Medicaid pays for about 70% of long-term nursing home or in-home nursing care in America. However, many people find they have to spend much or all of their savings before Medicaid will begin paying.
Eligibility for Medicaid benefits to pay for long-term care is based on a number of criteria, which can be categorized as non-financial criteria and financial criteria.
- Age 65 and over, or blind or disabled
- A U.S. citizen or lawfully admitted alien or refugee
- “Medical necessity” to be in a nursing home
Medical necessity is determined after an evaluation by a nurse employed by the state. In Oklahoma, Medicaid benefits are available for in-home care through the ADvantage Waiver Program.
Financial eligibility for Medicaid looks at three categories:
- transfers of assets
A Medicaid applicant who is unmarried must have less than $2,000 of countable assets. Certain assets are exempt, but examples of countable assets include cash, bank accounts, investment accounts such as stocks and bonds, CD’s, annuities, land, rental properties, mineral interest and some vehicles. Your residence is generally not countable as a resource, but it is subject to estate recovery, discussed below.
Adding other people to bank accounts or other investments will generally not change the nature of the assets and in some cases, can even make it more complicated to qualify for Medicaid.
Monthly income must be less than $2,199 and is based on the gross amount. It usually follows the “name on the check” rule, meaning it counts as income of the person named on the check.
There are a number of ways that you can protect your assets and income, and a plan should take into account your unique situation and desires. Planning for married couples is especially involved due to the complex rules regarding income and assets of a married couple. When doing planning for a married couple, our focus is on maximizing income and retained assets of the non-institutionalized spouse.
One of the most important parts of planning is protecting a spouse against losing the couple’s assets or a drastic reduction in income.
Medicaid eligibility involves a five-year look-back period, meaning any transfer of assets for less than fair market value will be included as countable assets, even if the applicant is no longer able to access the transferred assets. What this means is that outright gifts, deeding property, and other ways people try to avoid probate or qualify for benefits will not help, and may hurt your eligibility. Without careful legal planning, applying for Medicaid benefits before the end of the look-back period can have disastrous financial consequences.
Important to note: During the application process, Medicaid will review your previous five years of bank transactions, tax returns, and transfers of assets. Remember, the case worker’s job is to ensure the applicant meets the legal criteria, and the burden of proving that is on the applicant.
Unfortunately, it is not uncommon for an elderly person to gift or deed property to a child, and then through a divorce, a lawsuit, or simply bad management, the asset is lost. If nursing care is needed before five years passes, Medicaid will count that asset as though the applicant still owns and controls it, creating a difficult financial situation for the applicant and their family.
The transfer of assets during the look-back period creates a “penalty period.” The penalty period is a calculation of the time the applicant will be required to private pay before Medicaid will begin paying any costs. Medicaid uses a formula to determine the length of the penalty period, but generally speaking, if a nursing home costs $60,000 a year and you give away $60,000, the penalty period will be one year that the you will have to private pay before Medicaid begins paying.
In some cases, legal techniques can help remedy a transfer and avoid a penalty, while still allowing the family to protect some of the assets.
The best planning to protect your assets and income should be done five years before nursing care may be needed. In such cases, it is not uncommon to protect the majority or even all of a person’s assets. But even if a person is already in a nursing home or nursing home care is imminent, there are still planning options to protect some of the person’s assets from the nursing home.
Do not assume that a complete “spend down” is your only option until after consulting an elder law attorney.
Due to federal law and state budget issues, states are getting more aggressive in their “estate recovery” efforts. What this means is that the state can go after the assets of a person who has received Medicaid benefits to try to recover the costs the state has incurred. Most frequently, this occurs after death, but can also be during the person’s lifetime.
In many cases, after a person has been in a nursing home for 12 months, Medicaid can file a lien against their home and will be entitled to repayment from the home sale proceeds. Any property remaining in the estate of the Medicaid recipient, even if “exempt” under the asset rules, is at risk, together with property that was gifted or passed by some other legal means. Estate recovery can be an ugly surprise for the heirs of a Medicaid recipient, and must be part of any Medicaid planning.
This type of planning is the focus of The Elder Care Law Center. Please contact us or call (405) 435-9700 to schedule a consultation.