Ask Rob

Q: How does repayment of debt affect a Medicaid application?

A: The answer to this depends upon the type of debt and when the repayment is made. Any payment toward a debt that is documented in writing should be OK. Paying down a debt that is not contractual (like a loan from a friend or family member that has not been memorialized in writing) will likely be problematic.

The type of debt and timing are critical as well in how Medicaid will view the loan repayment. In Pennsylvania someone can seek Medicaid nursing home benefits up to 3 months prior to the date the application is submitted. However, if someone is seeking retroactive benefits, paying off certain debts will move the effective date forward and some will not, potentially creating a period of non-coverage. If you file an application for Medicaid nursing home benefits on April 1 and are seeking benefits to start on the previous January 1, you need to have spent down your assets and be eligible as of January 1. If as part of the spend down you paid a doctor’s bill or other medical expense on January 22, it will not affect the requested effective date of January 1. However, if you spent $15,000.00 reducing the balance on your home equity loan on February 1, it is presumed that spend down was complete on February 1 and there will be a period of non-coverage of one month. Spending money to fix up your home is an approved expense as long as you are not seeking retroactive benefits, the same as paying the doctor, but it is treated differently for spend down purposes. The lesson is to make sure non-medical expenses are paid as soon as possible (best with cashiers or bank checks that are removed from the account that day) as spend down will not be complete until all non-medical expenses have been paid.