Medicaid Planning with Long-Term Care
For some reason, most of us do not like to think about the future and what might happen. Yet, many of us are experiencing the realities of elder family members needing extensive long term or nursing home care, right now! This should inspire you to act now and prepare for your future long term care expenses. The cost for long-term nursing home care can be devastating to a family’s financial resources. Protect your resources with a Medicaid plan.
The average nursing home cost in Michigan in the year 2006 is $5,500.00 per month. Therefore, many people are concerned with paying for the costs of nursing home care should they or a family member need it. Medicare pays for nursing home care in certain circumstances and for a limited period of time. Most health insurance policies do not cover any long term care.
Deficit Reduction Act Notice
The Deficit Reduction Act of 2005, signed into law on February 8, 2006, contained significant changes to the Medicaid eligibility rules. Special care in record keeping is needed for any person who may need nursing home assistance in the next five years.
The manner in which divestment penalties are assessed has changed. Any Medicaid applicant who has given resources away will be ineligible for Medicaid nursing home assistance by the amount of time that resource would have paid for nursing home care.
The Deficit Reduction Act of 2005 did retain important protections for the spouse and disabled children of the nursing home resident. Family members who once gratuitously assisted a loved one, may now have a stronger reason to be paid for their care.
It is now more important than ever to consult with a knowledgeable Elder Law attorney if you anticipate a spouse or parent may need nursing home care in the not so distant future. Remember, earlier is better than later, but late planning is better than no planning at all.
Eligibility Requirements
Medicaid is often the only assistance program available to help pay for nursing home care. However, Medicaid will only pay for the costs of nursing home care if the patient is impoverished. The Medicaid eligibility rules define what assets must be included and what may be excluded. The rules also address what married couples may keep so that one spouse will qualify for Medicaid without also completely impoverishing the spouse living in the community.
There are primarily four requirements in order for Medicaid to pay nursing home costs.
- Non Financial Requirements: A person must be at least 65 years of age, blind or disabled, and be a U.S. citizen or a resident alien.
- Medical Necessity: The applicant must meet the medical eligibility requirement for Medicaid.
- Income: Monthly income cannot exceed costs of long term care and other medical expenses.
- Asset Eligibility: The maximum in assets a person may own is $2,000.00 subject to many exceptions. A person should not think that if their amount of assets greatly exceeds $2,000.00 that nothing can be done. There is usually an array of techniques available for legally preserving assets without losing it all. The base amount for both spouses entering a nursing home and applying for Medicaid is $3,000.00, also subject to many exceptions.
Spousal Impoverishment
A typical spousal impoverishment case is one in which one spouse is headed for the nursing home and the other will remain in the community. The community spouse is entitled to a certain level of asset protection which at the minimum is $19,920 and the maximum is $99,600 for the year 2006.
The amount the community spouse is allowed to keep is known as the Protected Spousal Amount (PSA). However, what many individuals going through the Medicaid process do not discover is that there are federal regulations and state rules that can be utilized to preserve in many, if not most, cases a significant amount of assets for the community spouse which far exceeds the published maximum stated above.
Spending Down
Spending down is a phrase that is used to describe the process of spending one’s assets in order to become eligible for Medicaid by bringing the countable resources below the $2,000.00 limit of assets allowed.
Spending down should only be done in an informed manner. Otherwise, money may be needlessly spent on goods or services that could be preserved.
Penalty Period
A penalty period may result when a resource is transferred out of the patient’s control within 60 months from the date of the Medicaid Application. This is called "divestment" and Medicaid will not pay for the costs of long term care during the penalty period. Divestment can occur whenever property is given away, a name is taken off a bank account, or a name is placed on a deed.
Divestment should only be done in an informed manner. Some divestment may leave the patient without any funds and without any way to pay for nursing home costs. The Deficit Reduction Act of 2005 drastically changed the manner in which divestment penalties are calculated. The new law can cause severe Medicaid penalties against anyone who has given resources away after February 7, 2006.
You should begin planning for Medicaid as soon as possible, to take advantage of all options available. An experienced elder law lawyer will explain how, through trusts, title changes, and gifting, you may be able to pass on some of your estate to your heirs before you qualify for Medicaid. Other Medicaid trusts are designed to preserve assets for your quality of life while you are receiving government benefits. You do not necessarily have to spend down as quickly as it seems.
Additional Information To Assit You
P. Mark Accettura has written a comprehensive book on the subject of Medicaid and Long Term Care: Medicaid and Long Term Care in Michigan. Getting good care without going broke.
Accettura & Hurwitz Attorneys and Counselors are experienced in Medicaid Planning and Long Term Care plans to help you avoid the many financial pitfalls associated with Long Term Care. Contact us today!