Medicaid is a program funded by both the federal and Hawaii state government which is designed, as its name implies (medical-aide), to assist low-income people (age 65 or older, or permanently and totally disabled, or blind) pay for certain health care services. The rules and regulations must fall within federal guidelines, but there is flexibility so that the rules do vary from state to state. Medicaid is a "needs based" program for the poor and is therefore subject to strict monthly income and asset limitations which are set by the federal and state government. Medicaid is authorized under Title XIX of the Social Security Act. In Hawaii the medicaid program is administered by the Med-Quest division of the Department of Human Services.

Medicaid will cover a wide range of services which includes, but are not limited to:

Income. To be eligible for Medicaid assistance, an applicant’s countable income may not exceed the federal poverty limit. (For a single person this is $850 and for a married couple it is $1,145). If the countable monthly income exceeds the federal poverty limit then it must be spent down on medical expenses to the medically needy standard (for a single person $418, for a married couple $565). The applicant would then qualify for additional medical assistance that exceeds the medically needy amount. When calculating an applicant's monthly income, certain income is exempt, including: supplemental security income (SSI), welfare payments and bonafide loans.

Assets. Individuals are not eligible for medicaid if their countable assets exceed the asset retention limit ($2,000 for a single person, $3,000 for a married couple). Certain assets are exempt including:

Transfer-of-Assets Rules.
Since medicare does not pay for "custodial care" which is what most patients require in an extended stay in a nursing home, medicaid may be the only resource after countable assets are spent down. The Hawaii medicaid program provides coverage for long term care costs for nursing home residents where a nursing home level of care is being provided. Hawaii also provides long term care coverage to several home and community based waiver programs.

1. Spousal Impoverishment Provisions. For a married couple, the medicare catastrophic coverage act (MCCA) allows the non-institutionalized spouse (community spouse) to retain up to $2,266.50 as a monthly maintenance needs allowance. The community spouse may also have countable assets of up to $90,660. These figures are for 2003.

2. Transfer of Assets Penalties. If an individual transfers assets for less than fair market value for the purpose of qualifying for medicaid benefits, there may be a period of disqualification. Transfers that took place within 36 months of the medicaid application (60 months in the case of a transfer from a revocable trust or into an irrevocable trust) fall within what is called the look back period. Transfers during this period for less than fair market value result in a denial of medicaid eligibility for the number of months that would have been required to spend the uncompensated value of the transferred assets on nursing home care. This is based on the average cost of nursing home care in the community . For Hawaii, that "devestment penalty devisor" is $7,314 for the year 2003.

3. Medicaid Liens. The state of Hawaii places a "lien" to recover from an institutionalized person’s estate the nursing home expenses paid for by the state of Hawaii. This lien will not be placed upon the home if the individual in the nursing home signs a statement of intention to return to the home. If it appears that the medicaid recipient is likely to stay in the nursing home permanently, the state will then place a lien on the home. The state will also not impose a lien on the home if the following individuals are lawfully residing in the home:

4. Exempt Transfer of Home. An institutionalized individual’s home may be transferred to the following persons without the imposition of a transfer penalty and will also avoid the imposition of a lien:

Under the Hawaii rules, a home that is co-owned can still have a lien placed upon it. Currently the state of Hawaii is not placing liens on life estates. The value of the life estate, however, is considered an asset for eligibility purposes. Also, a home which is transferred into a revocable trust is not considered an exempt asset. The home must be removed from the trust in order for it to be considered as a non-countable asset.

5. Annuity. Transfer of assets into an annuity will not incur the transfer of assets penalty if the return on the annuity is commensurate with the reasonable estimate of the life expectancy of the individual and the annuity can be deemed actuarily sound.

Home and Community Based Waiver Services. The state of Hawaii does provide alternatives to long-term care in a nursing home. The individual may receive medical assistance payments for nursing home services in their own home or in adult foster homes or adult residential care homes. Services in a persons own home are referred to as "nursing home without walls." In order to qualify for these services the individual must be admitted to a waiver program and meet all the other qualifications for medicaid. The waiver programs are funded to provide for a set number of recipients. Currently, the number of recipients exceeds the available funding and therefore there are waitlists. The type of services which may be provided under these waiver programs include the following:

Move countable assets into non-countable assets:

Transfer home to following persons (no penalty) - avoid lien:

If community spouse dies first, then her will should pour into her probate estate and then to supplemental needs trust established under her will for the benefit of the institutionalized spouse.

A good overview of Medicaid coverage can be obtained from the city and county of Honolulu elderly affairs division book entitled Deciding "What if?" www.elderlyaffairs.com. Once you have reached this website click on the Book Deciding "What if?" and scroll to page 45.

Also, check out www.seniorlaw.com