Are you a US citizen and struggling with medical expenses? Many of the American population depend on Medicaid life insurance to meet their medical expenses needs. Medicaid is a health care program for millions of families, children, seniors, and individuals with disabilities, who are living on low income. However, Medicaid eligibility ceases as soon as the recipient dies. What happens after you pass away? Can Medicaid be applied to funeral, cremation, or burial expenses? Or can families buy Medicaid life insurance that will pay for these last costs through Medicaid? These pressing questions raise a significant issue that families face. When funds are already limited, how can they set for the expenses that come with the end of life? Let’s go with me to find the answers to all these questions.
What Is Medicaid?
Medicaid is a federal and state-funded program of health care insurance that offers access to free or affordable medical services to millions of needy Americans including adults, children, pregnant women, senior citizens, and disabled individuals. Medicaid is categorized as a shared-cost program in which both the federal and state governments contribute towards the funding of the program based on their enrollment counts and cost developments within the healthcare sector.
But it is not only healthcare coverage. Consider these programs administered by Medicaid (depending on the state): Consider these programs administered by Medicaid (depending on the state):
(1) Autism services
2) Dental care
3) Behavioral services
(4) Telemedicine
The states decide on Medicaid services but have to adhere to the mandatory benefits set by the Federal government. The state programs of Medicaid life insurance are partially funded by the Federal government.
Can Medicaid Take Life Insurance from Beneficiaries?
Medicaid cannot take one’s life insurance policy while they are still living. It is always a common practice to forget about life insurance when applying for Medicaid. Still, on this matter, different forms of life insurance and the amount of policy can determine it to be an asset.
Medicaid life insurance is meant to help people with low income and to be eligible for this program, you cannot have more than $2000 in assets (depending on the state in the US).
If you have a life insurance policy that may disqualify you from Medicaid, you have a few options:
- Surrender the policy and spend down the cash value.
- Assign the policy to your spouse or a special needs trust. If the policy were to be transferred to the spouse, the cash value would be considered the spouse’s community resource allowance.
- Transfer responsibility for the policy to a funeral home. It can therefore be used to pay for your funeral expenses, which form part of exempt assets.
- Borrow from the available cash surrender values. This leaves the face value and hence the cash value and the death benefit lower while the policy remains effective.
It is important, therefore, that you seek legal counsel from your attorney before taking any actions with a life insurance policy.
The Medicaid Estate Recovery Program can rightfully stake its claim to a number of your assets after death. However, can Medicaid take life insurance from beneficiaries? With few exceptions, Medicaid can’t collect life insurance bills from a beneficiary. This is the case as the life insurance company will directly make the payment to the beneficiary rather than to the estate.
But if there is no beneficiary, the benefit goes to the estate of the deceased. Medicaid is allowed to seek reimbursement for certain medical costs they incurred through Medicaid estate recovery and life insurance.
Therefore, to protect the life insurance benefits, there is a need to appoint a beneficiary. If you name a beneficiary, Medicaid, in general, cannot touch those funds. The policyholder should also not keep the beneficiary designation a secret.
How Does Life Insurance Affect Medicaid Eligibility?
You may be wondering, Medicaid and life insurance eligibility. “How does life insurance affect my Medicaid eligibility?” Well, here’s how.
In a few ways:
- If you are receiving SSI, or
- You are eligible through other non-MAGI limits, or
- You need nursing home care
Finally, if you own a life insurance policy, you may be disqualified from getting Medicaid.
But, not just any life insurance policy. The plan of life insurance you have matters to Medicaid.
All whole-life policies with cash value as a part of the purchase of the policy are also considered as an available asset for Medicaid. If you wanted to be eligible for Medicaid life insurance, you would have to “spend down” these whole life policies.
The cash surrender value, which is part of permanent life insurance (whole life and universal life insurance), has value. This value is an eligible asset for Medicaid purposes. They needed to “spend it down” in some way to eventually become eligible for Medicaid life insurance.
Yet, it is crucial to consult a competent lawyer in your state because the rules governing Medicaid vary from one state to the other.
How To Protect Life Insurance From Medicaid?
Here are a few strategies to protect your life insurance from Medicaid.
1. Establish an Irrevocable Life Insurance Trust (ILIT):
This transfers the life insurance policy out of your estate so Medicaid cannot take it during their look-back period. The trust owns the policy instead of the owner.
2. Spend Down Excess Assets:
But if your assets exceed the limit of Medicaid, spend the rest on non-countable items before applying. This could range from repaying debts, renovating the house, or pre-funding for burial space and funeral services.
3. Establish a burial trust:
One of the useful strategies is to set up an irrevocable trust the purpose of which is to pay for funeral expenses. These trusts are commonly not counted when determining the assets in Medicaid. The money therefore must not be used for outlay other than for the funeral of the deceased.
4. Consult with an experienced Law attorney:
To ensure that you get a proper plan to shield your life insurance from Medicaid, it’s essential to cooperate with an experienced law attorney. They can also give you advice depending on your situation and assist you when it comes to various legal complexities.
Medicaid life insurance policies and Medicaid qualification
Now the main question that arises is “Impact of life insurance on Medicaid asset limits”.
Term life insurance policy does not cause the person to become ineligible for Medicaid. It offers limited or short-term coverage and is not invested in cash value that can be accessed in cash.
A whole life insurance policy may affect one’s eligibility for Medicaid. These permanent policies create a cash value that policyholders can surrender or ‘withdraw’, if the cash value is greater, it will lead to ineligibility depending on face value limits by state.
Funeral insurance often called burial insurance, the final expense or even funeral cost insurance does not impact Medicaid. This type of whole-life insurance only pays for burial or cremation expenses without any other benefits. Since the funds can only be used for these expenses, burial policies do not count toward the asset limits.
What does Medicaid allow for funeral expenses?
There are some amounts that Medicaid will pay when the beneficiary is dead. It varies from state to state, but there is a maximum federal amount that can be covered.
In general, Medicaid will pay for typical services provided by a funeral home, such as transportation of the body, preparation of the body, a simple casket, and a basic grave liner. This often does not include items such as flowers, obituaries, catering services, or even costly caskets.
The funeral payment which Medicaid does provide is paid directly to the funeral home. Families cannot obtain it on their own. If the funeral costs more than the amount that Medicaid reimburses, families are required to pay the balance.
There is a provision for states to set lower funeral expense limits depending on the cost prevalent in their region. However, no state can pay more than the federal maximum amount that is established in the law. In general, the coverage itself is quite simple, and the purpose is to provide decent and low-cost funerals for those receiving Medicaid.
Conclusion:
As we wrap up Medicaid life insurance. It is also important to know that Medicaid can assist in paying for medical bills. However, it is important to meet some other requirements in terms of income and assets. But if your income or assets are high, then you will not be eligible for the grant. However, these policies are complex and require a better understanding of how they work in practice. But Medicaid rules could change in the future. This is because you have to know everything there is to know before you can purchase a Medicaid life insurance policy.
FAQs
The general rule is no, applicants for Medicaid may not transfer assets during the five years before application without triggering a waiting period for benefits.
You can apply for Medicaid anytime in one of the following ways:
Find and check with your state’s Medicaid agency to apply. You must be a resident of the state where you are applying for benefits.
References:
