What is Medicaid and how can it help me pay for long term care?
Medicaid pays nursing home costs for certain "qualified individuals," once a person has run out of money and out of other options. For most senior citizens and their families, it is very necessary. The truth is that Medicaid covers 50% of the nursing home expenses in this country, because few families can afford to pay thousands per month for nursing home care. Medicare does not cover most nursing home expenses, so Medicaid fills the void. The Medicaid rules are extremely complicated - and there are very few advisors who know the rules.
What if I've been denied for Medicaid in the past?
Someone may have told you, "It's too late to do anything, because there's a five-year look-back penalty!" That is technically right, because there's a five-year audit by the state Medicaid department of all of your financial documents when you apply for Medicaid. But if you ask, "How many Medicaid applications have you ever completed?" The answer is usually zero! You need help from an elder law firm that knows the Medicaid rules and works with them every day. Those giving bad Medicaid advice include well-meaning lawyers, accountants, nursing home staff -- even the Medicaid case workers themselves. The hidden truth is this: A good elder law attorney has learned the state, federal, and even the county rules governing Medicaid. He will then apply the specific facts of your family situation to the Medicaid rules and figure out what options you may have. We'll show you how the legal services of a qualified Elder Law attorney will save you money. If they won't, we'll tell you that too.
Won't Medicare pay for my nursing home stay?
Medicare and Medicaid sound similar, but are totally different programs. Medicare provides healthcare benefits for the over 65, blind, and disabled; while Medicaid provides medical benefits for the impoverished. Medicare is a type of public health insurance for those age 65 and older. Many seniors are unaware that Medicare does NOT pay for long term care. If a senior is enrolled in Medicare hospitalized for at least three days, and then admitted into a skilled nursing facility, Medicare may pay for up to 100 consecutive days. However, in order for Medicare to pay, there must be improvement in your condition. Medicare really only cares about you if you can get better. Since chronic diseases like Alzheimer's and Parkinson's have no cure today, Medicare won't pay for care in those situations. Medicaid is paid for by both federal and state funds but is "administered" on a state level. Therefore, rules can vary from state to state (even county to county) rather dramatically.
What is the difference between Medicare and Medicaid?
-Health insurance for seniors age 65+
-Federally controlled, uniform application across the country
-Pays for no more than 100 days of nursing home care
-Pays for primary hospital care and related medically necessary services
-Must have contributed to Medicare system to be eligible and generally be over age 65
-Needs-based health care program
-Controlled state by state, which created different regulations in each state of application
-Pays for long term care
-Pays for medications
-Must meet income and asset limits to be eligible and be over 65, disabled, or blind
Will I even need long term care?
While 100% of us are going to die, according to the AARP, at least 70% of us who live past the age of 65 will spend a substantial period of time in a long term care facility. There's a pretty good chance that we're only going to die in one of two ways: 1. We die suddenly, or relatively quickly. 2. We die progressively over a long period of time and we are maintained by expensive drugs, medical procedures, and nursing homes at an extremely high cost. One of the worst things about a lingering death is that our healthcare system was not set up to provide for us when we have a chronic care need. You must use up all your assets - usually down to about $2,000 - before you can qualify for government help. Once we begin to have mobility and memory issues, we become a "declining senior." In my office, we find that 90% of those who reach the declining senior stage will need substantial in-home or nursing care prior to their death.
What will happen to my spouse if I go into a nursing home?
As we all know, life does eventually end. But that's not the end of the journey for the surviving family. In my experience, many couples are not aware of all the issues that arise when the first spouse dies. First, the survivor spouse will lose one of the two Social Security checks. In addition, the survivor spouse may lose some or all of your pension. There's a good chance a wife will outlive her spouse by seven years or more. Seven years without one of the Social Security checks, and a depleted bank account from long term care costs, can be totally devastating. The grocery bill might be a little smaller, most of the daily costs of living for the healthy spouse are going to stay the same. Once a spouse becomes ill with Alzheimer's, Parkinson's, or other long term illness, it's easy to become so focused on paying for care that you may overlook the financial needs of the survivor. Fortunately there are options, and actions you can take to protect yourself and your loved ones.
Won't my existing estate plan protect me from being impoverished?
One area that has not changed with the times is traditional estate planning. The cost of long term care planning was probably not included in a will or living trust that you may already have. Most attorneys who prepare estate plans have been taught using old cases, with long-dead individuals who lived in a different time and place. During the last 100 years, the life expectancy of a North American has gone from only 47 years of age to around 82 years of age. Most planning has not evolved to reflect that massive change. Typical estate plans are primarily created as cheaply and easily as possible. The end result is that the attorney asks you a couple of questions: your name, who you want to leave things to. It doesn't involve any planning for long term care. The world has changed! According to the AARP, 70% of individuals who have reached age 65 will live for some time in a long term care facility. You need documents with powerful protections to help you save your hard-earned money.
Can't I just fill out the application myself?
The fact is, a simple mistake could cost you everything. Medicaid is a complicated process, with its own set of definitions for seemingly self-explanatory words. A professional accountant I know, whose mother needed Medicaid benefits, read and analyzed the Medicaid regulations. He transferred $500,000 to an irrevocable trust. Then he began paying for his mother's care through what he thought was the Medicaid waiting period. Finally, he filled out a Medicaid application and submitted it. Because he filled out the form incorrectly, the Medicaid department was able to count the $500,000 transfer as a gift, and they composed a penalty period of ineligibility of more than 100 months. A "little" error is easy to make by anyone who does not work in the area of Medicaid. My clients find that they need the help of someone who works with the Medicaid rules every day to achieve the best possible outcome.
How can I find the right attorney?
I recently looked at a bar association listing of attorneys who identify themselves as elder law attorneys. Frankly, I was a little surprised to see that some individuals who are really general practitioners also consider themselves to be elder law attorneys. Today's seniors need a special longevity plan - this will help their families know what their wishes are in the event that they become incapacitated (as happens with dementia and other chronic diseases) before they die. If you are married, then it's highly probable that one of the two of you will spend a substantial amount of time in a nursing home before you die. When looking for an elder law attorney to help with your plan, ask them: 1. How many Medicaid applications does your firm do in a year? 2. How many veterans does your firm assist with the VA aid and attendance benefits per year? 3. How many elder law oriented estate plans has your firm done this year?
How does Medicaid count my money?
They focus on dividing your financial assets into three different categories: 1. Available Assets, 2. Exempt Assets, 3. Unavailable Assets. Available assets is made up of assets that you could cash in and use for your own nursing home care. Available assets are also referred to as "countable resources." #2 is Exempt Assets. The Medicaid Department allows you to keep these assets. If an asset is exempt, you do not have to cash it in to pay for your nursing home bill. The third category is called Unavailable Assets. Those are assets which appear to have some value, yet for one reason or another, they are not available to be spent on long term care. One of the best examples of an unavailable asset is an irrevocable prepaid burial insurance policy.
What assets are exempt?
Exempt Assets: Each state has its own limit on assets and its own guidelines for which assets count toward the total. In general, however, the following assets do not count against you for Medicaid eligibility: Your home: Your principal place of residence. (second homes, such as vacation homes or condos, are not exempt assets.); Household and personal belongings: Furniture, appliances, jewelry, and clothing; One car; Burial plot/prepaid funeral plan; Cash value of permanent life insurance policies up to $1,500 (In most states, this is exempt only if the face value of all policies combined does not exceed $1,500. Cash: A small checking or savings account not to exceed the limit imposed by the state. Most of the time, a single Medicaid applicant may keep only about $1,500 to $2,000.
Can I give money to my children?
Seniors who want to avoid being impoverished have to compete with a harsh reality that was put in place by former President Bush's administration when Congress passed the Deficit Reduction Act of 2005 (DRA). The DRA made harsh changes in the way that the government will punish seniors for acts of charity and family giving. The Medicaid rules assume that when a senior makes a gift, the purpose of that gift was to get rid of some assets in order to qualify for Medicaid nursing home expenses. That's right - seniors are guilty until proven innocent. The DRA creates a penalty of ineligibility for Medicaid when a senior who gave away money needs nursing home services at any time within 5 years after the gift. It's a harsh punishment that our government has created for seniors who suffer chronic long-term illnesses within 5 years after a gift.
How does Medicaid allow me to spend my own money and still qualify?
Below is a list that includes some ways to use your money that are usually allowed, so that you may qualify for Medicaid. However, purchases must be for fair market value. Allowable spend down purchases and transfers: Purchase of a new home; Payment of nursing home bills; Payment of outstanding debt (like credit card bills); Prepayment of an outstanding mortgage, property taxes, and estimated income or capital gains taxes; Paying for home repairs; Purchase of furniture; Prepayment of funeral and burial expenses; Purchase of household goods and personal effects; Purchase of a new car; Payment of legal and medical bills; Paying for travel (While the ill person may not want to or be able to take a trip, a healthy spouse is permitted to use spend down money this way.)
What about annuities?
Financial advisors often suggest the use of an annuity. We have found that in many cases, financial planners don't fully understand when an annuity will be counted for Medicaid purposes. However, in some cases, we might suggest purchasing a Medicaid-Qualifying Annuity (MQA). An annuity contract is a countable asset for Medicaid eligibility purposes. That means Medicaid counts both the principal, and any interest you've earned. The only type of annuity the fits a narrow exception is referred to as a Medicaid Qualifying Annuity. If there is money left in your annuity when you die, it may be required to be paid back to the state before it's given to your loved ones. Under the DRA, you have to repay the state for any Medicaid benefits it has paid on your behalf. The truth is: most financial advisors have no knowledge of Medicaid rules. Get help from a qualified elder law attorney.
Will I Lose My Home?
Yes and no. Because the home is the largest asset a couple can keep while still qualifying for Medicaid, it is also usually the main target of estate recovery. For a great many people who need Medicaid benefits for long term care, the home makes up most of their life savings. Often, it's all a couple has to pass on to their children. Now, the home is an exempt asset according to Medicaid. It continues to be exempt as long as the community spouse lives there. However, after both the ill spouse and the healthy spouse pass away, the property may no longer be protected. But the state has the right to take back whatever it paid for the care of a Medicaid applicant. Because the home is the largest asset a couple can keep (while still qualifying for Medicaid), in most states it is also the main target of estate recovery. After both spouses die, the state's estate recovery unit has the authority to take just about any property that the Medicaid recipient had their name on.
Where can I find more information on how to qualify for Medicaid?
This legal guide only shows you part of the story. In order to find out more of what you need to know, simply sign up for my free report on how to qualify for Medicaid benefits at www.LearnMedicaid.com/law.
Are there benefits for Veterans to pay for care?
Yes. Few veterans are aware that there is a little-known benefit called Aid and Attendance which helps veterans to pay for in-home care or nursing home care. It is one of the only benefits available that pays for in-home care! Veterans who qualify can obtain up to $11,830 per year, married veterans may qualify for $15,493/year, and widows/widowers of veterans may qualify for up to $7,933 per year. Please visit www.wartimeveteran.com/law to get your free report on how you may qualify for this important benefit.
Additional resources provided by the author
Law ElderLaw, LLP is here to provide guidance to you in the following areas:
- Basic estate plan documents such as powers of attorney, wills, and possibly trusts
- A good idea of whether or not a client may qualify for VA benefits
- Care options available in the local community for both the ill senior and spouse
- A review of Medicare and Medicaid as it applies to your circumstances
- A comprehensive understanding of available personal or family resources to pay for care
This legal guide reveals part of what you need to know to qualify. To find out more, please visit www.lawelderlaw.com/Medicaid to get the whole story.