Rule Change:  Protecting a Home and Medicaid Benefits

Jessica Arends

February 2019 

 Many people who require in-home care, assisted living, or nursing home care rely on Medicaid programs to help pay for their care when they do not have enough funds to pay for it on their own.  Historically, the Medicaid applicant’s home (as long as it is not in a revocable living trust), has been a non-countable (ie.,  exempt) asset for Medicaid eligibility.  This means that a Medicaid applicant could reduce their other assets to the eligibility limit and keep their home.

The Michigan Department of Health and Human Services (DHHS) determines Medicaid eligibility based on the Bridges Eligibility Manual (BEM).  As of February 1, 2019, there is a change in the BEM’s that could impact the ability for some Medicaid applicants to keep a home they formerly lived in and become eligible for Medicaid benefits.

First, we look at the definition of a homestead.  According to BEM 400 at 35, “A homestead is where a person lives that they own, is buying or holds through a life estate or life lease.”  This means the legal ownership (as reflected in the deed or other legal documents) must be examined to see if the applicant is an owner, a life estate holder, or has a right to live in the home through a life lease that was granted to them.

If a person is filing for Medicaid benefits to cover the cost of assisted living or skilled nursing care, they live in a facility rather than their home.  BEM 400 at 36 describes how the homestead should be treated if the applicant is absent from the homestead.  In general, the home does not impact eligibility and can be kept if the applicant is in assisted living or a nursing home, a co-owner resides in the home, or a dependent relative lives in the home.  Unmarried applicants that move out of their home to go live with a child or move from their home to senior independent living traditionally have been able to keep their home when they move to assisted living or a nursing home because they formerly lived in it.

The change as of February 1, 2019, appears to threaten the scenarios above.  BEM 400 at 36 replaced “formerly lived in” to “lived in prior to the time the individual left the property.”   It now says, with the following spelling errors contained in the BEM’s,

“Exclude the homestead (see definition in this item) that an owner lived inprior to the time the indiidual left the property…”

This raises the question, how is “formerly lived in” different from “lived in prior”.  Arguably they mean exactly the same thing, but then there would no purpose behind the revision to the BEM.  Therefore the revised language suggests that the DHHS is going to interpret it to mean, “lived in immediately prior” and that furthermore, they will additionally add the requirement that “left the property” means “left the property to enter a LTC facility, when determining whether the applicant lived in the home “prior to the time” they left the property.  If an elderly person requires care and moves into their child’s home to receive the care – the risk is that the home will not be excluded and therefore will be a countable asset. If the home is a countable asset, the value of it will be added to the value of that person’s other assets and make them ineligible for benefits.  For example, if a single person has $1,900 in their bank account and no other assets, we would presume they are eligible because they have less than $2,000. But if the home is now countable because it is not where they last lived – the value of their home, let’s say its worth $120,000 would mean that they have $121,900 in countable assets. This person could not get benefits until the assets were reduced down to less than $2,000 – which means the home would have to be sold and the funds spent-down (or use other planning techniques available to preserve some assets).

Because this change is so new, we have not seen whether the DHHS is expanding its inquiry when reviewing applications.  Perhaps this rule will not be focused on and we won’t see any changes in treating homes as exempt based on when the person last lived there. But this change is something we talk with our clients about and help plan for in the event it is focused on.  For those who file applications without getting proper advice, this could have a devastating impact on those relying on Medicaid to pay for the cost of assisted living and nursing home care.