individual. The time of disqualification is based upon the amount given away, roughly on the basis of how much care could have been paid for by the amount that was given away. MassHealth uses a “daily rate” to calculate this period. For example, if the daily rate that MassHealth uses is $250 per day, and a person gives away $100,000, their penalty period would be $100,000 ÷ $250 = 400 days, or about fourteen months.
There are a handful of exceptions to gifting penalties, such as transfers to a disabled child or grandchild. But many disabled persons need the support that their excess assets could provide. For these individuals, MassHealth rules allow excess assets to be aside in a Disability Trust, instead of spending them. Assets in a qualifying Disability Trust are disregarded, or “exempt,” under the rules for countable assets. This treatment applies to savings, inheritances, personal injury settlements, gifts, or virtually any kind of asset that the individual might have.*
The exemption from countable assets comes at a price. In order to qualify as exempt, the trust must meet the following criteria:
- The individual must be disabled.
- The trust can benefit only the disabled individual.
- Upon the death of the beneficiary, the trust must pay back the state from assets that remain in the trust.
Disability trusts support the person’s independence, dignity and comfort. Benefits can be as basic and life-changing as hearing aids, eyeglasses and companionship visits in a nursing home, or as simple and relatively inexpensive as cable TV or a bedside telephone.
More Information About Disability Trusts
There are two primary types of disability trusts—“individual” trusts and “pooled trusts.” The names can be confusing. Even a pooled trust is between just one beneficiary and one trustee. But unlike an individual trust, a pooled trust is managed and invested with other pooled trusts, under a “master trust” instrument that provides the rules and instructions that govern all of the separate pooled accounts.
To learn more about the types of trusts and how they work, please refer to the “Disability Trust Programs” tab of this website.
* There is a special rule for a personal residence: as long as it is not in trust, it is an exempt personal residence. If put into trust, it paradoxically becomes a countable asset. This is so, because the state needs to be able to place a lien against the property for estate recovery purposes after the individual’s death, and it cannot do so if the asset is in trust.