In general, Medicaid is a need based program to provide aid to those with chronic medical conditions. As a bit of background, Medicaid and Pre-Medicaid planning in Florida is an important part of creating a Florida estate plan and designing a wealth transfer and preservation strategy in Florida. In the fast changing world of healthcare and public policy, changes are common and policy makers continue to strive for ways to provide aid while attempting to balance budgets. This endeavor, spurred on by the Affordable Care Act (“ACA,” a/k/a “Obamacare”), precipitated many changes nationwide, making today’s topic of Florida Medicaid and the Affordable Care Act a important ongoing discussion for many Florida residents.
A Brief History of Medicaid in Florida
Medicaid is a “need-based” program providing healthcare coverage to elderly, blind, and disabled individuals. Though jointly funded by both federal and state tax revenue, Medicaid is primarily administered at the state level. As a result, available Medicaid programs and eligibility criteria can vary significantly between states. In Florida, Medicaid is not available to all low-income individuals, though several Florida Medicaid programs provide assistance to persons whose situation makes long-term employment difficult or impossible.
Florida’s Medicaid programs do provide standard Medicaid coverage for low-income elderly, blind, and disabled individuals. Additional family-based coverage categories include needy children and their parents or other caretaker relatives, pregnant women, former foster care recipients up to age 26, and non-citizens with medical emergencies who would be eligible but for their citizenship status. To qualify, a potential beneficiary must have income and asset levels below the applicable limits, which are tied to the federal poverty level and based on the size of the applicant’s household.
Florida residents who qualify for SSI (Supplemental Security Income) are also automatically qualified for Medicaid with no need for a separate application. SSI is a federal program administered by the Social Security Administration that provides monthly cash payments to elderly, blind, and disabled beneficiaries with low incomes.
A separate Medicaid program is available for Florida residents in need of nursing home or comparable Florida long-term care. For qualifying applicants, Florida Medicaid’s long-term care program covers the cost of nursing homes, assisted-living facilities, and at-home care. To be eligible, an applicant must be a Florida resident age 65 or older, or disabled, and his or her health status must necessitate full-time long-term assistance. And, as with standard Medicaid, the applicant must have income and assets below the program limits.
Florida’s Medically Needy program is a special, corollary Medicaid program for individuals who are ineligible for regular Medicaid due to income or asset levels above the program limits, but who have recurring, monthly healthcare costs above a certain threshold. The applicable threshold varies depending on the applicant’s income level and household size. Monthly healthcare costs up to the threshold are the beneficiary’s “share of cost,” which works similarly to a health insurance deductible. The overage can be paid by Medicaid.
Florida Medicaid Changes Prior to the Affordable Care Act
Because access to quality healthcare is such a vital part of our lives, Medicaid eligibility is enormously important to many people. Though “Medicaid-for-all” has been proposed by several major political figures, the need-based nature of the program has thus far remained fairly constant. Even so, specific eligibility criteria can vary substantially from state-to-state and year-to-year. For example, over the four-year period from 2016 to 2020, the income cap for Florida Medicaid long-term care applicants has increased from $2,199 to $2,349, allowing beneficiaries to remain eligible with $150 per month of additional income.
Over the years, Congress and state legislatures have also made significant changes to the rules and standards that apply when calculating income and asset levels for Medicaid eligibility. Rules changes can have a serious impact on Medicaid-planning strategies, sometimes requiring altogether new approaches to planning. And, in some cases, what looks like a minor change can necessitate careful planning by an applicant who would have previously qualified with ease.
Fortunately, experienced Medicaid-planning attorneys stay abreast of program modifications and develop new planning strategies when Congress or the states change the rules of the game. Many of the most significant recent changes have arisen from the Deficit Reduction Act of 2005 and 2010’s Affordable Care Act (“ACA”).
Florida Medicaid and the Deficit Reduction Act of 2005
The Deficit Reduction Act (“DRA”) implemented meaningful changes to the manner in which Medicaid applicants’ asset levels are calculated. Most notably, the Act altered the treatment of certain asset classes and strengthened the “lookback period” that can result in eligibility penalties.
Historically, the value of an applicant’s personal residence was usually ignored for purposes of the Medicaid asset test. A primary residence was not considered a “countable asset,” and therefore Medicaid applicants could retain their homes without any concern that the value of the real estate would be disqualifying. Under the DRA, though, a primary residence, while still excludable to a point, is only protected up to $500,000 in value. States have discretion to increase the exemption amount (within limits), and the amount is also periodically updated for inflation.
As of 2020, the home equity limit (i.e., the fair market value minus any mortgages or other liens) for Florida Medicaid is $595,000. This means that, for instance, an applicant for Medicaid long-term care whose home is worth $300,000 probably won’t need to worry about the value of the Florida homestead when qualifying. But if the home is worth $600,000, strategic Medicaid planning will be necessary to ensure the value isn’t disqualifying.
The home-equity rule also has a few exceptions under which an applicant’s home won’t be countable regardless of value. If an applicant’s spouse, minor child, or adult child who is blind or disabled resides in the home, it will be excluded from the asset test.
As with a primary residence, the DRA also introduced annuities into the realm of countable assets. Once considered an exempt asset, under DRA an annuity purchased prior to filing can now result in an eligibility penalty. But that doesn’t mean annuities are never helpful in Medicaid planning. When properly structured, purchasing an immediate annuity can still be an effective strategy for bringing an applicant’s total wealth beneath the asset-test threshold.
Cash used to purchase an eligible annuity is removed from the applicant’s aggregate wealth for asset-test purposes. To avoid the five year Medicaid lookback rule, the annuity must be both non-transferable and irrevocable, and the State of Florida must be named as a remainder beneficiary—allowing the state to recoup Medicaid costs after the applicant’s death. Of course, an annuity that solves an asset-test problem can raise new income-test issues, but there are Medicaid planning strategies for addressing that as well.
The DRA made annuities potentially subject to the lookback period and also altered the lookback period itself. The lookback rule lets Medicaid impose an eligibility penalty for asset transfers made before an applicant sought Medicaid coverage. Historically, Medicaid would “look back” three years, and, if any prohibited transfers occurred during that period, the applicant’s eligibility would be delayed. The duration of the delay is calculated in months by dividing the value of the transfer by the average monthly cost of care.
Since DRA, the lookback window was extended from three years to five years, so asset transfers made up to five years prior to filing can now result in an eligibility penalty. It’s important to remember, though, that a transfer that triggers the lookback penalty isn’t disqualifying—it just delays coverage during the penalty period, which begins when an applicant would otherwise have qualified for Medicaid.
Transfers trigger the lookback penalty if made in exchange for inadequate or no consideration. So, for example, gifting a pristine classic Mustang to your favorite nephew will trigger a lookback. Conversely, the sale of an asset for fair market value—or in exchange for other valuable consideration—won’t result in a penalty. Experienced Medicaid planning attorneys can make the most of this exception by arranging asset transfers that receive real value in exchange that does not count toward the Florida Medicaid asset test and the 5 year lookback rule.
For instance, a personal services contract can be used to remove cash or other valuable assets from a Medicaid applicant’s estate in exchange for services (typically personal care or support from a close friend or relative) that won’t qualify as a “countable asset.” Essentially, the applicant pays in advance for services to be rendered over time. Crucially, the services provided in return must have bona fide value. If the services exchanged under the contract are trivial or merely symbolic, the exchange isn’t actually made “for value” and will therefore still trigger the eligibility penalty—and might result in other complications, too.
Another option is using rental real estate for Florida Medicaid planning, provided it is generating legitimate rental income as this is a key exception to the asset test under current Florida Medicaid rules.
Medicaid Changes and the 2010 Affordable Care Act
The ACA required states to expand Medicaid coverage to all adults under 138% of federal poverty level. However, that provision was subsequently rendered ineffective by a U.S. Supreme Court case holding the proposed enforcement mechanism (i.e., withholding of federal funding to non-compliant states) unconstitutional.
When the ACA was enacted in 2010, it mandated that each state expand its Medicaid program by 2014 to provide assistance to adults earning less than 138% of the federal poverty level. However, a subsequent U.S. Supreme Court decision in National Federation of Independent Business v. Sebelius, though generally finding the ACA constitutional, ruled unconstitutional the statute’s proposed withholding of federal funding to non-expanding states. As a result of the ruling, Medicaid expansion became effectively optional for the individual states.
Most states expanded Medicaid coverage anyway, 36 having opted for Medicaid expansion, including four rolling out new programs in 2019 (Idaho, Utah, Virginia, and Nebraska).
Florida remains among the 14 states which have thus far elected not to expand Medicaid coverage. Thus, Florida’s Medicaid program remains available only to the traditional categories of blind, disabled, and elderly beneficiaries, along with caretakers of eligible minors or disabled dependents. For the time being, the more relevant Medicaid change for Floridians comes in the form of a provision allowing states to submit waiver requests for “demonstration projects…likely to promote the objectives of the Medicaid program” and for state programs designed to promote innovation in healthcare insurance coverage.
ACA State Medicaid Waivers
While encouraging expanded Medicaid coverage, the ACA also permits states to request waivers from various provisions of the law for “demonstration projects…likely to promote the objectives of the Medicaid program” and for state programs designed to promote innovation in healthcare insurance coverage. To obtain a waiver, a state must first submit an application to the Department of Health and Human Services’ Center for Medicaid and Medicare Services (“CMS”). If the waiver is approved, the state can then implement its proposed program subject to any modifications or limitations imposed by CMS.
Supporters of the waivers view them as a means of spurring innovation through federalism, allowing states to serve as “laboratories of democracy” (in the famous words of former Supreme Court Justice Louis Brandeis), “try[ing] novel social and economic experiments without risk to the rest of the country.” Detractors express concern that waivers could allow states to avoid providing Medicaid coverage to disadvantaged groups.
Florida’s Recently Approved Medicaid Waivers
Another interesting aspect of Florida Medicaid and the Affordable Care Act is that, under the standard Medicaid system, applicants are potentially eligible for retroactive coverage for up to 90 days prior to submitting an application.
However, beginning in February, 2019, Florida began testing, under a Medicaid approved CMS waiver, a rule that limits retroactive Medicaid coverage to 30 days. Under the regular rule, successful applicants can obtain retroactive coverage going back as far as 90 days from the application date. The rule currently subject to testing in Florida commences coverage as of the first day of the month in which an application is submitted. Children and pregnant women are excluded from the shortened period and remain eligible for up to 90 days of retroactive Medicaid.
Florida’s framework makes coverage effective as of the first day of the month in which an application is filed. Notably, the retroactive coverage kicks in based on filing date (as opposed to approval date), so delayed processing does not limit coverage.The rule’s trial run was initially set to conclude at the end of June, 2019, but was extended by the Florida Legislature through July, 2020. A bill is currently pending before the Florida legislature which would remove the expiration date altogether.
The Florida legislature thinks the Florida Medicaid waiver program will encourage Medicaid beneficiaries to maintain continuous coverage by applying for the Medicaid managed-care program proactively, rather than waiting until after receipt of medical treatment. Early estimates suggest the waiver will result in savings of around $98 million during the initial six-month trial period. Opponents of the waiver argue it “will limit access to healthcare for the poor, elderly and those with disabilities,” according to the Miami Herald. Children and pregnant women are expressly exempted from the reduced period of retroactive Medicaid coverage.
CMS’s approval requires the State of Florida to reevaluate the change before permanent implementation. Passed as part of the budget bill for the first part of 2019, the retroactive-coverage limitation became effective on February 1, 2019, and expires at the end of June, 2019, unless extended by the legislature. The limitation has not yet been extended by the legislature.
CMS also recently approved a Florida pilot program expanding Medicaid coverage for mental-health and substance-abuse treatment from community health care providers, including qualifying social workers and psychologists. And another CMS-approved program allows Florida to introduce a Medicaid managed dental program, which is gradually being rolled out beginning in the southeastern part of the state.
Medicaid Work Requirements: Possible National Trend
Several of the states that have expanded Medicaid to include non-disabled, low-income adults have sought to impose work requirements as a condition for continuing eligibility. As with Florida’s limitation on retroactive coverage, work-requirement programs must be approved by CMS. Although the Obama Administration was reluctant to consider approval of any employment conditions for Medicaid, CMS under the Trump Administration has encouraged pilot programs “to help lift individuals out of poverty and improve their health and well-being through work and community engagement.”
Individual program specifics vary from state to state, but work eligibility is generally only applicable to non-disabled adults who are otherwise Medicaid eligible. In most states, at least part-time work (usually 80 hours per month) is required, though the requirement can usually be satisfied through qualifying volunteer activity or evidence that the beneficiary is actively seeking employment. In most cases, beneficiaries with young dependents are specifically exempt. In Tennessee, for example, work requirements do not apply to beneficiaries with one or more dependent under six years of age.
Wisconsin’s “Badger Care” approach applies work requirements to childless, non-disabled Medicaid beneficiaries under the federal poverty line. Total Medicaid coverage for individuals within that category is capped at 48 months between ages 19 and 49, with each month in which the beneficiary works or receives work training in excess of 80 hours excluded from the monthly tally. Wisconsin also proposed a drug-screening requirement, which was rejected by CMS.
Thus far, Tennessee, Kentucky, Indiana, Arkansas, New Hampshire, and Wisconsin have adopted work requirements. Maine and Michigan have also received CMS waivers allowing for pilot programs, but changes in state electoral politics have raised doubts as to whether the programs will be implemented.
A March, 2019, decision from the DC Federal District Court created uncertainty over the viability of Medicaid work-eligibility programs. The DC court suspended implementation of the Kentucky and Arkansas plans on the grounds that CMS, in granting approval, did not sufficiently consider the impact the programs would have on Medicaid coverage. Finding CMS acted “arbitrarily and capriciously,” the court vacated the approval and remanded the waiver petition for further consideration. On April 10, 2019, the Department of Justice filed a notice of appeal with the DC Circuit Court of Appeals, seeking reinstatement of CMS’s prior approval.
Advocates of Medicaid work requirements say that they ease state budgets while still providing support to elderly and disabled beneficiaries, low-income children, and people attempting to lift themselves out of poverty. Detractors say the requirements deny coverage to vulnerable groups, forcing them to rely on emergency room treatment and forego preventative care, thereby resulting in higher overall long-term costs.
As always, how you or your loved ones may be impacted by recent Medicaid changes should be discussed one on one with your trusted Florida elder law attorney.
Steve Gibbs, Esq.
