The Medicaid Maze

If you are reading this article, it is likely because you have had a conversation or situation involving a Nursing Home, Assisted Living Facility, and/or the astronomical costs associated with these types of facilities. Or perhaps you are carefully considering the future and all available options. It is no secret that paying for long term care is one of the biggest concerns most folks have when heading into retirement.

Knowing this, we must consider the ways by which long term care is funded. Nursing homes in general are part of a multi-billion-dollar industry. They provide a service and reasonably expect payment in return. Someone staying at a skilled nursing facility will typically use either their own funds to pay for their stay, referred to as “private pay,” or they will look to secure a Medicaid benefit.

Recent data supports the fact that Medicaid recipients make up more than half of all residents at skilled nursing facilities across the nation. Medicare is not a viable long-term option as it will only provide temporary, limited coverage in certain situations. Similarly, too few individuals engage in pre-planning measures to offset the costs of care such as securing long term care insurance policies that serve to minimize the out-of-pocket costs associated with institutionalized care. On that note, the likelihood of a senior securing a long-term care insurance policy in their late 70s or beyond is extremely low and cost prohibitive.

So where does that leave you? What can you do to protect what you have worked for and saved all your life? Do you have to spend every dollar saved on nursing home care? Can steps be taken to protect assets in light of the fact that someone needs care right away? These are all questions that come up in these types of situations and should be considered in any discussion around this topic. Medicaid is a means-based program which means that the agency will consider the assets and the income of the applicant along with several other categorical factors.

FINANCIAL QUALIFICATION

Consider the following information as it relates to qualifying for Long Term Care Medicaid (“LTC”), the benefit that pays for an individual’s stay in a participating skilled nursing facility:

ASSETS

$2000 in “Countable assets” whether single or married. (Note: This differs slightly to the extent that both spouses are entering a facility together and sharing a room)

“Countable assets” is a defined term in the Medicaid policy and resource manuals and generally includes everything EXCEPT the applicant’stangible personal property (i.e., clothing, furniture), one motor vehicle that is used to transport the applicant, the homestead and any contiguous property up to a value of $636,000.00 (otherwise known as the applicant’s principal place of residence), and assets that are otherwise unavailable. Notedly, there are some exceptions that apply to all of the above and to certain types of pre-existing life insurance policies.

If married, the applicant is considered the “Institutionalized Spouse” for Medicaid purposes and the non-institutionalized spouse is considered the “Community Spouse.” If a Community Spouse exists, then there will be a Community Spouse Resource Allowance (“CSRA”) that caps out at $137,400.00 as of 2022. There is also a minimum allowance of $27,480.00. That said, the maximum does not apply to everyone as it is based on the total collective assets of a married couple at a given point in time. The explanation becomes a bit technical but to summarize, the CSRA is based on the amount of assets in existence as of the last day of the month prior to the established continuous period of institutionalization (“CPI”). A CPI is established after 30 days of continuous placement at one or more qualified medical facilities.

INCOME

If the information regarding assets seems to be a bit much, take comfort in the fact that a review of the applicant’s income is much more straightforward. The general rule is simply that an applicant cannot make more than what the cost of the facility would be at the private pay rate. In other words, if you make $5,000 a month and the cost of the facility is $4,000, then you would be ineligible based on your income. Alternatively, if the monthly facility costs are $8,000 and you only make $4,000 a month, then your income should not present an issue. Note that, if approved for Long Term Care Medicaid, the majority of the applicant’s income will be assigned to the facility in something called a Patient Monthly Liability or PML for short.

5-YEAR LOOKBACK

There is also 5-year lookback period associated with Long Term Care Medicaid and the transfer of assets from an applicant’s gross estate. The supposed theory is that, in the absence of a penalty on asset transfers, anyone could get qualified for a Medicaid benefit by simply transferring ownership of assets to another person at the appropriate time. Thus, the lookback. So, what exactly can and can’t you do? Well, the general rule is that you cannot give anything away without adequate consideration in return. Nonetheless, if a transfer occurred earlier than 5 years from the date of application, the transfer should not be considered or result in a penalty. As always, there are some exceptions. Medicaid assesses transfer penalties based on a divisor number, currently set at $7,110.00 as of 2022. In essence, this means that the applicant is penalized one month of coverage for every $7,110.00 in assessed “gifts” that took place within the lookback period.

SUMMARY

To put it bluntly, applying for Long Term Medicaid is a process. Much of the information provided in this article is meant to serve as an introduction to the legal maze of securing a Medicaid benefit but it is not intended to explain all there is to know. That said, we hold true to the fact that providing information empowers individuals to take action and make plans to protect themselves and their loved ones. The professionals at McIntyre Elder Law are ready and able to assist and serve as your guide through this legal maze. Please call us at 704-749-9244 or reach out at www.mcelderlaw.com to schedule your consultation today!

Therron Causey, J.D.

Attorney at Law

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Greg McIntyre, JD, MBA

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