00:00:00
Michelle Dexter: Well, good afternoon everyone. I hope that you can all hear me okay, and I’m so thankful that you are giving us some of your time this afternoon. My name is Michelle Dexter. I am an attorney here with Keystone Law Firm. We practice estate planning, trust administration, probate, guardianships, and conservatorships. We have also done long-term care planning with irrevocable trusts, Miller Trusts, and those types of things in the past.
We wanted to do this presentation today on Medicaid because more and more of our clientele are running into issues where they’re looking for additional caretaking, assisted living, or skilled living places, and obviously, we’re all worried about the costs of those things. Today’s presentation is intended to share information about Medicaid: what it provides, how you qualify, and some of the strategies available based on individual circumstances. We want to show how people can work with the strategies that ALTCS allows to get qualified because I know a lot of people look at the rules and just think, “Oh, I’m never going to qualify.” End of story.
00:07:07
Michelle Dexter: That often causes a lot of stress. We want to make sure people are aware of what ALTCS provides. To clarify, Medicaid and ALTCS really are the same thing. ALTCS is Arizona’s Long-Term Care System, which is Arizona’s version of the Medicaid program. You might hear me refer to ALTCS or Medicaid interchangeably.
Every state operates its own Medicaid program, and the rules can vary. For example, here in Arizona, we have a five-year look-back period, while some other states have a three-year look-back period. These are things to keep in mind if you or a family member are looking to qualify in another state. The main qualifications we look for are:
Age
U.S. Citizenship
Medical Qualifications
Income and Assets
What ALTCS Provides
00:08:12
Michelle Dexter: So, what does ALTCS provide? It covers payment for skilled and assisted living facilities, as well as home and community-based services. This might include a facility providing services or having someone come into your home for a few hours a week. It also includes medical services, therapies, equipment, dental care, care coordination, and some hospice care.
When you apply for ALTCS, they have a couple of different medical plans, and you are asked to choose one. I often see people on Facebook or community boards asking which one is better. I highly recommend looking at the facilities you are interested in and finding out which medical plans they accept. At the end of the day, that is the most important factor.
00:09:35
Michelle Dexter: Not every assisted living facility accepts ALTCS. You have to find out which facilities accept the program and then determine which medical plan they accept. It is helpful to do that research in advance.
Age and Citizenship Requirements
Michelle Dexter: Regarding age requirements: here in Arizona, we have the AHCCCS program, which is usually for individuals under the age of 65. That is a health insurance program for those who meet certain income requirements. ALTCS is primarily for individuals over 65. If you are under 65, qualifying for ALTCS requires a serious level of disability, such as blindness or a qualifying physical, developmental, or mental disability.
00:10:56
Michelle Dexter: Regarding U.S. citizenship: citizens have immediate eligibility. Green card holders have a five-year wait from the time they entered with a qualified status. For other qualified non-citizens, wait times vary. Undocumented immigrants are not eligible for these benefits.
Medical Qualifications and “ADLs”
Michelle Dexter: Medical qualification can be a bit more discretionary. If your loved one is already placed in an assisted living facility, the medical qualification generally happens relatively quickly and easily. However, I was talking to a friend at the Agency on Aging who mentioned that ALTCS is making medical qualifications a bit more difficult lately, likely because so many people are applying.
00:12:04
Michelle Dexter: If your family member is not currently in a facility, maintaining good records prior to the application is vital. You want to document hospital visits, falls, or any injuries that did not require a hospital visit. This documentation helps the evaluator see a bigger picture beyond the 30-minute evaluation.
You should also track their ability to perform “Activities of Daily Living,” or ADLs. There is a list of about 60 items they check. Can they make their own food? Can they drive or grocery shop?
00:13:03
Michelle Dexter: Can they bathe, feed, or dress themselves? For those who have experience with Alzheimer’s or dementia, you know that patients can often “fake it” during a short conversation. They might tell an evaluator they can feed themselves while you’re in the background knowing they haven’t been able to do that in years. You need to provide the information necessary to demonstrate that the medical need is truly there.
Income Requirements and the Miller Trust
00:14:02
Michelle Dexter: Income is one of the first places where we can use creative strategies. The income limit goes up slightly every year. This year, it increased by $81. Currently, an individual can have $2,982 in monthly income. This includes Social Security, pensions, and IRA distributions. If your income exceeds that $2,982 amount, you will likely need a Miller Trust (also known as an Income-Only Trust).
00:15:04
Michelle Dexter: People often see that their income is over the limit and give up, but that is where we discuss options like the Miller Trust. If you are a married couple and only one spouse needs assistance, we can use “Name on the Check” rules. If my husband needs care but the majority of the income is in my name, he may still qualify because they can separate our incomes.
00:16:12
Michelle Dexter: Another alternative is a 50/50 division of community income, where we combine all income and split it down the middle to see if the applicant falls within the guidelines. If a married couple both need assistance, the combined income limit is $5,964.
Case Example: Sally and the Miller Trust
Michelle Dexter: Let’s look at an example. If “Sally” has a total income of $4,500 from Social Security, a pension, and RMDs, she is over the limit. Some sources, like IRAs, can be adjusted by reducing distributions. However, Social Security and pensions have no flexibility.
00:17:24
Michelle Dexter: When income exceeds the limit, an Income-Only Trust (Miller Trust) is the appropriate vehicle. The name comes from a specific legal case, but it’s also called a Qualified Income Trust.
00:18:28
Michelle Dexter: When we create a Miller Trust, the gross income is deposited into a trust account. This must be the gross amount—no deductions for life insurance or other benefits can be pulled out beforehand. From there, ALTCS determines the “share of cost.” They allow a personal needs allowance (currently around $200 a month) for things like haircuts or clothes, and Medicare costs also come out of that.
00:19:36
Michelle Dexter: Any money left in that trust account at the time the beneficiary passes away is subject to Medicaid reimbursement. This means if the state spent $100,000 on care and the trust has $5,000 left, the state takes that $5,000.
00:20:49
Michelle Dexter: Managing a Miller Trust requires strict compliance regarding timing, deposits, and accounting. Not every bank understands what a Miller Trust is. We typically have to send clients to specific branches where the staff is trained on these accounts. It can be stressful to set up while you are also trying to qualify for benefits, but it is worthwhile.
Spousal Income Strategies
00:21:52
Michelle Dexter: Now, let’s look at a couple where only one spouse needs benefits. Using “Name on the Check,” if the husband earns $5,000 and the wife earns $2,500, and the wife needs care, the husband keeps his $5,000. The wife’s $2,500 goes toward her care.
00:23:04
Michelle Dexter: This is beneficial because the “healthy spouse” (community spouse) doesn’t have an income cap on money in their own name. We want to ensure the healthy spouse can maintain their standard of living.
00:24:17
Michelle Dexter: ALTCS also has a Minimum Monthly Maintenance Needs Allowance (MMMNA). The healthy spouse is entitled to a minimum monthly income of roughly $2,643, up to a maximum of $4,066. If the healthy spouse’s own income is very low, they can receive an “income shift” from the spouse receiving benefits to reach that minimum.
Resource Limits and the Primary Residence
00:26:35
Michelle Dexter: The resource limit is $2,000 per person. This sounds low, but the goal of the program is not to provide benefits to those who can pay for care themselves. However, there are “non-countable” resources. Your primary home and your first vehicle generally do not count toward that $2,000 limit.
00:27:55
Michelle Dexter: A major catch is that Arizona is an “estate recovery” state. While they might not count your house for eligibility, they can put a lien on it. When you pass away or sell the house, the state seeks reimbursement for the cost of your care. If a healthy spouse is still living in the home, ALTCS typically does not place a lien, but there is no guarantee that the house won’t eventually be subject to recovery if the healthy spouse passes away.
00:29:06
Michelle Dexter: We suggest taking steps after qualification, such as using a trust or a specific type of deed, to try and avoid probate and protect the home from recovery.
Countable vs. Non-Countable Resources
Michelle Dexter: That $2,000 limit has not been raised in the nine years I’ve been doing this. Countable resources include bank accounts, brokerage accounts, second homes, and the cash surrender value of life insurance policies.
00:30:11
Michelle Dexter: For a married couple, the healthy spouse can keep a minimum of $32,532 and a maximum of $162,660 in resources. Resources are counted at the time of application. If a couple has $100,000, they are each considered to have $50,000. The healthy spouse keeps their $50,000, but the spouse needing care must “spend down” their $50,000 until they reach the $2,000 limit.
The Five-Year Look-Back and Penalties
00:31:32
Michelle Dexter: Arizona has a five-year look-back period. They will request bank statements for the five years prior to your application and ask about specific transactions, like a $200 cash withdrawal. It’s helpful to have these records organized in advance.
Any transfer made without receiving fair value in return—such as giving away a car, jewelry, or money—is considered a gift and triggers a penalty.
00:32:32
Michelle Dexter: They divide the gifted amount by the average monthly cost of care (the “divisor”). If you gave away $50,000 and the divisor is $10,000, you would have a five-month penalty period where you must self-pay before Medicaid steps in.
00:33:45
Michelle Dexter: If you are managing finances for a parent with dementia and cannot explain past transactions, ALTCS is sometimes gracious, but you must do your best to show when you took over and what you know.
Pre-Planning vs. Crisis Planning
00:34:52
Michelle Dexter: Pre-planning is best if you have more than five years before you need benefits. This allows for the use of irrevocable trusts to protect assets. “Crisis planning” is when you need benefits in less than five years. This often involves strategic gifting where you protect half of the assets and use the other half to pay through the penalty period.
Allowable Spend-Down Expenses
00:35:51
Michelle Dexter: If you need to spend down money to qualify, allowable expenditures include:
Paying off debts (mortgages, credit cards, personal loans).
Home renovations that allow you to age in place (ADA compliance, zero-entry showers).
Personal service contracts (hiring someone for in-home care).
00:37:21 Irrevocable burial and cremation contracts (up to $9,000).
00:38:54 Purchasing an exempt vehicle (e.g., trading in old cars for one new, reliable, or handicap-accessible vehicle).
Irrevocable Trusts and Long-Term Care Insurance
00:40:43
Michelle Dexter: Long-term care insurance can be a great option if started early, though premiums have increased over the years. When pre-planning with five years to spare, an irrevocable trust is often the best way to protect a home or brokerage accounts. You continue to live in the home, but because it is in the irrevocable trust, it is protected from Medicaid recovery.
The Child Caregiver Exception
00:44:59
Michelle Dexter: There is a federal law that says if your child has lived in your home and provided caretaking duties for at least two years—preventing you from needing a facility sooner—you may be able to transfer the house to them without a penalty.
00:46:13
Michelle Dexter: I haven’t seen this used often, and I usually prefer using an irrevocable trust because the child doesn’t get a “stepped-up basis” for tax purposes if the house is transferred this way while you are alive.
Final Thoughts and Resources
00:51:30
Michelle Dexter: For Maricopa, Pima, and Pinal counties, the divisor for penalties is currently $8,666 per month. For all other counties, it is $8,132.
00:52:39
Michelle Dexter: You can also sometimes pay a child or spouse to be a caregiver through ALTCS, though they must get licensed and the pay is not very high. Be careful, as being a full-time caregiver can be a financial detriment to the child’s own career and retirement planning.
00:54:41
Michelle Dexter: We are at the end of the presentation. We have resources on our Keystone YouTube channel, and the Area Agency on Aging and ahcccs.gov are also great resources. We believe education is the key to having the right documents in place. Estate planning documents are evolving; they should be reviewed annually and updated at least every five years.
00:56:53
Francisco Sirvent: (Audio issues resolved) I just wanted to give everyone one last chance to hear about our “Intro to Wills and Trusts” webinar this Friday at noon. I’ll post the link in the chat. We’ll go over the basics: probate, the difference between a will and a trust, powers of attorney, and healthcare documents. These topics are general enough to be applicable anywhere in the country.
Transcription ended after 00:59:08
