Medicare was a life-changing piece of legislation for America’s seniors.
Before it came along, only about 55 percent of older Americans had health insurance. Now, anyone over 65 can get coverage.
However, Medicare doesn’t cover everything a senior needs. For example, it won’t pay for long term nursing home care. For that, you need to turn to Medicare’s sister program, Medicaid.
Created in 1965 at the same time as Medicare, Medicaid is a joint state and federal program aimed at providing healthcare to people who wouldn’t otherwise be able to pay for it.
In Pennsylvania, a resident cannot have countable assets over $2,400 or $8,000 (depending on the resident’s gross monthly income) to be considered for Medicaid eligibility. These assets can include cash, money in savings, checking or retirement accounts, stock and bonds and real estate outside of your home.
The rules of Medicaid
It’s tempting to hear this and think “Easy enough. I can just transfer all my assets to someone in my family, then apply for Medicaid.”
Unfortunately, it isn’t that simple.
Let’s say that you transfer your assets to your children in December of this year. Then in April of 2020, you apply for Medicaid.
However, the federal government will look at your assets for the past five years when determining your eligibility. If they see you’ve made a substantial transfer, it can affect your eligibility.
This five year time-frame is known as the “Medicaid look back period,” and is a required disclosure for anyone who applies for Medicaid.
Some resources don’t get counted when determining Medicaid eligibility. These include cars, clothing, appliances and household goods, along with pre-paid funeral expenses, life insurance policies that have a cash value below $1,000 and term life insurance.
And not every asset transfer causes a penalty. Giving money to a spouse, a disabled child, or establishing a trust fund for a loved one who has a disability is permissible.
What does it mean to “spend down”?
This might leave you wondering: How do I reach the Medicaid eligibility threshold and still have money to leave behind for my family.
This is where proper Medicaid planning comes into play.
Many people think applying for Medicaid as a senior in order to get nursing care means essentially turning over your home to the nursing home.
But that isn’t the case. With careful planning, you can make sure you protect your assets and still legally reach the Medicaid eligibility threshold.
Let’s say you know you’re going to need long-term nursing home care. You have $300,000 in the bank but had always planned to give some of that money to your kids.
If you transferred that money to your kids, Medicaid would bar you from accessing the program for approximately 29 months the rule is that the amount of the transfer is divided by the average daily cost of nursing home care.
However, you could transfer approximately half the money to your kids, so that the penalty period would only be half as long. Then, you could use the remaining funds to purchase an annuity that pays for nursing care until the penalty phase is over. Medicaid gets what they want, the nursing home gets paid and your kids still have their inheritance.
Are you wondering how to apply for Medicaid? It might be time to reach out to an elder law attorney, who can help you figure out the best way to protect your assets.
The experts at Newman Elder Law can help you with Medicaid planning to ensure you or your loved ones get the care you need without having to sacrifice your hard-earned savings. Contact us today to find out how we can help your family.
This article is not intended as a substitute for legal advice. While every precaution has been taken to make this article accurate, we assume no responsibility for errors or omissions, or for damages resulting from the use of the information in this article.