It is scary to think you might suffer a physical or mental health crisis and be unable to pay for the care you need in a nursing home. Even if you have savings and income, the thought of all of that going to your care instead of your spouse or beneficiaries in a Will is frightening. However, with careful advance planning, you may be able to afford quality care if you need it and protect your property and assets at the same time. Our Estate Planning and Elder Law attorneys are experienced in Medicaid Planning and can design a plan that helps you accomplish your Estate Planning goals while protecting funds to pay for long-term care one day.
Medicaid for Long-Term Care
One thing all of our clients tend to have in common is confusion about Medicaid and whether they can qualify for it to pay for long-term care. People who have never been on Medicaid assume they will not be eligible for it as they age. Their information often comes from other people rather than knowledgeable sources and is often inaccurate.
The reality is that many people can qualify for Medicaid to pay for a nursing home if they plan for it. Why is this important? You may believe that as soon as you reach 65 and are covered by Medicare, you’ll be set. However, Medicare does not cover long-term care for more than 20 days. Medicaid, on the other hand, can be used to pay for a nursing home—if you meet the eligibility requirements.
There are many questions when it comes to Medicaid for long term care. People encounter rumors, misunderstandings, and outright lies about Medicaid. It is necessary to provide a general background of the program’s eligibility requirements before any discussion of planning can occur. It is common for families to assume a loved one does not qualify for long-term care Medicaid when in fact, they may. More commonly, families attempt to plan for future long-term care by acting on rumors and incorrect advice.
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 $60,000.00 annually for one individual. As a spouse or child this can be very upsetting, to watch what your loved one worked to earn for a lifetime slowly dissolve into nothing.
If an individual is needing long-term care at skilled nursing facility, they have three options: (1) long-term care insurance, (2) privately paying cash upwards of $5,000 per month or (3) Medicaid. We have found that only approximately seven percent 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 an 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 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 $585,000.00 is a non-countable asset while $25,000.00 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” $25,000.00 if we are trying to qualifying a single person for Medicaid. If it is a married couple, having up to $25,284.00 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 twenty-one–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 a home and an Individual Retirement Account (“IRA”) or other 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 your assets.
Imagine an eighty year old surviving spouse owns her own home and has $100,000.00 in her IRA that was rolled over from her spouse upon his death and $10,000.00 cash in the bank. If this individual needs long-term care, they 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 I Avoid Losing Your Home if You Need Medicaid?
Yes! An experienced Elder Law Attorney like those at Ross & Shoalmire, LLP 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 caregiver, such as the spouse or adult child. An experienced Elder Law Attorney like those at Ross & Shoalmire, LLP can assist individuals or families with how to maintain or become eligible for Medicaid and also how to protect assets, such as your home, from Medicaid Estate Recovery. The Ladybird Deed is a tool frequently used to protect a home and if you or a loved one has qualified or may qualify for Medicaid, you should consult with an Elder Law Attorney about how you can use a Ladybird Deed to protect your home from Medicaid Estate Recovery.
What is the difference between: Medicaid and Medicare?
MEDICARE is the federal health insurance program for people who are over the age of 65 or meet other specific criteria if they are younger. Medicare consists of Part A (Hospital Insurance), Part B (Medical Insurance), Part C (Advantage Plans), and Part D (prescription drug coverage). Individuals pay a monthly premium for this coverage that is typically deducted from a person’s Social Security benefit each month. When a person enters a long-term care facility, Medicare often covers their stay for the first 20 days. Longer coverage can occur if supplemental insurance coverage is in place. MEDICAID is a federally mandated program that provides payment for skilled nursing care for individuals who meet certain requirements. Although Medicaid is a federally created program, the actual administration of that program is left to the individual states. Because of this division between federally created rules and state administration, there are many specific differences between the states (although the overall rules are generally the same.) Also, the rules quite change frequently. As a result, the following information is for general knowledge and should not be relied upon without the advice of an expert in the field.
Eligibility for Medicaid
Unlike Medicare, which is available to most people over the age of 65 regardless of income, Medicaid is a need-based program. It covers basic healthcare services for individuals of all ages who can demonstrate financial need. However, it can also cover nursing home care for older people who qualify.
In order to qualify for Medicaid for a nursing home, you must meet the following criteria:
- Be a U.S. citizen, or a foreign national living lawfully in the U.S., and a resident of the state where you are applying for benefits
- Be over the age of 65, disabled, or blind
- Have a gross monthly income of less than $2,313 (in 2019)
- Meet “medical necessity” requirements for skilled nursing care
- Meet certain asset requirements
- Live in a facility that accepts Medicaid
It is the income and asset requirements that often disqualify seniors in need of long-term care, but with the right kind of Estate Planning, you can make sure you qualify for the care you need without burning through your life savings.
What is a Medicaid bed?
Not all facilities accept Medicaid as a way to pay for long term care. Those that accept Medicaid only accept a limited number of recipients. A “Medicaid bed” refers to a bed in a semi-private room at a facility that accepts Medicaid.
If my spouse has to go to the nursing home, will I be required to pay all of their income to the nursing home?
Not always. Each state allows a Monthly Maintenance Needs Allowance (MMNA) for the spouse not needing Medicaid (community spouse.) In 2019, the federally mandated minimum is $2,058.00 and the maximum is $3,160.50. The MMNA differs from state to state. This means the community spouse is allowed to keep up to the maximum amount allowed by their state of residency.
Does Medicaid count our total income towards the income cap?
No. Medicaid only counts the applicant’s income towards the income cap. The current income cap is $2,313.00 per month (in 2019).
What if the applicant has too much income?
Even if the applicant has too much income, they can still often qualify for Medicaid. If the applicant otherwise qualifies for Medicaid long-term nursing home benefits, the applicant (or the applicant’s spouse or duly appointed agent) may create a Qualified Income Trust or “Miller Trust.” This trust allows the applicant to transfer his/her income into the trust and then qualify for Medicaid long term nursing home care benefits. This means that no one should ever be disqualified for Medicaid because they have too much income. Either you are under the income limit and qualify or you are over the limit, set up a Miller Trust, and then qualify. This type of trust has very specific requirements and you should contact an expert for more details.
It should be noted that a Miller Trust is only used to overcome the income cap issue and is not a tool that can be used to protect assets.
What assets can I keep and still qualify for Medicaid?
When applying for Medicaid, the state will look at what they call your “countable resources.” To qualify for Medicaid, an unmarried individual’s countable resources cannot exceed $2,000.00. If both spouses are applying for longterm care nursing home benefits, their combined countable resources generally cannot exceed $3,000.00. When a couple is married and only one is applying for long-term care Medicaid, all available non-exempt resources of both spouses are counted as resources. Included are assets held in joint or individual names of the married couple. One half of the couple’s resources are set aside for the spouse not applying for Medicaid, with a minimum set aside amount of $25,284.00 and a maximum of $126,420.00 (in 2019). There are ways to increase the maximum amount that can be set aside for the at-home spouse, but the strategies can be complex and should be discussed with an expert.
THE FOLLOWING IS A MORE EXTENSIVE LIST OF EXEMPT ASSETS:
- a) The principal residence of the Applicant up to a value of $585,000.00;
- b) A burial plot held for the Applicant or the Applicant’s family;
- c) Term or burial insurance, if it has no cash value;
- d) Identifiable burial funds in the amount of $1,500.00, or a prepaid irrevocable burial contract regardless of the value;
- e) One automobile, regardless of value;
- f) Household goods and personal items;
- g) Life insurance policies owned by the Applicant with total face values of $1,500.00 or less per insured person;
- h) Livestock and poultry that are held for business purposes or for consumption;
- i) Business property essential for self-support; and
- j) Non-business property valued at up to $6,000.00, essential for self-support (generally mineral interests).
Can’t I just give everything to my children?
No. Any gift made within a 5 year “look-back” period will incur a penalty. During the penalty period, the applicant may be qualified for some limited Medicaid benefits, but Medicaid will not pay for the nursing facility. Consult with an expert to discuss any gifts before making one.
How Medicaid Planning Works
When you meet with our Medicaid Planning team, we will discuss several options for making sure you qualify for these valuable benefits. If your current monthly income is higher than the amount allowed by Medicaid, you may be able to set up a Qualified Income Trust, also known as a Miller Trust. With this tool, your income will be transferred directly into the Trust and will not be counted when determining eligibility for Medicaid. You will receive a small monthly allowance from the Trust for personal needs, but will not have access to the money otherwise.
While a Miller Trust can take care of excessive income to help you qualify for Medicaid, it cannot be used to lower the value of your assets. Some of your assets—including your primary residence, one automobile, household goods, personal items, life insurance policies, and some business property—are exempt from consideration, but the value of any additional property, investments, and savings cannot exceed $2,000, or $3,000 for a married couple. Working with a Medicaid Planning Attorney, you will have options for reducing the value of your nonexempt assets and qualifying for Medicaid, but the sooner this is done, the better.
Contact a Medicaid Planning Attorney Today to Get Started
It’s never too early to plan for the possibility that you or your spouse will one day need a nursing home. Fill out our contact form or give us a call, and we will tell you about the ways we may be able to help you protect your hard-earned savings. With four offices throughout Northeast Texas and Southwest Arkansas, we are conveniently located for clients from Dallas to Little Rock. Get started protecting your future today!