Why is Medicaid, for the nursing home, so Complicated?

One might think applying for Medicaid to pay for the nursing home would be pretty straightforward.  “We spent the money, so now we apply, right?”  No, not right.  First you have to prove you don’t have excess assets and  “assets” include more than money.  And then you have to prove that within the five years before applying you spent your money the way Medicaid approves. When folks learn what Medicaid calls “countable”  assets and what is allowable and disallowed “spend down” they often say “That does not make any sense.”

I don’t propose to go into a list of Medicaid’s peculiarities here.  Let’s go back to the basic question: Why is Medicaid so complicated?

We could say that Medicaid is the product of Congress and that says it all.  That would be true but that doesn’t really answer our question.

My answer is that there are different strands running through the program, some seemingly artifacts of history (“That’s just the way it turned out, that’s all.”) and some are pursuit of different goals.

Here’s my take.


Medicaid has a concept of “applicant.” The applicant is a person.  In the nursing home program the term does not mean “family.”  It does not mean “married couple.”  It means the person who is in the nursing home and who has bills to pay.   In fact, in the history of Medicaid spouses were, and still are in some phases of the Medicaid program, treated as separate households.  For example: the day after a husband is approved for Medicaid, his wife could win the lottery and Medicaid would still pay the nursing home.  (P.s., in over 20 years I never had a client win the lottery.)

Different goals.  Here’s a couple examples of conflicting goals:

First goal: limit the use of trusts to gain eligibility and maintain net worth.  In this arena we find the rules concerning trusts and annuities. It used to be that people could easily shelter their assets in a trust and then apply for Medicaid assistance.  In 1993 Congress tried to seal that door with the trust provisions of the Omnibus Budget Reconciliation Act,  “OBRA 93.”  Now “Medicaid asset protection trusts” must be established more than five years before applying for Medicaid and once the money or property is in the trust “you cannot get it back.”

Second goal: protect the spouse from impoverishment. In 1988 Congress enacted the Medicare Catastrophic Coverage Act. It is known as “MCCA.” Part of the MCCA was provisions to protect spouses from being impoverished and one recognized way of protecting spouses was placing money and property in trust for their “sole benefit.” These provisions were not changed by the MCCA.

Protection of the spouse is part of the larger goal of meeting responsibilities for for dependents. Even in OBRA 93 there are provisions that allow trusts for minor and disabled persons.

Putting money in the right kind of trust is permissible “spend down” and putting it in the wrong kind of trust is “divestment.”

So here we have with two statutes that were added to the Medicaid program within five years of another. OBRA 93 tries to limit the number of people who can get Medicaid assistance the MCCA tries to expand it.

That’s just the way things go,

All the best,