Acknowledgment: Portions of information in this article are courtesy of the American Council on Aging (ACOA) and are used with permission.
While virtually everyone knows Medicare is the federal government’s health insurance program for adults age 65 and older, that is not the only such government-sponsored insurance seniors can utilize. There is also Medicaid, a healthcare program targeted to low-income individuals. In Colorado this is called Health First Colorado. The Colorado Department of Health Care Policy & Financing is the administering agency for Health First Colorado, which is jointly funded by the state and federal government and managed according to protocols set by the federal government. In many ways, Medicaid is more complicated than Medicare, especially as related to eligibility and strategies that can be utilized to affect that eligibility. These are the main subjects of this article.
Colorado Medicaid for Long-Term Care
One of the major expenses Medicaid pays for is long-term care (LTC), the primary topic we will cover. LTC is a type of care that Medicare generally does not cover for seniors, except in very limited, short-term circumstances. For those who qualify, Medicaid may pay for LTC in nursing home facilities and assisted living residences, but services and supports are also available to help seniors remain living in their homes.
There are three categories of Medicaid LTC programs for which Colorado seniors may be eligible.
1) Institutional / Nursing Home Medicaid – For this entitlement program, anyone who meets the eligibility requirements will receive assistance. Benefits are provided only in nursing home facilities.
2) Medicaid Waivers / Home and Community Based Services (HCBS) – These benefits are intended to prevent and delay nursing home admission. Support may be provided at home, in adult day care, or in assisted living. The number of participants is limited and wait lists may exist.
3) Regular Medicaid / Elderly Blind and Disabled (EBD) – As an entitlement program, this one provides benefits if eligibility criteria are met. Various LTC benefits, such as personal care assistance or adult day care, may be available.
(More information on HCBS and EBD at https://hcpf.colorado.gov/hcbs-waivers.)
Each of these programs has its own financial and medical eligibility criteria. Financial criteria change annually and vary based on marital status. Also Colorado offers alternative pathways to eligibility. These are some of the factors that can make Medicaid confusing.
Income and Asset Limits for Medicaid Eligibility for LTC in Colorado
Colorado seniors must be financially and medically eligible in order to get LTC assistance through Medicaid. A single individual applying for Nursing Home Medicaid must meet the following criteria (as of 2023):
1) Have income under $2,742/month;
2) Have assets under $2,000; and
3) Require the level of care provided in a nursing home facility.
The same criteria apply for Medicaid Waivers and HCBS. For EBD, an applicant must have income under $914/month, asset limit of $2,000, and must require help with activities of daily living, often called ADLs (tasks such as bathing, dressing, feeding, and cleaning oneself.)
Note that these financial criteria may be somewhat different for couples who are both seeking Medicaid coverage. Another important thing to note is that if only one spouse of a couple needs Medicaid assistance, the income limit applies only to the Medicaid applicant, and the assets of the non-applicant spouse do not have to fall under the same $2,000 limit. More on this shortly. Health First Colorado suggests checking your eligibility by applying at https://www.healthfirstcolorado.com/apply-now/. Assistance in applying is also available at Benefits in Action, an AgeWise Colorado Provider, at https://www.benefitsinaction.org/application-assistance.
How Income is Calculated for Colorado Medicaid
Nearly all income that a Medicaid applicant receives is counted toward the income limit. This includes employment wages, alimony payments, pension payments, Social Security, retirement pensions/distributions, stock dividends, and Veteran’s benefits. Keep in mind that when only one spouse of a married couple applies for Nursing Home Medicaid or a Medicaid Waiver, only the applicant’s income is counted toward the income limit. Plus, the non-applicant spouse may also be entitled to a Minimum Monthly Maintenance Needs Allowance (MMMNA) from their applicant spouse. The MMMNA is the minimum amount of income a non-applicant spouse is said to require to avoid spousal impoverishment.
Effective in 2023, the MMMNA in Colorado is $2,465. So if a non-applicant’s monthly income falls under $2,465, income can be transferred to that spouse from the applicant spouse to bring the non-applicant’s income up to this level. In 2023, the applicant spouse in Colorado may transfer up to a maximum of $3,715.50/month in income to the non-applicant spouse. This technique is fairly straightforward and is commonly utilized and encouraged by Medicaid. During the application process, the state Medicaid agency, Health First Colorado (https://www.healthfirstcolorado.com/), assists in determining the amount of the spousal income allowance. Benefits in Action, mentioned above, may be of help here as well (https://www.benefitsinaction.org/application-assistance.)
In Colorado, a non-applicant spouse can further increase their Spousal Income Allowance if their housing and utility costs exceed what’s called a “shelter standard” ($739.50/month as of 2023). But this Spousal Income Allowance cannot push a non-applicant’s monthly income over $3,715.50. This is the maximum Monthly Maintenance Needs Allowance. The Allowance not only prevents a non-applicant spouse from becoming impoverished, but also effectively lowers the applicant’s countable income for eligibility purposes.
(Income is counted differently when only one spouse applies for Regular Medicaid. The income of both the applicant and non-applicant spouse is calculated toward the applicant’s income eligibility and there is no Monthly Maintenance Needs Allowance.)
Counting Assets for Colorado Medicaid
Countable assets that are calculated toward Medicaid’s asset limit are referred to as non-exempt assets. These include, stocks, bonds, investments, bank accounts (credit union, savings, and checking), retirement accounts, and real estate in which one does not reside. Non-countable exempt assets include personal belongings, household furnishings, an automobile, irrevocable burial trusts, and generally one’s primary home.
Note on home exemption rules – For a home to be exempt from counted assets, the Medicaid applicant must live in it or intend to return to it. For 2023, the home equity interest in the home must not exceed $1,033,000. (Home equity is the value of the home, minus any outstanding debt against it. Equity interest is the amount of the home’s equity that is owned by the applicant.) If a non-applicant spouse lives in the home, it is automatically exempt. (For seniors applying for Regular Medicaid, there is no limit on how much equity value the applicant has in the home.)
While one’s home is generally not counted toward Medicaid’s asset limit, it is not exempt from Medicaid’s Estate Recovery Program (MERP). After a Colorado Medicaid LTC beneficiary’s death, the state Medicaid agency attempts reimbursement of care costs through whatever estate of the deceased still remains. This often includes the home. Without proper planning strategies in place, the home will be used to reimburse Medicaid for providing care rather than going to family as inheritance. (See “Home Protection Strategies” near the end of this article for ways that exist to keep a home out of MERP.)
Treatment of assets for a couple in Colorado
All assets of a married couple are considered jointly owned. This is true no matter which LTC Medicaid program is being applied for and applies whether one or both spouses are applicants. However, when only one spouse of a married couple applies for Nursing Home Medicaid or a HCBS Medicaid Waiver, certain “spousal protections” apply to ensure the non-applicant spouse does not become impoverished. In 2023 in Colorado, this non-applicant spouse is generally permitted up to $148,620 in countable assets, while the Medicaid applicant is usually allowed only $2,000.
The amount of assets that the well spouse is able to retain, which includes mutually held assets, is called the Community Spouse Resource Allowance (CSRA). In addition to preventing the non-applicant spouse from living in poverty, it can also effectively lower the applicant’s resources, hopefully to a Medicaid compliant level. As part of the Medicaid application process, Health First Colorado, the state’s Medicaid agency, typically assists in calculating the amount of the spousal resource allowance. The nonprofit Benefits in Action may be another source of help. (Note that there is no CSRA for Regular Medicaid.)
Colorado Medicaid’s look-back rule
Colorado has a 60-month “look-back” period for Nursing Home Medicaid and Medicaid Waivers. This is the 5-year period that immediately precedes one’s date of application. During the look-back, Medicaid checks all asset transfers to ensure none were sold or gifted under fair market value. This includes asset transfers made by one’s spouse. The look-back rule is meant to discourage persons from gifting assets in order to meet Medicaid’s asset limit. Persons who violate this rule are penalized with a penalty period of Medicaid ineligibility. Note that the federal gift tax rule that allows gifting up to $17,000 per recipient without filing a gift tax return cannot be used to reduce assets for Medicaid eligibility purposes. It violates the 60-month look-back period. So when you can, plan far ahead on such actions.
Medical/functional need requirements in Colorado
As mentioned earlier, an applicant for Medicaid LTC assistance must have a bona fide medical need for long-term care. This is true for Nursing Home Medicaid and Medicaid Waivers. There may be additional eligibility requirements for some program benefits. As an example, for a Medicaid Waiver to cover the cost of home modifications, it may be required that one cannot safely live independently without modifications. For LTC services via the Regular Medicaid program, a functional need with the ADLs is required.
Qualifying for Colorado Medicaid When Over the Limits
If you are age 65 or older in Colorado and do not meet the Medicaid eligibility requirements described so far in this article, you may still be able to qualify for Medicaid LTC. Here are a number of possible ways.
Qualified Income Trusts (QITs) – These trusts allow Nursing Home Medicaid and Medicaid Waiver applicants with income over Medicaid’s limit to become income-eligible because Medicaid no longer counts income put into irrevocable Income Trusts toward the income limit. Irrevocable means the terms of the trust cannot be altered or canceled. These can be useful for individuals who are not married or whose non-applicant spouse’s income exceeds the MMMNA. Essentially, one’s “excess” income is directly deposited into the trust, in which a trustee is named, giving that individual legal control of the money. Colorado allows the Medicaid applicant to be the trustee if a successor trustee is also named. The funds, managed by the trustee, can be used only for very specific purposes, such as contributing toward the Medicaid recipient’s medical bills and care or contributing toward the cost of nursing home care or HCBS long-term care. IMPORTANT NOTE: Upon the death of the Medicaid participant or in the event of Medicaid disenrollment, the remainder of the funds in such a trust normally can be claimed by the state to offset its Medicaid costs.
Irrevocable Funeral Trusts – These are trusts set up for the purpose of paying for the Medicaid applicant’s funeral in advance. For applicants who have assets exceeding the countable limit, establishing an Irrevocable Funeral Trust (IFTs) can reduce their countable assets by up to $15,000 (or up to $30,000 for married couples). Irrevocable means that the terms of the trust cannot be changed or canceled. Setting up this type of trust also prevents one’s family from having to shoulder the financial burden of a funeral and burial. The process of establishing an Irrevocable Funeral Trust is fast, simple, and generally requires no legal fees. CAUTION: Be aware there are many other options available to pre-pay for a funeral that sound similar but aren’t Medicaid exempt.
Asset Spend-Down – Persons who have countable assets over Colorado Medicaid’s asset limit can become asset eligible by “spending down” excess assets. Note this is different from selling or gifting assets, which can violate the look-back rule. Legitimate spend-down can be devoted to things like home improvements (e.g., updating the heating/plumbing), home modifications (e.g., wheelchair ramps, roll-in showers, and stair lifts), vehicle modifications (e.g., wheelchair lifts, adaptive control devices), prepaying funeral and burial expenses, and paying off mortgage or credit card debt. When spending down, it is best to keep documentation of how the assets were spent as evidence the look-back period was not violated.
The American Council on Aging offers a Spend Down Calculator to assist persons in determining if they might have a spend-down, and if so, provide an estimate of the amount.
Medicaid Asset Protection Trusts – A Medicaid Asset Protection Trust (MAPT) is a type of irrevocable trust that protects assets from being counted toward Medicaid’s asset limit. These trusts also preserve assets for family and other loved ones as inheritance. Assets, which may include one’s home, are put into a trust and are no longer considered owned by the person who created the trust (the Medicaid applicant). IMPORTANT: While there is no limit as to the value of the assets that can be placed in this type of trust, a major shortcoming is that MAPTs can be a violation of Medicaid’s look-back period, which would trigger a period of ineligibility. So these trusts should only be utilized well in advance of the need for Medicaid LTC.
Medicaid Planning – The majority of persons who consider applying for Medicaid are over-income and/or over-asset, but many still cannot afford their cost of LTC. Medicaid planning exists for these individuals. By working with a Medicaid Planning Professional, families can employ a variety of strategies to help them become Medicaid eligible., as well as to protect their home from Medicaid’s Estate Recovery Program (MERP). The ACOA offers an online questionnaire to help you Connect with a Medicaid planner. You can also check with Health First Colorado (https://www.healthfirstcolorado.com/).
A few less common strategies for handling Colorado Medicaid
The following are additional strategies that may help someone in becoming eligible for Colorado Medicaid, but these are less frequently used and come with important cautions.
Medicaid Compliant Annuities – For married couples in which only one spouse applies for Nursing Home Medicaid or a HCBS Medicaid Waiver, a Medicaid Compliant Annuity may be a good option. This planning technique turns countable assets into non-countable income for the non-applicant/healthy spouse. For this strategy, a lump sum of money is paid to an insurance company, which in turn will pay the healthy spouse a monthly payment. These annuities must be irrevocable, must be immediate (payments start right away), and the monthly payments must not exceed the life expectancy of the recipient. For single applicants, a Medicaid Compliant Annuity is also a possibility. However, the income generated from this kind of annuity is counted toward Medicaid’s income limit. So this is not always the best option.
Medicaid divorces – A Medicaid divorce is the legal termination of a marriage of a couple in which only one spouse applies for Medicaid LTC. This strategy protects assets for the non-applicant spouse and lowers the countable assets of the applicant spouse. However, since the establishment of spousal asset transfers (discussed above), Medicaid divorces are not nearly as common. This is because the Community Spouse Resource Allowance (CSRA) allows the non-applicant spouse to retain a higher portion of the couple’s assets, preventing spousal impoverishment. This strategy is complicated; professional consulting is advised. An experienced attorney in elder law and divorce would be a good source to consider.
“Half a Loaf” strategy – This strategy has the aim of lowering a Medicaid applicant’s assets, while preserving assets for loved ones as an inheritance. But it does violate Medicaid’s look-back period, so it triggers Medicaid ineligibility for a specific period of time. The idea behind this strategy is that with advanced planning, the Medicaid applicant has the funds to pay for long-term care until the period of ineligibility is over. A Medicaid applicant would give approximately one-half of their assets to family and then purchase a Medicaid Compliant Annuity with the remaining assets. This annuity creates an income stream, which is used to pay for long-term care during the Medicaid ineligibility period. This strategy is considered very complicated and professional assistance is highly recommended.
Home protection strategies
As this article has shown, there are many income and asset planning techniques used to qualify for Medicaid LTC when one is over the eligibility limits. There are also planning techniques available to protect one’s home from Medicaid’s Estate Recovery Program (MERP). One technique mentioned earlier is placing the home in a Medicaid Asset Protection Trust. Here are two more techniques.
Child caregiver exception – The child caregiver exception allows Medicaid applicants to transfer their home to their healthy adult child. The child must have lived with their aging parent for a minimum of 2 years immediately prior to the parent’s nursing home admittance. The child must have provided a level of care that prevented the parent from requiring nursing home care during this time. Take care to confirm these and other stipulations so that utilizing this exception does not violate Medicaid’s look-back rule.
Sibling exception – The sibling exception permits Medicaid applicants to transfer their home to a sibling who also has equity interest in their home. This means the sibling shares ownership of the home. The sibling must have lived in the home for a minimum of 1 year immediately preceding the institutionalization (i.e., nursing home placement) of the sibling applying for Medicaid. Transferring the home protects it from MERP and instead preserves it for one’s sibling. Prior to transferring the home to a sibling, it is crucial that all state-specific criteria for the sibling exemption be met. So again, take care to be sure all criteria are met in order not to violate Medicaid’s look-back rule.
Two Specific Colorado Medicaid Programs to Keep in Mind
Elderly, Blind and Disabled Medicaid Waiver – Provides services to disabled individuals and seniors living at home and in assisted living facilities to promote independent living and prevent premature nursing home placements. Assistance may include adult day care, personal care assistance, home modifications, personal emergency response systems, and more. There are two available options for one to self-direct their own care, both of which allow a program participant to hire the caregiver of their choice. These options are Consumer-Directed Attendant Support Services (CDASS) and In-Home Support Services (IHSS). See more on this in our AgeWise Colorado article at https://agewisecolorado.org/blog/consumer-directed-care-assistance-for-colorado-seniors-and-caregivers/.
Program of All-Inclusive Care for the Elderly (PACE) – Combines the benefits of Medicaid, including long-term care services, and Medicare into one program. PACE is operated by Health First Colorado and Medicare. The program provides comprehensive medical and social services to certain frail individuals 55 years of age and older. The goal of PACE is to help individuals live and stay in their homes and communities through comprehensive care coordination. For more information on the PACE program, including eligibility qualifications, benefits and services, the costs associated with PACE, and how to apply for PACE, please refer to the Colorado Department of Health Care Policy & Financing PACE web page.
How to Apply for Colorado Medicaid
For additional information about Colorado’s Medicaid programs, or to apply, contact your county’s Human Services office. Find these offices at https://cdhs.colorado.gov/contact-your-county. You can also call the Colorado Department of Human Services at 1-303-866-5700. Another option is to apply online at Health First Colorado (https://www.healthfirstcolorado.com/).
Additionally, your local Single Entry Point Agency may be able to provide assistance with applying for Medicaid. These can be located by county in Colorado at https://hcpf.colorado.gov/single-entry-point-agencies#ALTSS.
You may also be able to obtain assistance from your Area Agency on Aging (AAA), not so much directly but by having the AAA refer you to sources of help they are familiar with. Colorado’s AAAs are AgeWise Colorado Providers. You can link to them at https://agewisecolorado.org/aging-advocacy/area-agencies-on-aging/.
And, finally . . .
While not all of the planning techniques described in this article require professional Medicaid assistance, persons in doubt of the Medicaid rules should strongly consider talking with a Medicaid planner. The application process can be complicated, and assistance with the process may be welcomed. Incorrectly implementing a planning strategy can result in unknowingly violating Medicaid’s look-back rule, resulting in a Medicaid ineligibility period, or making other key miscues. Once again, the ACOA offers help in finding Medicaid planners at Connect with a Medicaid planner. In addition, these sites list what they call “top rated” Medicaid lawyers in Colorado, searchable by city or county: https://www.lawyers.com/medicare-and-medicaid/colorado/find-law-firms-by-city/ https://www.avvo.com/medicaid-medicare-lawyer/co.html