Medicaid Myths & Facts
Too many people lose too much money needlessly because their decisions were based on half truths, rumors, and myths. This booklet was written with the specific purpose to prevent someone, maybe you, from becoming the next victim of needless impoverishment.
When faced with a nursing home stay, it is crucial that you are completely informed of all the pertinent facts so that you do not become impoverished paying the nursing home for your cost of care. Please be informed that YOU DO NOT HAVE TO SPEND ALL OF YOUR MONEY PAYNG FOR NURSING HOME COSTS!
Hopefully by dispelling the myths and stating the facts that this booklet will serve as a beacon to help people successfully navigate their way through the nursing home financial planning maze.
Myth # 1
"All the information I need on Medicaid is available from my state Medicaid Office."
That is like saying everything you need to know about taxes is available from the IRS! Sure your state offices can provide you with general knowledge about Medicaid program requirements, but what you need to know is usually not available from the people employed by the state to process applications. They are not in a position to be your advisor or advocate. They are paid to gather information and not give it out.
It is usually prudent, when faced with a nursing home crisis, to seek the assistance of a professional advisor. Again, be sure that the individual or firm that advises you is well versed in Medicaid eligibility requirements and long-term care issues. This will ensure that your specific needs are addressed and that you minimize the financial drain on your savings and maximize the preservation of your estate.
Myth # 2
"My Attorney/CPA/Financial Advisor will be able to help me with my Medicaid Eligibility."
Medicaid eligibility is a complex, ever-changing arena that requires very specific knowledge of federal as well as state program requirements and guidelines. There are many sources of general knowledge available to the public, none of which should be used as a planning tool for specific family situations.
The person you trust with your tax returns, your investments, your checking and savings account, or even your legal matters is probably not the person that you should trust with your eligibility for Medicaid benefits. These disciplines are unique and require a great deal of specific working knowledge and training in taxes, investing, banking, and law. Medicaid eligibility planning is another unique field of estate preservation and management. Should you need this type of information for yourself or a family member, please seek out a professional who specializes in this area.
You may want to test his or her qualifications by asking a few questions like What is the current maximum income for a Medicaid applicant?, or What is the current maximum Protected Resource Amount for a community spouse?. If there is a hesitation, or a need to go look up this information, then you're probably talking to the wrong person.
Myth # 3
"Medicaid is like Welfare, isn't it?"
Medicaid was created by Title XIX of Social Security Act and is the healthcare safety net for all senior Americans. Almost three quarters of the people receiving long term care in nursing facilities in the State of Texas are Medicaid residents. Many of these people paid for their own care until every penny they had saved was gone (usually spending far more money than necessary), and then qualified for benefits.
There has recently been a great deal of proposed legislation overhauling our nation's healthcare system. The retooling of Medicare and Medicaid with an emphasis on the purchase of long-term care insurance does have its merits. However, it also fails to address the dilemma of senior citizens who either cannot afford care or who cannot medically qualify for it. For those families and individuals, Medicaid is the only choice for financial assistance during a long-term care or nursing facility stay. But as you'll see, you do not have to be poor or go broke qualifying for Medicaid benefits.
Myth # 4
"We have too much money to qualify for Medicaid."
One of the most widely circulated myths is that a person with more than $2,000 in assets can never qualify for Medicaid benefits. Not true.
Some resources and assets are not even considered by the state Medicaid agency and are exempt from counting toward the $2,000 resource limitation. Such items include your home, personal belongings, an automobile, certain pre-paid burials contracts, and even some business property. The value of some of these assets can sometimes be without limit, yet eligibility for benefits will be approved!
For married couples, $2,000 is the limit only for assets in the name of the Medicaid applicant - not the applicant's spouse. Medicaid will currently allow $117,240 to be protected for the healthy spouse still living at home. This Protected Resource Amount (or P.R.A.) should be established the first month of admission to a hospital or long term care facility if a continuous stay of more than 30 days is expected.
Just remember that the 'spend down' to Medicaid eligibility limits can include spending for yourself and your spouse, not just to a nursing home.
Myth # 5
"I can just gift my way to Medicaid eligibility."
Be very, very careful if you are considering giving any of your money away, or selling anything for less than what it is worth. In either case, you have affected an uncompensated transfer , as the state will call it. Any transfers or resources within 5 years of applying for Medicaid can make you or your spouse ineligible for benefits for an unlimited length of time.
Federal legislation in 1997 made it a criminal act to make transfers and gifts within that three to five year period. This throw granny in jail law levied monetary fines, called for imprisonment, as well as imposing waiting periods for benefits. This law has since been modified, but gifting is still dangerous unless you know what you're doing. Fortunately, there are still methods of planned gifting (that should be carefully designed) that are allowed.
If you have already made gifts in the past, those may or may not cause difficulty with your potential Medicaid eligibility. Each state has a formula to determine the appropriate waiting period for each gift. It is wise to have a professional advisor in these matters to ensure you don't violate any state or federal regulations with any gifts made.
Myth # 6
"My income is too high to ever qualify for Medicaid."
Until early 1994, many people could honestly make that statement, but not anymore. The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) brought about many changes in the eligibility guidelines developed by the Health Care Finance Administration (HCFA). One area that OBRA '93 addressed is hardship cases where an individual's income exceeds the state's income maximum, but is still insufficient to pay privately for nursing home care.
The Qualified Income Trust (Miller Trust) is the tool created to help people with high income qualify for Medicaid. Keep in mind that this specialized income trust is only to solve the problem of too much income - it does not help if you still have too many resources. For married couples, be aware that your Qualified Income Trust should include stipulations that allow payment to the stay-at-home spouse for protected income under the Spousal Impoverishment provisions of the Medicaid guidelines. With a properly drafted Qualified Income Trust, all income of the Medicaid applicant is deposited into a separate trust account, then the trustee (that you name) makes distributions. These dispersals are to the nursing home resident for their personal needs allowance, the spouse for their protected income, and the balance to the nursing home as applied income.
Myth # 7
"I can lose my home to claims by the sate once I am the recipient of Medicaid assistance?"
Yes! The Estate Recovery Law passed in Texas in March of 2005, does allow the State of Texas to file a claim on the home of a deceased Medicaid recipient. However, there are several exemptions as well as legal remedies that would allow the recipient to protect their home from claims by the state.
Myth # 8
"I just can't afford to have my spouse in a nursing facility."
This is a real fear of many people whose spouses may need full time nursing care. Many times this is an unfounded fear because of lack of information about provisions that protect the financial condition of the healthy spouse. The Medicare Catastrophic Care Act of 1988 mandated that spouses of institutionalized individuals should have a protected spousal share of savings (or resources) and income. The protected share currently provides $117,240 of assets and more than $2,931 of monthly income. And this is in addition to the spouse's ability to have an automobile and a home of unlimited value!
As stated earlier, the Protected Resource Amount (or P.R.A.) should be established the first month of admission to a nursing home - even if you don't intend to apply for Medicaid benefits for months or even years later. Keep in mind that the P.R.A. can only be established from the month that your spouse begins his or her continuous, uninterrupted stay in a hospital or nursing home.
The levels of protected assets and income changes annually, so be sure to claim your full rightful share if the need arises.
Myth # 9
"I don't have enough money to need a professional advisor."
It is important for just about anyone with any money or property to have someone with specialized knowledge and experience help them with important financial or estate planning decisions.
Don't be intimidated by the thought that your estate is not worth someone's time to talk to you. A good financial advisor treats everyone's estate with respect. You have worked hard to accumulate your savings for retirement, and those dollars should work hard for you after retirement.
Think of an advisor as someone who is standing on the other side of a minefield from you. You now have to cross that minefield. Since it is obvious that he or she didn't take a wrong step, wouldn't it be wise to ask them where to step? (or more importantly, where not to step!) My dad once told me that experience is something you get usually just after you needed it most!
Why make financial mistakes that others have already made and paid dearly for, when you can avoid them entirely? Be sure to take the F.A.C.T. test on page nine (9) and assess your own need for long term care financial planning.
Myth # 10
"Carrying the note on real estate can be a great source of income in my retirement years."
Homes that have been seller-financed can provide a source of monthly income, but can also cause problems with qualifying for Medicaid benefits. Remember that the financial qualifications for eligibility involve an assessment of both the income and the assets of the applicant.
Unfortunately, the note you hold in that sort of real estate arrangement will be more than likely considered as both an income and as an asset. Even though you have sold the home, the note itself could be resold to someone else - making it a source of available cash to you or your spouse.
Real estate has many advantages as an investment and may have many attractive tax benefits. As a general rule, it can become quite an obstacle in estate preservation planning because it is not easily liquidated in emergencies. You may have a desire to fund a burial expense plan, to repair your exempt homestead, or to effect a program of allowable gifting; all permissible under current Medicaid guideline, but not achievable with an asset as illiquid as a real estate lien note. Think before you decide to become someone's mortgage company.
Don't wait for a health care emergency to begin getting your affairs in order. Your planning options as a healthy, active senior citizen are much broader. You surely don't wait for a fire in your house to begin considering homeowner's insurance, do you? And statistically speaking, there is a much greater likelihood of a person over the age of 65 entering a nursing home than having that house fire.
Planning now for your long term care needs will likely prevent much distress in the future for your family and loved ones, and will give you the peace of mind knowing that your wishes will be honored and that your nest egg will not be destroyed by an unexpected illness or untimely death.
Financial Assessment & Consumer Test
Do you have one minute to see if your life savings are at risk to the extraordinary cost of today's health care? Most people wait too long to find out. Medicare? Medicaid? Private insurance? Deplete your savings? How will you pay for care? There's no time better than today to find out. Take just 60 seconds and answer the questions below. Then grade yourself by counting how many 'Yes' answers you make. Check your score below to see how you should proceed.
|Are you married?|
|Do you own a home?|
|Does your monthly income exceed $2,163?|
|Does the total of your bank accounts and investments exceed $2,000?|
|Have you (or your spouse) had a significant change in health since you
last discussed your finances?
|Do you still need disability planning documents like a Durable Financial
Power of Attorney and Durable Healthcare Power of Attorney?
|Have you gifted any significant money to family, friends or charity in the
last five (5) years?
NUMBER OF 'YES' ANSWERS:
Zero- You probably don't need to update your plan. You have either already completed your planning, or your estate is modest enough in size not to need planning.
1 to 3- Act now to safeguard your money. A moderate measure of planning or updating of your situation could save you a considerable amount of money.
4 to 7- Making uniformed decisions could cost you your life savings. You have a lot at stake and should have a plan developed by a professional that specializes in senior financial matters. You need long term care financial planning and guidance.
We urge you to call your local The Ladyman Law Office so that we can help you protect your estate from unnecessary expenses. Thousands of seniors already have, and are glad they did!