The need for long-term care continues to grow as our population ages. The costs of long-term care have also continued to grow. Long-term care expenses can easily exceed $60,000 annually for one individual. As a spouse or child, it can be very upsetting to watch what your loved one worked to earn for a lifetime slowly dissolve into nothing.
Options for Paying for Long-Term Care
If an individual is needing long-term care at a skilled nursing facility, they have three options:
- Long-term care insurance
- Privately paying cash upwards of $5,000 per month
We have found that only approximately 7% of our clients have long-term care insurance. Likewise, there are not many individuals that can privately pay for care for any great length of time. It is essential that individuals and families understand how one or both of them may qualify for Medicaid if they have a health condition or crisis that requires long-term care.
Long-Term Care Medicaid is the only government program available to pay for skilled nursing home costs. To say that the rules and regulations surrounding Medicaid are complex is quite an understatement. Our firm has been navigating this maze for years and on a daily basis reviews changing policies and rules.
The purpose of this article is not to give you a detailed explanation of Medicaid qualification for you or a loved one (please contact our office for a free consultation for this), but to make sure you are aware of the most important change in Medicaid rule interpretation in a decade.
Medicaid Eligibility Requirements
Medicaid determines eligibility for an individual by dividing their assets into countable resources and non-countable resources. The non-countable resources have no effect on eligibility, while the countable resources after a certain point prevent the person from receiving benefits. So, for example, a home worth up to $585,000 is a non-countable asset, while $25,000 in cash is a countable asset.
In its simplest terms, getting someone qualified for Medicaid is a matter of either spending the countable resources or converting the resources from countable to non-countable assets. In the example above, we need to “spend down” $25,000 if we are trying to qualify a single person for Medicaid. If it is a married couple, having up to $25,284 is the federal minimum that a spouse at home can keep and no spend-down is needed.
If you are in a situation that requires spending countable assets, this could be spent by privately paying for care at the nursing home or it could be used to make improvements on the home, prepaying for funeral, making exempt transfers to disabled children or college accounts for grandchildren under the age of 21—thus converting countable cash into a non-countable asset. Why does this matter to you?
For the vast majority of Americans, the two largest personal assets a family owns are their home and an Individual Retirement Account (IRA) or another type of qualified retirement account (401k, 403b, Thrift Savings Plan, etc.). As discussed above, the home is a non-countable asset. Under recent changes in policy interpretation, IRAs, or other retirement accounts for individuals over 70 ½ that are required to take their minimum annual distribution are also non-countable assets. This is a significant change in how we approach Medicaid planning and how we can plan to protect assets.
Imagine an 80-year-old surviving spouse owns her own home and has $100,000 in her IRA that was rolled over from her spouse upon his death and $10,000 cash in the bank. If this individual needs long-term care, she will most often be told by someone along the way that she must spend all of her IRA before qualifying for Medicaid and this is now outdated and very bad advice. Our spouse here can qualify for Medicaid by simply spending $8,000 on prepaid burial (or other eligible spend-down) and now has $2,000 or less in the bank which is her only countable asset. It is important to note that while her home and IRA are non-countable assets that do not prevent her from being eligible, it is essential to protect those assets from Medicaid Estate Recovery (MERP) upon her death.
When an individual qualifies for Medicaid in Texas, upon their death the family will receive two letters from MERP’s debt collector HMS: the first providing Notice of Intent to file a claim against the estate and second providing the amount of the claim. Without proper planning, the family has to sell the home to pay the MERP claim before any proceeds can be distributed. This is why you have heard that an individual will lose their home if they accept Medicaid.
Can You Avoid Losing Your Home?
Yes! An experienced elder law attorney like those at Ross & Shoalmire, P.L.L.C. can assist individuals or families with maintaining or becoming eligible for Medicaid and also how to protect assets, such as your home, from Medicaid Estate Recovery. There are also exemptions to Medicaid Estate Recovery, but we do not recommend that you rely upon the use of an exemption when there is a better alternative. The Deficit Reduction Act (DRA) provides exemptions from MERP and if the beneficiary qualifies for an exemption, then the decedent’s estate avoids estate recovery. Unfortunately, the exemptions are conditional. The facts that may give rise to an exemption if the person died today may not exist at the time of the beneficiary’s death.
For example, Mr. and Mrs. Smith own a home with surrounding 25 acres valued at $280,000 at the time Mr. Smith enters the skilled nursing facility and applies for Medicaid. Since a couple may own a home and still qualify for Medicaid, the home will not impede eligibility. The couple is happy that they can keep the home, and are also pleased when made aware that there will be no estate recovery against an estate in which the Medicaid beneficiary is survived by a spouse. However, if the spouse at home dies first, the exemption is lost and the house will be subject to an estate recovery claim that the family was not expecting.
The fear of losing their home, either for their spouse or their children, places elderly couples and individuals in a position in which they will sometimes avoid entry into a nursing home out of fear of losing their home and stay in their own home even though it is detrimental to their health or the health of their primary caregivers, such as the spouse and adult child.
Ross & Shoalmire, P.L.L.C. can assist individuals or families with how to maintain or become eligible for Medicaid and also how to protect assets, such as a family home, from Medicaid Estate Recovery. For example, the Ladybird Deed is a tool frequently used to protect a home. If you or a loved one has qualified or may qualify for Medicaid, you should consult with an Elder Law attorney to develop a plan that best fits your circumstances.