Medicaid Untangled
Trying to untangle the knot of myths and confusion about the Medicaid program is a daunting task, and it requires a huge disclaimer: There's no way to do this subject justice in a few cryptic paragraphs when the manual that describes all its wrinkles and exceptions is thicker than a phone book.
Medicaid is, plain and simple, a joint state/federal welfare program, like food stamps. Instead of covering the groceries, however, it's intended to pay nursing home expenses for people who need that level of care but don't have the income and assets to afford it. It's entirely different than Medicare, a largely age-based assistance program that has nothing to do with a person's resources.
Let's start with mega-myth #1 - the one that just won't die: A couple must first spend everything they've got on the nursing home, including the proceeds from selling their house, before the one who needs skilled nursing care can qualify for Medicaid assistance. Not true to any extent.
Here's the way it actually works. When a person begins to need nursing care, the couple (or at least the healthy spouse) goes into the Medicaid office (it's in Keene for our area) for what's called a "resource assessment" to determine whether they qualify, and if not immediately, what they need to do to qualify. There are 2 components to qualification: income and assets. The only income that matters is whatever Social Security or pension income the nursing home spouse receives. The spouse still at home can keep all of his or her income, no matter how much it is. If the nursing home spouse receives more income than what Medicaid would pay the nursing home per month (currently about $4,800), less any amount the stay-at-home spouse may need from that income to pay regular living expenses, then the whole process stops there and the couple just has to come up with the funds to pay the nursing home. Sometimes, though, even if Medicaid itself won't kick in, the couple may be able to negotiate an amount to pay the nursing home that's less than the regular private pay rate, but still more than Medicaid would have come up with.
But let's say the couple clears the income hurdle. Then the assessment looks at the couple's assets - and both spouses' assets are in the pot no matter whose name is on them. Also, not just what the most recent bank statements show, but whatever the past 5 years' records would reveal, i.e., helping the grandkids with tuition payments, sending the little ones out on the Big Red Boat, buying a condo for a recently-divorced daughter - or basically doing anything else during the last 5 years that caused the couple's assets to be given to or used for someone other than themselves. That's the so-called "look back" period you hear everyone whisper about, and it's the real thing - and it's not a myth. For that reason, it's wise to keep all those financial records for at least the past 5 years to avoid having to pay to have them re-created at banks and investment firms. Since you're already keeping them for 7 years for tax purposes (you are, right?), that shouldn't be a new assignment. For assets transferred more than 5 years ago, those are off the radar screen entirely and don't figure in the assessment equation at all.
So now we're getting to the real nub of the issue: What assets do get counted? Not your principal residence if there's still a spouse living there. Not your car or other personal belongings like jewelry, art work, tools, or the 48" flat screen. Not your burial plots either. Or term life insurance that doesn't have any current cash value. And most importantly, not half of your financial assets - bank accounts, IRAs, cash value of insurance or securities - up to a total of about $115,000 currently. As an example, let's say all that countable stuff adds up to $300,000. Your spouse at home can keep $115,000 of it (that's OK because it's less than 1/2 of the total) and the rest will need to be spent down to $2,500 before Medicaid starts picking up the tab. That means you've got to use up $182,500.
But the key thing to remember at this point is that the spouse at home doesn't need to spend that $182,500 of hard-earned funds on the nursing home. They can be spent on things of real value to the family. Like paying off the mortgage on the house, back real estate taxes, or finally catching up with all that deferred maintenance (new roof, new furnace, new appliances). Even buying a house or condo for the at-home spouse if there's been no personal residence. Or paying off legitimate debts like car loans, credit cards and uninsured medical bills. In short, it wouldn't take a lot of imagination to see where to spend most of those funds without paying them all to a nursing home each month.
There you have it in a very tine nutshell. By the way, besides spending up the excess assets, there are a number of planning techniques to consider depending on the circumstances - and I don't mean giving all your assets to your kids and hoping they'll help you out if you need it!
Posted 10/11/2013
Medicaid is, plain and simple, a joint state/federal welfare program, like food stamps. Instead of covering the groceries, however, it's intended to pay nursing home expenses for people who need that level of care but don't have the income and assets to afford it. It's entirely different than Medicare, a largely age-based assistance program that has nothing to do with a person's resources.
Let's start with mega-myth #1 - the one that just won't die: A couple must first spend everything they've got on the nursing home, including the proceeds from selling their house, before the one who needs skilled nursing care can qualify for Medicaid assistance. Not true to any extent.
Here's the way it actually works. When a person begins to need nursing care, the couple (or at least the healthy spouse) goes into the Medicaid office (it's in Keene for our area) for what's called a "resource assessment" to determine whether they qualify, and if not immediately, what they need to do to qualify. There are 2 components to qualification: income and assets. The only income that matters is whatever Social Security or pension income the nursing home spouse receives. The spouse still at home can keep all of his or her income, no matter how much it is. If the nursing home spouse receives more income than what Medicaid would pay the nursing home per month (currently about $4,800), less any amount the stay-at-home spouse may need from that income to pay regular living expenses, then the whole process stops there and the couple just has to come up with the funds to pay the nursing home. Sometimes, though, even if Medicaid itself won't kick in, the couple may be able to negotiate an amount to pay the nursing home that's less than the regular private pay rate, but still more than Medicaid would have come up with.
But let's say the couple clears the income hurdle. Then the assessment looks at the couple's assets - and both spouses' assets are in the pot no matter whose name is on them. Also, not just what the most recent bank statements show, but whatever the past 5 years' records would reveal, i.e., helping the grandkids with tuition payments, sending the little ones out on the Big Red Boat, buying a condo for a recently-divorced daughter - or basically doing anything else during the last 5 years that caused the couple's assets to be given to or used for someone other than themselves. That's the so-called "look back" period you hear everyone whisper about, and it's the real thing - and it's not a myth. For that reason, it's wise to keep all those financial records for at least the past 5 years to avoid having to pay to have them re-created at banks and investment firms. Since you're already keeping them for 7 years for tax purposes (you are, right?), that shouldn't be a new assignment. For assets transferred more than 5 years ago, those are off the radar screen entirely and don't figure in the assessment equation at all.
So now we're getting to the real nub of the issue: What assets do get counted? Not your principal residence if there's still a spouse living there. Not your car or other personal belongings like jewelry, art work, tools, or the 48" flat screen. Not your burial plots either. Or term life insurance that doesn't have any current cash value. And most importantly, not half of your financial assets - bank accounts, IRAs, cash value of insurance or securities - up to a total of about $115,000 currently. As an example, let's say all that countable stuff adds up to $300,000. Your spouse at home can keep $115,000 of it (that's OK because it's less than 1/2 of the total) and the rest will need to be spent down to $2,500 before Medicaid starts picking up the tab. That means you've got to use up $182,500.
But the key thing to remember at this point is that the spouse at home doesn't need to spend that $182,500 of hard-earned funds on the nursing home. They can be spent on things of real value to the family. Like paying off the mortgage on the house, back real estate taxes, or finally catching up with all that deferred maintenance (new roof, new furnace, new appliances). Even buying a house or condo for the at-home spouse if there's been no personal residence. Or paying off legitimate debts like car loans, credit cards and uninsured medical bills. In short, it wouldn't take a lot of imagination to see where to spend most of those funds without paying them all to a nursing home each month.
There you have it in a very tine nutshell. By the way, besides spending up the excess assets, there are a number of planning techniques to consider depending on the circumstances - and I don't mean giving all your assets to your kids and hoping they'll help you out if you need it!
Posted 10/11/2013