This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled program coming in 2016-2017. The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.) The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system. The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care. The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month. The June 23, 2016 installment discussed the difficulty in understanding the need for a Miller Trust. The July 1, 2016 installment discussed the need to empty the Miller Trust account every month. The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance. The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts. The July 21, 2016 installment discussed the changes that the Ohio Department of Medicaid made to the form Miller Trust document. The July 28, 2016 installment discussed whether income is supposed to go directly into the Miller Trust. The August 4, 2016 installment discussed Medicaid’s insistence that the transfers (or deposits) into the Miller Trust account be automatic. The August 11, 2016 installment discussed money that doesn’t actually reach the Medicaid-recipient that, nonetheless, counts as “income” for purposes of using a Miller Trust. The August 18, 2016 installment discussed the appearance that a person on long term care Medicaid has an increase in income when he/she stops paying Medicare premiums. The August 25, 2016 installment discussed the impact of tax withholding on certain income sources and the difficulty that the tax withholding creates for the Miller Trust. The September 2, 2016 installment discussed the limit placed on monthly costs of the Miller Trust. The September 9, 2016 installment discussed how Ohio’s Medicaid rules appear to count income tax refunds twice. The September 15, 2016 installment discussed the Ohio Department of Medicaid’s change in policy regarding real estate (other than the residence.) The September 22, 2016 installment discussed keeping the house with an intent to return to home. The September 29, 2016 installment discussed keeping the house while a dependent family member lives there. The October 6, 2016 installment discussed the home that is co-owned by someone else (other than the spouse.) Today’s installment will discuss real property that is “essential for self-support.”
Before July 31, 2016, a single person who asked for Medicaid’s help to pay for long term care costs and who owned a home had 13 months after the beginning of Medicaid coverage during which to put the home up for sale. (If the Medicaid applicant were married and the spouse still lived in the home, there was no obligation to sell.) That 13-month time period is gone. As part of the big August 1, 2016 change in rules, Ohio Medicaid rescinded the 13-month rule. Now, the person must decide to keep the house or to sell the house before applying for Medicaid.
If the person decides to sell, then the rules regarding real estate discussed in the September 15, 2016 installment apply.
If the person decides not to sell, then one of a number of certain conditions must apply. Under the new rules, if the applicant for Medicaid for long term care owns a parcel of real estate and the parcel is “essential to [the applicant’s] self-support,” the applicant may keep the parcel. The complicated criteria for “essential to self-support” are set forth in Ohio Administrative Code section 5160:1-3-05.19 (which was amended effective August 1, 2016.)
The first way in which real estate can qualify as “essential to self-support” is to be used as part of the applicant’s employment. For a person in long term care, however, employment is unlikely. To qualify for help with long term care costs, a person must need help with activities of daily living (such as bathing and dressing) or be unsafe to stay home alone. A person who needs help with activities of daily living or who cannot stay home safely is unlikely to be able to work. Because of the applicant’s likely inability to work, this language in the Medicaid rules seems pointless.
The second way that a parcel of real estate qualifies as “essential to self-support” is to be a “nonbusiness property used to produce goods or services essential to basic daily living needs.” “Basic daily living needs” is defined as “food, basic clothing, basic housing, and medical care.” So, for example, a farm produces food, so it can qualify as “essential to self-support.” For these nonbusiness properties, however, only $6,000 of the equity in the property is excluded from the Medicaid eligibility calculation. As a result, this exclusion is not very helpful for real property. (The same exclusion rules apply to personal property used to produce goods or services essential to basic daily living needs. For personal property (aka the “stuff” that someone owns other than real estate) the $6,000 exclusion can be useful.
Finally, the last type of real property “essential to self-support” is “nonbusiness income-producing property” such as rental property or mineral rights. Like with properties that help produce goods and services for basic daily living needs, only the first $6,000 of equity is exempted from the Medicaid eligibility calculation. However, that exclusion applies only if the annual rate of return is 6% (subject to certain limited exceptions on the rate of return target.) Because of the $6,000 limit, this is not very useful for people trying to shelter resources from the costs of long term care. In addition, the rate of return target may make even the $6,000 exclusion inapplicable.
All in all, the “essential to self-support” rule only works for people who fall within the “aged blind disabled” program who do NOT need long term care. Unfortunately, the Ohio Medicaid rules do not explain this limitation. Applicants are left to realize for themselves that “essential to self-support” isn’t useful for very many people who need long term care.