Based on
a September 2011 poll, conducted by NPR, the Robert Wood Johnson Foundation,
and the Harvard School of Public Health, less than 5% of adults considered
Medicaid when asked how they would pay for long-term elder care. This
stunningly low number sheds light on the fact that while people are living
longer and are more aware of the potential need for long-term care as they age,
they are unaware of an important method of paying for that care.
Medicaid
is a federal program, administered by the states, that pays for nursing home
care for individuals who meet the program’s medical, income, and asset
requirements. The current average yearly cost of nursing home care in Michigan
exceeds $85,000 for a private room. At that rate, even a period of two to three
years will deplete the savings of the average person, leaving any surviving
spouse with little money to use for their own care. If however, an individual
is eligible for Medicaid benefits, the program covers the majority of that
cost. The phrase "Medicaid Planning" has become a catchall for the
methods used to allow an individual to qualify for Medicaid benefits, while
preserving a greater portion of their assets for the well-being of their loved
ones.
As a
potential applicant contemplates whether to engage in Medicaid planning it is
important to consider to consequences and benefits of qualifying for Medicaid.
The largest benefit is the applicant’s assets are not consumed by years of
expensive medical bills. For a married couple, this insures that the spouse who
is not in need of nursing home care has the assets to provide for their own
needs. For a single applicant, Medicaid Planning can result in more of the
applicant’s assets being passed on to their loved ones.
The
consequences of qualifying for Medicaid include the need to leave a home and
reside in a nursing home. When faced with that reality, many potential applicants
realize that staying in their own home is more important than passing assets to
their children. A second often forgotten consequence is that while Medicaid
pays for a great deal, if an applicant needs to spend assets in order to
qualify for Medicaid, those assets are not available if they are needed for
some reason in the future.
Applying
for Medicaid benefits is not something to engage in lightly, especially for
potential applicants who presently have significant assets, which they could use
to pay for care. Proper Medicaid planning is more than spending, giving away,
or attempting to protect assets to reach Medicaid’s eligibility requirements.
The rules governing Medicaid eligibility consider more than a person’s present
financial condition and impose a penalty period of Medicaid ineligibility if the
applicant divests wealth to become eligible for Medicaid. The Department of
Human Services (DHS) "looks back" 60 months from the date of a
person’s application for benefits to determine if that person has given away
assets that would impose a penalty on eligibility. There are however ways to
spend down assets legally to reach the eligibility threshold.
The first
and easiest method requires the client to own a home. DHS considers a single
home an exempted asset when determining whether a person meets the asset
threshold for Medicaid benefits. The personal property within that home is also
exempt. Therefore, a person can pay off mortgages, make necessary repairs, make
improvements to the home to increase its value, and purchase new furnishings.
All of these techniques are especially useful if one spouse of a married couple
needs to take advantage of Medicaid. In addition to the home and personal
property, a single car is an exempt asset, this is true even if the applicant
never drives the car. Another item that DHS classifies as an exempt asset when
determining eligibility for Medicaid, as a pre-paid funeral contract. While
many people find it difficult to even think about planning their own funeral,
but by taking the time to make those decisions that will eventually become
necessary, a Medicaid applicant can both ease the burden on their love ones
after their death and remove assets to help qualified for Medicaid.
While
spending down assets is a viable method of reaching the Medicaid eligibility
threshold when an applicant has few assets, there are times when an applicant
desires to qualify for Medicaid, frequently because they are aware that their
condition is likely to be prolonged and expensive, leaving them with nothing to
pass on to their loved ones, that require more advanced planning.
While it
is possible to engage in planning that will assist a potential applicant in
becoming Medicaid eligible, the scope of that planning varies greatly based
upon the applicant’s present circumstances. Different methods are used when the
applicant has a living spouse who is not in need of Medicaid benefits than
would be used for a widowed applicant. Furthermore, in a situation where both
spouses will potentially require substantial long-term care, still other
methods can assist in preserving more assets to pass on to beneficiaries. The
complexity of this advanced planning makes it unsuitable to discuss at length
in this forum. In addition, potential applicants are cautioned not to attempt
such advanced planning without consulting an attorney versed in Medicaid
regulations.
Medicaid planning is a complex area of law,
but one with potentially large benefits. Whether a person needs additional care
in the near future or simply is aware of the potential need for that care later
in life, the proper preparations today, including a complete estate plan, a
plan for regular annual gifts, and understanding the pros and cons of the
Medicaid program, can insure that any long-term elder care does not leave their
loved ones in dire financial straits.
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