Navigating Medicaid for Dementia Care: What Families Need to Know

Navigating the U.S.’s federal and state health insurance program, Medicaid, to cover dementia-related long-term care can feel overwhelming, especially as the program differs widely from state to state. Medicaid planning expert Michael Guerrero helps families understand eligibility, apply for benefits, and plan ahead for care.

Guerrero, co-founder of a consultancy called Elder Care Resource Planning that helps families navigate Medicaid, has spent nearly a decade advising caregivers —- many supporting people living with dementia — through the Medicaid process. Through his firm, he works closely with his clients to develop compliant, cost-effective strategies for long-term care coverage. 

Guerrero’s team also reviews estate planning documents and helps families prepare the extensive financial documentation required to apply for benefits.

Guerrero joined Being Patient founder Deborah Kan for a conversation about how Medicaid works for long-term dementia care. He explained the key differences between Medicare and Medicaid, outlined the types of care covered, and discussed why benefits vary across states. 

Being Patient: Why is navigating Medicare and Medicaid so overwhelming?

Guerrero: The area is really complex. Many of us are caring for parents who are already on Medicaid, yet we don’t have Medicare or Medicaid at all because we’re still employed under 65. It’s an area [that many of us are] just not familiar with.

Being Patient: Is it still true that Medicare covers essential care for people 65 and older, but anything extra on top of it, like in-home support, requires Medicaid?

Guerrero: That’s basically correct. I like to say Medicare provides a backbone of medical services for anything from hospitalization, doctor visits, any other medical services or tests. Medicare generally starts for people at 65, and then they sometimes buy additional insurance on top of Medicare. 

What Medicare doesn’t cover is what they call long-term care. This is anything that’s considered non-medical: sitters, people staying with their loved one for the purpose of making sure that they’re safe or in a safe environment, or remembering to eat on time. It’s not what a doctor would have to order, but it’s very much necessary for those folks who are suffering from a type of dementia. Medicaid is one of the only significant public sources of money that will help you with the long-term care costs associated with dementia.

“Medicaid is one of the only significant public
sources of money that will help you with
the long-term care costs
associated with dementia.”

Being Patient: What is that threshold there? What do people need to qualify for Medicaid in terms of long-term care support?

Guerrero: Medicaid benefits start when you can show you’re financially absolutely in need. It’s really intended to be a last resort for families who are paying for long-term care but there are some significant differences. 

First of all, Medicaid is a federal program that is run by the states. There’s basically 51 different versions of Medicaid: [50 states plus Washington, D.C.]. There are different levels and different eligibility rules. In general, $2,000 is the asset limit for an unmarried individual. There’s allowances for your home [and] car, [and] there’s allowances for your spouse to hold on to a certain amount of cash outside the car and house. In some states, there’s also allowances for your tax-qualified retirement account to be treated as not a resource that you have to spend down. So that’s just the beginning of the financial complexity to somebody considering long-term care. It does involve a significant reduction in your available resources to qualify for Medicaid.

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Being Patient: When it comes to long-term care funded publicly through Medicare or Medicaid, what does that actually look like?

Guerrero: It’s a federal source of money. It’s a significant chunk of money that will pay for your care when you’re qualified, indefinitely. So that’s really a big commitment, especially for those who are suffering from dementia. Because, as you know, the need for long-term care when you have dementia is generally a lot longer than other types of long-term care cases. It’s an indefinite commitment, as long as you can annually certify that you meet the ongoing requirements, they will pay [for] everything that really is needed for your care, except for what you can provide through your income. 

Generally, the rule is Medicaid doesn’t pay for basic living expenses [such as] room and board, food, and electricity, but Medicaid does pay for things like sitters, significant care supplies, or medical equipment for the home, so that you can continue to live in an environment that’s most familiar for you. 

Being Patient: Are you making payments to the government? Is that the extra layer? Is it like private insurance, where you’re essentially saying, “I’m taking out a long-term care policy from the government,” and making payments toward future care?

Guerrero: That’s a good analogy, but it does fall apart. Long-term care benefits from Medicaid are [significantly] different from long-term care insurance. Long-term care insurance sometimes has unlimited policies but most of the policies have a lifetime cap. Medicaid is basically an unlimited commitment. For as long as you need it, they’ll support you. Now, your income goes to pay for what you need: room and board, rent, [and] food. If you’re in a facility, then it goes towards the facility, which is privately run but accepts Medicaid payments. You’re not paying the government per se, nor did you pay any premiums for Medicaid prior to qualifying for the benefits. It’s not like our Medicare, which we pay into for our working lives, and then we pay an additional premium during our retirement years. This is different. It’s a benefit that we all pay for through our tax dollars. It’s a tremendous program that provides essential long-term care. 

“Medicaid is basically an unlimited commitment. For as long as you need it, they’ll support you.”

Almost half of the money that goes to long-term care from Medicaid actually does not go to nursing homes. So a traditional way of thinking about Medicaid is that it’s there for the nursing home just in case we ever need a nursing home for long-term care. But Medicaid these days, in many states, is providing what we call community-based support: having people live in their home, independent living, PACE programs where they have health support in a centralized daycare facility, memory care, or assisted living. These are all considered community benefits. And many Medicaid dollars – about half of them, in fact – will flow to these types of services.

Being Patient: If you have a loved one in a nursing home for dementia care who’s there under Medicaid, what will happen to them if Medicaid gets slashed?

Guerrero: It’s a complicated question. At this point, it’s an unknown political question because we’re right in the middle of policymaking. Medicaid is a large program. I like to think of it as an umbrella program, meaning underneath it are other smaller programs, all referred to as Medicaid. Like the Children’s Health Insurance Program, the Obamacare expansion, the programs for working-age adults, disabled individuals, and the long-term care program. What Congress has been debating – and many of [these] are only proposals to date – is mostly focused on working-age adults. Rolling back the so-called Obamacare or Affordable Care Act expansions, and especially the commitments. We may see a reduction in that area or further work requirements. The commitments that the federal government and the state governments have to pay for long-term care have been a long-standing program. It was originally passed as new legislation under the Johnson administration. It’s been around for a long time, and that basic commitment would be a big change. Congress has acknowledged the essential services that Medicaid provides for long-term care. And the core of long-term care benefits from Medicaid is not being necessarily thrown away at this stage.

Being Patient: Does Medicaid pay for a family member to care for another family member?

Guerrero: Yeah, absolutely. There are many states and many programs within those state budgets for Medicaid that allow family members to be paid as the caregivers for qualified Medicaid beneficiaries under long-term care benefits. 

“There are many states and many programs
within those state budgets for Medicaid
that allow family members to be paid
as the caregivers for qualified Medicaid
beneficiaries under long-term care benefits.”

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Being patient: Would you say that’s the majority of states, or is that just a select few?

Guerrero: It’s hard to say precisely, but it’s very common that we see that the states have some way of paying a friend or a family member to provide that care, if it’s desired by the Medicaid beneficiary. There’s a bunch of terms that are related to this, like consumer-directed or beneficiary-directed care. It’s more often that we see spouses are not allowed to be the paid caregivers, but adult children or other family members are allowed to be paid caregivers.

Being Patient: Is there a playbook of how to navigate the system? I’m sure a lot of ears perked up when you said there is a way for family caregivers to get paid. How would anyone ever know if they qualify?

Guerrero: We’ve just released a very simple but effective tool to do a quick financial eligibility test for your state, for your situation, and for your income levels. It’s available at eldercareresourceplanning.org. We are a family-owned business; we are working nationally to try to educate people as much as possible. We offer a free consultation for anyone to speak with one of our consultants and help to diagnose their situation and help them through that pathway. It’s a bit of a maze; there are not just eligibility rules and their complicated functionings, but there are also all these questions about programs. What is the best program for me? How can it best match what we want? That 20-minute free consultation is a great way to get some of those questions answered.

Being Patient: Can you give us a scenario just to illustrate what you’re talking about? If a person has a household income of $100,000, for example, tell us how that works.

Guerrero: So there’s quite a few examples I’d have, but let’s pick [a state]. Speaking of policy changes, California has no asset limits for anyone who is looking to use Medi-Cal benefits and [is] 65 or older, they only look at income. Income in California is not a hard limit, but a sliding scale limit. It’s not [based on] household income, but just the income issued in their name. If it’s greater than 138 percent of the federal poverty level – currently that number for an individual is $1,800 – that means their fixed Social Security or pension or annuity incomes come up to more than that per month. They can participate in Medi-Cal benefits as long as they pay a portion of their income, called the share of cost, to the providers.

California’s a bit unusual because of the no asset limit. Currently, there is a proposal in the works to return to having an asset limit, so it’s a bit of an unusual state. But what we would look at is the goal of the family (home care, daycare, or memory care) and what’s available in their area, what’s available through the Medicaid program, and how best to get there.

Being Patient: Is there a difference in benefits if you’re considering home care versus memory care? Does Medicaid serve memory care better than it serves in-home care? Is there one that has more benefits than the other?

Guerrero: Each state is running different programs. When it comes to these community-based benefits, like memory care, home care, daycare programs, they’re all up to the states, whether they offer them or not. So you’ll have to look at each one of the states and whether they’re offered. 

“Each state is running different programs.
When it comes to these community-based
benefits, like memory care, home care, daycare
programs, they’re all up to the states,
whether they offer them or not.”

In almost all of the states, home care services in some form are available, but not in all states are the assisted living or memory care options available. It’s more common to see available home care benefits than you would see a residential facility like a memory care assisted living option. 

There are some states where those are options, like Colorado, New York, Indiana, and Illinois. [They have] supportive living programs where dementia care can be provided for. These assisted living [programs], though, are more complicated because they’re not available as commonly. The reason is [because] the reimbursement rates to the providers is very low. The providers are looking for ways in which they can attract new residents who are not going to be on public assistance, or at least not immediately on public assistance. So you would pay for a few years out of your own pocket, and then you can use Medicaid benefits in that facility. That’s more of a likely scenario in those facilities that accept Medicaid.

Being Patient: What do people have to do to apply for these benefits? What’s the process?

Guerrero: All states have some sort of form, whether it’s paper or online. Long-term care is different because they have something called a five-year look-back. Because of the strict asset limits for these valuable long-term care benefits, the government set up these rules where it said you can’t immediately qualify for long-term care benefits if you gave money away in the five years preceding your application.

We’re also responsible as applicants or applicants’ representatives in preparing comprehensive financial documentation for all five years to show the caseworker that no money was ever given away during that period. Now, you can imagine that someone in their 70s or 80s might have four or five accounts at different financial institutions, a retirement account. So you have 60 months of five or six different accounts just to get started for somebody who’s an average case.

Being Patient:  When you say “giving away,” what is it exactly? What do you mean?

Guerrero: The five-year look-back is one of these areas where Medicaid is famous. It’s almost because it’s punitive in a way. The Medicaid rules are really harsh. They say you’ve got to qualify with the asset limit. If you gave away money, then what does that mean? Well, then the caseworker has to follow a mathematical formula and calculate how many days or months or years that gift represents.

Being Patient: Is an example of giving away something like a grandparent paying for their grandchild’s education? Would you be penalized for something like that?

Guerrero: Yeah, absolutely. What you would need to do in a case like that is you would need to go through extensive documentation to show the caseworker [and] to prove to Medicaid that the gift was done for some reason other than qualifying for Medicaid. Of course, your granddaughter or grandson’s education should be self-explanatory, but it’s not. You have to explain yourself as part of this application.

Being Patient: What are the top three things people need to do to prepare?

Guerrero: If you can do anything to prepare, make sure that you empower somebody with a durable power of attorney, and make sure that durable power of attorney has broad enough powers, including gifting powers and powers to establish a trust, because many times trusts are necessary as part of your application process.

Also, be clear about what your expectations are in terms of the type and the environment for your care, so that your family knows that. Make your financial records as accessible or transparent as they can be to somebody other than yourself. Keep files with account numbers so that a person can step in and facilitate the process of accessing benefits.

Being Patient: What is a normal expectation from time to application to approval?

Guerrero: From data submission to data decision, it’s generally about three months or 90 days. [It also depends] on the type of facility. If it’s a nursing home, and you expected that you were financially eligible when you applied, then the nursing home should be covered for those 90 days while you were waiting for a decision. 

If it’s some other type of community benefit like home care or assisted living, then generally the rule is, during that pending period, you’re not going to get any financial assistance. You will start to get financial assistance if you’re working with or enrolled in a Medicaid provider once you have the approval on hand after three or four months.