Question: My mother is a widow and she lives with me. She has an IRA with $10,000 and about $2,000 in her checking account. Her only income is $1050 per month from Social Security. She is being placed in a nursing home and I am told that she will have to take monthly distributions from her IRA and pay those distributions and her Social Security to the facility. She may only keep $50.00 per month allowance from her income. This does not seem fair. Isn’t her IRA protected? Why does she have to spend some of her IRA each month for her care?

Answer: The question you ask is interesting. As you may know, when an applicant applies for Medicaid, the agency looks at income and resources. Resources are the total amount of assets in an applicant’s name, as opposed to income, like social security, which is paid to the applicant each month. You indicate that she has a total of $12,000 in resources- her IRA and her checking account. Under Medicaid regulations, she may keep a total of $15,900.00 (2021). This is her resource allowance. From her income of $1,050, she may keep $50. She does not have to take monthly distributions from her IRA as income.

The confusion has to do with protecting IRA accounts when an applicant applies for chronic care Medicaid. Generally, we tell clients that the IRA does not have to be spent down and used for their care, provided the applicant is taking the required minimum distribution (in accordance with the Agency’s life expectancy tables) in twelve equal monthly distributions. If they satisfy that criteria, then the rest of the IRA, no matter what amount, will not be counted as a resource and need not be spent down. This is a means of protecting the IRA by converting it from an asset into an income stream.

I had a similar situation to the facts you present and the Agency found that the applicant was not eligible for Medicaid because he failed to take his monthly distribution and therefore did not pursue all means of income. I took the case to fair hearing and lost before the administrative law judge. Thereafter, I brought an action in Supreme Court challenging that fair hearing decision, known as an Article 78 proceeding. After two years, we won the case. The Court held that since the IRA amount was under the resource allowance limit, the entire IRA was protected and there was no requirement for the applicant to take the monthly distributions.