Medicaid eligibility question (sold a house)

[RumBurgundy]

I live in Louisiana, which has the Medicaid expansion. When signing up on Marketplace in a previous year, it kicked me to Medicaid because my annual income is below $18k due to being FIRE. No big deal, I'm in my late 30s and rarely need to see a doctor so any concerns over "lack of choice" didn't/don't affect me.

However this February I sold my house in order to downsize, so obviously that's a relatively large amount of income and I assumed I would not be eligible for Medicaid (or ACA subsidized plans) until 2022. However, when I called the state Medicaid office to report the change in income and formalize cancellation of my Medicaid policy, the person I spoke to told me that in my case, the income would be considered a "one-off anomaly" and that I could keep my Medicaid if my monthly income after February would continue to be under $1482, which it will be. I have my doubts, and voiced them to the rep asking how much of this is subjective/open to interpretation and would a different person at his office have a different opinion whenever my account comes under annual review. He said he has personally handled several cases like this over his "15 years experience working with that office." He added that the worst case scenario would be that the Medicaid office would consider me ineligible only for the month in which the sale took place, and that I might be on the hook for some doctor visits for that month alone and my Medicaid coverage would resume automatically in March. But he concluded by advising me not to cancel my Medicaid plan.

Has anyone else had a similar scenario and been told the same thing? I'm programmed to think "if it's too good to be true..."

[nalor511]

The rep is correct, lump sum does not count.

[seattlecyclone]

Yeah I ran into this same thing here in Washington. The rule here is that you need your income to increase above the threshold for two consecutive months in order to lose your coverage. You could win the PowerBall one month and still be covered under Medicaid the next month if your income went back down to previous levels.

[RumBurgundy]

The rule here is that you need your income to increase above the threshold for two consecutive months in order to lose your coverage.

That's an interesting rule. I wonder if that applies here too.

[ObviouslyNotAGolfer]

I am facing a similar situation with my father's house. My mother just died with no will and it was owned jointly by both of them.

My lawyer told me that it passes to him. I will have DPOA soon and want to sell it because he is never going to live in it again and it is a financial drain. (I do not want to rent it out!) He is in long-term care, and he cannot take care of himself at all.

From what I understand from the California side of things, selling will kick him off of MediCAL *****INSTANTLY***** and he will have to spend down the entire proceeds from the house before he can re-apply. I guess he could stay at the nursing home and just pay them out of this money and they re-apply and **HOPE** he can get back on (and if not, get kicked out I suppose-a disaster of EPIC proportions).

Meanwhile, I would have to put a fair amount of money into the property and THEN deal with liens, so it is very unlikely worthwhile to sell. I am going to ask my lawyer how to just walk away. My name is not on the deed or anything. Hopefully no one would come after me with both barrels...

[ObviouslyNotAGolfer]

OP, I would talk to a lawyer or two about something this important. The story of my life is paying for other people's mistakes:

"Oh, she shouldn't have told you that. That's not right."

[jim555]

Capital gains under $250,000 for property held five years are not considered for ACA income.

Also lump sums are not considered for Medicaid as long as they are not periodic or recurring.

[ObviouslyNotAGolfer]

Interesting. I will have to talk to my lawyer. I found this on the Council of Aging website from 2019: https://www.medicaidplanningassistance.org/question/impact-of-selling-a-house-while-on-medicaid/

Q: Will my mom lose her Medicaid if we sell her house?

A: Yes, if you sell your mom’s house, she most likely will lose her Medicaid coverage. This is because in order to qualify for Medicaid, there is an asset limit. Generally speaking, in most states, this asset limit is $2,000. (To find the asset limit in your state, click here). However, there are a number of higher valued assets that are exempt (not counted) towards the asset limit. This includes one’s primary home, given the applicant (or his / her spouse) lives in the home, or the applicant expresses an “intent” to return to the home in the future.

If you sell your mom’s house, you are basically taking an exempt asset and turning it into a countable asset. Stated differently, the money from the sale of the home will count towards Medicaid’s asset limit. More often than not, this extra cash will put a Medicaid recipient over the asset limit, which is cause for Medicaid disqualification.

In this situation, it becomes necessary to “spend down” the excess assets (the profits from the sale of the home) in order to meet Medicaid’s asset limit. This can be done by paying off debt, purchasing an irrevocable funeral trust, buying an annuity, paying for long-term care, and even taking a vacation. Once the excess assets have been “spent down” and the individual has assets at or under Medicaid’s asset limit, he / she can reapply for Medicaid.

When “spending down” assets, it is critical to be aware that Medicaid has a look-back period (60-months in all states, but California, which is 30-months). Simply put, Medicaid reviews all past asset transfers during the look-back period. If an applicant (or even the applicant’s spouse) has given away assets or sold them for less than they are worth during this timeframe, this is a violation of the look-back rule. This will result in a period of Medicaid disqualification.

[Shane]

Same thing happened to us in 2016, and our Medicaid coverage was completely unaffected. Like you, OP, I was skeptical, so asked the rep I spoke with on the phone for his name and wrote it down. Also, asked him to make a note on our account that I had called to tell Medicaid that we had had a large amount of income, much of which was going to be considered capital gains by the IRS, which he promised to do. Still was worried about it, so paid our CPA to call Medicaid on our behalf to explain to them our exact situation, and they told him the same thing - we were still qualified. All the Medicaid people are concerned about is your regular monthly income. As others have said above, you could make $1MM one month, but as long as your usual monthly income after that is below $14xx/month, you're still good. Medicaid doesn't care.

[ObviouslyNotAGolfer]

Thanks, I wonder whether this is true in California as well!

[jim555]

Elderly Medicaid is completely different from ACA "expansion" Medicaid.  The case here is ACA Medicaid.  The only criteria is income under $1,468 a month.  Resources are not considered, they would be considered for elderly Medicaid.  The rules are the same in California and all states. 

[Shane]

Yeah, the ACA may have its faults, but I'm super grateful it passed when it did, just a few years before we hit FIRE in 2016. Expanded Medicaid under the ACA has provided me and my family with completely free healthcare for the past 5 years. Obviously, it's unknowable how things will change by then, but I'm not looking forward to turning 65 and having to switch to Medicare. It sounds like, in comparison to Medicaid, which is really simple, Medicare is going to be a convoluted nightmare, with Parts A, B, C, D, blah, blah, blah. Rather than Medicare for All, I think we should push for Medicaid for All. Medicare sounds like it's just a big handout to private insurance companies and the healthcare industry.

[jim555]

Medicare is much more expensive and has no out of pocket max which is why people get a Medigap policy.  The saying should be Medicaid for All.

[Dicey]

@lhamo is very well versed on this subject, so pinging her on your behalf.

[Rob_bob]

So does expanded ACA Medicaid actually care about your actual monthly income or your average income over the year?  Most months my income is well below the monthly limit but my quarterly dividend income pushes me over the limit.  However my monthly average income is well below the monthly limit.

So would Medicaid kick me off every 3 months then insure me the other months?

[jim555]

So does expanded ACA Medicaid actually care about your actual monthly income or your average income over the year?  Most months my income is well below the monthly limit but my quarterly dividend income pushes me over the limit.  However my monthly average income is well below the monthly limit.

So would Medicaid kick me off every 3 months then insure me the other months?

If the income is recurring and periodic they can use a methodology to smooth it out.  In NY if you qualify for one month they let you keep it for a year, then it gets recertified.

[SimpleCycle]

The proceeds from selling a house is not "income" per se.  It is a capital gain that is excluded from taxable income, and therefore excluded for ACA and Medicaid expansion purposes.  For a single person, you must have owned the house for 5 years and the profit (not the total amount) must be less than $250k to have the gain excluded.

https://www.healthcare.gov/glossary/capital-gains/

[SimpleCycle]

So does expanded ACA Medicaid actually care about your actual monthly income or your average income over the year?  Most months my income is well below the monthly limit but my quarterly dividend income pushes me over the limit.  However my monthly average income is well below the monthly limit.

So would Medicaid kick me off every 3 months then insure me the other months?

It depends on your state, so I'd check with your state Medicaid office.  This also only applies to expansion Medicaid for those under 65 - regular "aged and disabled" Medicaid has asset limits.

[ObviouslyNotAGolfer]

Elderly Medicaid is completely different from ACA "expansion" Medicaid.  The case here is ACA Medicaid.  The only criteria is income under $1,468 a month.  Resources are not considered, they would be considered for elderly Medicaid.  The rules are the same in California and all states.

Thanks, I think that clarifies the confusion here.

[Shane]

The proceeds from selling a house is not "income" per se.  It is a capital gain that is excluded from taxable income, and therefore excluded for ACA and Medicaid expansion purposes.  For a single person, you must have owned the house for 5 years and the profit (not the total amount) must be less than $250k to have the gain excluded.

https://www.healthcare.gov/glossary/capital-gains/

You're right but, even if a person or couple exceed the capital gains exemption limits you mentioned by hundreds of thousands of dollars, it still will not disqualify them from receiving Medicaid. In our case, our home sale was well within the $500K capital gain exemption limit for a primary residence, but since we had also used our property in a business and had written off some parts of the physical infrastructure as business expenses, when we sold it, we had to claim the money we had deducted as business expenses in previous years as income. So, for one month in 2016, our CPA told us that our 'income' was something like $80K. That made me really worried that we were going to suddenly lose our health insurance. After calling to speak with two different people at Medicaid myself and also having our CPA call to explain to Medicaid exactly how much money we had made from the sale of our home, it turned out that it didn't matter, because in the next, and following months, our income went back below the limits to qualify.

[RumBurgundy]

Capital gains under $250,000 for property held five years are not considered for ACA income.

This could be very relevant info as well, bookmarking this. Thanks!