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Medicaid is a federal and state program designed to supplement the income of persons who require medical and/or nursing home treatment. If the person qualifies for Medicaid benefits under the Institutional Care Program (ICP) the state will pay the difference between the person's monthly income and the monthly charge for the nursing home. The medicaid program in Florida is administered by the State Department of Children and Families.

Persons who meet the financial eligibility requirements and who are age 65 years or older, and/or blind, and/or disabled, and/or members of a family with dependent children, are eligible for Medicaid benefits. The financial eligibility requirements are that the person have income of less than $1,536.00 per month (Florida income cap for 2000) and assets of less than $2,000.00. The income cap changes each year according to changes in the Federal Benefit Rate.

All of the person's income is counted except the spouse's income, support in kind or in goods, infrequent or irregular dividends or interest. If the person's countable income exceeds $1,536.00, the person is not eligible to receive Medicaid benefits. Currently, the Department of Children and Families will permit the creation of a irrevocable Qualified Income Trust (or "Miller" Trust) which may entitle the person to Medicaid benefits even though their income is over the income cap. If the person qualifies for Medicaid benefits, then all of his or her monthly income must be paid to the nursing home, except for $35.00 which may be kept for their personal needs. Medicaid then will pay the balance of the nursing home bill.

Typically, if a person's assets exceed $2,000.00 in value, they are not eligible for Medicaid benefits. (If their income is low enough, they may be able to keep up to $5,000.00). The person's homestead is not counted as an asset to determine Medicaid eligibility as long as the person expresses a desire to return to his or her home. One automobile, regardless of use or value, is also exempt. Also, personal effects, irrevocable prepaid funeral arrangements, household furnishings, life insurance with a cash value of less than $2,500.00, and assets that were transferred by the person more than 36 months prior to the date of application for Medicaid benefits are not counted as assets to determine Medicaid eligibility. Additionally, the person can set aside $2,500.00 in an account designated as his or her "burial fund", in addition to the $2,000.00 referred to above.

If the person in the nursing home (the "Institutional Spouse") is married, the "spousal impoverishment rules" give some relief for the spouse at home (the "Community Spouse"). Transfers of assets between the spouses is not treated as a countable asset (discussed below). The Community Spouse may retain $84,120.00 (for the year 2000), plus an irrevocable prepaid funeral plan, plus a $2,500.00 "burial fund", plus all of the other non-countable assets listed above.

As noted above, an applicant will not qualify for Medicaid benefits until his assets are spent down below $2,000.00. If the person transfers any assets to another person, (other than their spouse), he or she will be disqualified for a number of months determined by dividing the amount transferred by $3,300.00. For example, if the person transferred $33,000.00 to a son or daughter, said person would be ineligible for Medicaid benefits for 10 months from the date of application ($33,000.00 divided by $3,300.00).

There are several strategies that can be used to preserve the person's assets and still allow him to qualify for Medicaid benefits.

1. Any amounts owed on a non-countable asset may be paid-off (i.e. mortgages on the homestead, loans on the one automobile, etc.).
2. Repairs to any non-countable assets necessary to protect and preserve the asset.
3. If the assets are substantial, it is possible to make transfers (gifts), which will decrease the amount of the countable assets. It then becomes necessary to wait for a minimum of 36 months (the "look back" period) before applying for Medicaid benefits.
4. Under some circumstances, assets may be converted to income through the purchase of an immediate annuity.