The high cost of long-term care, especially nursing home expenses, can rapidly drain your savings. However, with proper planning and the right strategies, you can qualify for Medicaid while protecting your hard-earned assets. In this blog, we’ll look at ways to protect your assets and still benefit from several programs under Medicaid’s umbrella of services.
Medicaid’s Long-Term Care Services
Medicaid offers several vital long-term care services to help individuals access the care they need. In particular, we’ll examine Nursing Home Care, the Assisted Living Waiver, and the Home Care Waiver—PASSPORT Program.
Nursing Home Care
Most people assume that Medicare will cover their nursing home care needs. However, most are shocked to find out that Medicare will only cover up to 100 days’ worth of care. Usually, Medicare stops far short of the 100-day mark due to stringent requirements to stay under their service coverage.
The other options are paying out of pocket, having enough long-term care insurance to cover the cost, or accessing Medicaid to help with the cost of long-term care in a nursing home. Don’t think you qualify for Medicaid or won’t ever need Medicaid to help with your or a loved one’s care costs?
Accessing Medicaid allows a person in a nursing home to receive the 24/7 care they need, while Medicaid handles the nursing home costs. With proper planning for accessing Medicaid, you can avoid entirely depleting your assets or relying on financial gifts from family members to pay for nursing home expenses.
Assisted Living Waiver
The Assisted Living Waiver program provides Medicaid benefits for individuals residing in an assisted living facility. This program helps cover the cost of care and services in an assisted living setting, enabling participants to live in a more home-like environment while still receiving the support they need.
While there are Medicaid income eligibility requirements, these limits are flexible, and there are many options to have Medicaid supplement the cost of assisted living, allowing more individuals to access affordable assisted living care while protecting their assets.
Home Care Waiver – PASSPORT Program
The PASSPORT (Pre-Admission Screening System Providing Options and Resources for Treatment) program is a Medicaid Home Care Waiver designed to help eligible individuals remain in their homes or communities instead of entering a nursing home. PASSPORT covers a range of home care services, including personal care, home health care, adult day care, and medical services.
This program allows participants to direct their own care, giving them more control over their services. By accessing PASSPORT benefits with the assistance of an elder law attorney, individuals can avoid or delay placement in a nursing home and preserve their independence longer.
The Role of Elder Law Attorneys in Medicaid Planning and Asset Protection
Elder law attorneys can play a crucial role in helping individuals protect their assets from long-term care expenses while qualifying for Medicaid. These skilled attorneys understand the complex Medicaid rules and restrictions, allowing them to develop effective asset protection strategies tailored to each client’s situation.
At Jarvis Law Office, our elder law attorneys can help you protect your home and other needed assets. While Medicaid will help with many costs, there will likely be items they will not cover, so preserving assets for the person needing assistance or their spouse is incredibly important.
The experienced elder law attorneys at Jarvis Law have numerous tools and strategies to help with nearly every situation. With their guidance, you can successfully navigate the Medicaid application process while protecting your options and assets. Don’t attempt Medicaid planning and asset protection alone—consult with our experienced elder law attorneys to ensure your financial security.
Understanding Medicaid Eligibility and Benefits
Medicaid is a needs-based government program, meaning you must meet strict income and asset limits to qualify. The Medicaid application process is complex, and improper planning can result in a penalty period. So, understanding Medicaid eligibility and benefits is essential to protecting assets from long-term care expenses.
Let’s dig deeper into Medicaid’s eligibility guidelines.
Income and Asset Limits for Medicaid Eligibility
Medicaid has strict income and asset limits for qualifying for benefits. As of 2024, the income limit for long-term care services is $2,829 per month, and the asset limit is $2,000 for an individual. To become eligible, any income or assets above these limits must be spent down or transferred properly, preferably under the advisement of a skilled elder law attorney.
Countable assets include cash, bank accounts, investments, and other assets that can be converted to cash. However, certain assets are exempt, like your primary residence (up to a certain equity value), one vehicle, and personal items.
A Jarvis Law Office elder law attorney can help you navigate these limits and develop strategies to qualify for Medicaid while protecting your assets. However, even when an item is “exempt” initially, that doesn’t mean that the State won’t come after it later on. For this reason and others, it’s important to plan properly from the start to prevent unwanted surprises later on.
Medicaid’s Look Back Period and Penalty for Improper Transfers
Medicaid has a five-year look-back period. This means that anytime you apply for one of Medicaid’s long-term care programs, they look back to review all of an applicant’s financial transactions for the preceding five years. It’s important to understand how the look back and penalty for improper transfers work before you apply for any of these programs. If you’ve made improper transfers or gifts of assets during this five-year period, you’ll likely face a penalty, which could significantly delay your Medicaid eligibility.
Also, there is no limit to the length of the penalty period, so giving away a significant amount of assets could prevent the applicant from accessing Medicaid benefits for the remainder of their lives. This is yet another reason why it’s so important to pre-emptively work with an experienced elder law attorney who routinely deals with resolving these and other issues prior to ever applying for Medicaid.
The initial challenge of having a penalty period to deal with means you’re ineligible for Medicaid benefits, leaving you to pay out-of-pocket for long-term care. The reality is even more harsh in that the funds needed to pay through the penalty period often exceed the amount given away due to the methodology that Medicaid uses to calculate the penalty period. In short, you may need to pay MORE money for care than the amount given away, causing additional financial devastation or, worse, having no option to access care at all.
To avoid these unintended and burdensome outcomes, it’s crucial to work with an elder law attorney to implement asset protection strategies well before you need long-term care. Don’t attempt to transfer assets or make gifts without understanding the Medicaid rules and potential penalties.
Benefits of Medicaid Coverage for Long-Term Care
Despite the income and asset limits, the benefits of Medicaid far outweigh the costs of paying privately for long-term care. With Medicaid, you can access comprehensive coverage for nursing home care, assisted living care, and home care services.
With the right planning and guidance from our elder law attorneys, you can navigate the Medicaid system and secure the benefits you need while safeguarding your financial security.
Asset Protection Strategies
Proactive planning is key to protecting your assets from the high cost of long-term care. Consider the following strategies. Keep in mind that consulting with an elder law attorney is the best way to determine the right approach for your situation.
Transferring Assets to Family Members or Trusts
One strategy is to transfer assets to family members or trusts. Gifting assets to children or grandchildren can reduce your countable assets, helping you meet Medicaid’s asset limit. However, this must be done carefully to avoid triggering a penalty period.
Medicaid has a five-year look-back period, and improper transfers can result in a penalty, delaying your eligibility. Certain trusts, like asset protection trusts, can also hold assets while protecting them from nursing home expenses. A skilled lawyer can help you navigate the Medicaid rules and implement a gifting strategy or trust plan that safeguards your future.
Converting Countable Assets to Exempt Assets
Another approach is to convert countable assets to exempt assets. For example, you could use countable assets to improve your primary residence, which may be an exempt asset, depending on whether your spouse is living there or if you are able to return home in a reasonable amount of time. Renovations like adding a first-floor bedroom or walk-in shower can enhance your home’s value while reducing countable assets.
However, this strategy does not work in every situation. Medicaid may force the sale of the home to become eligible for Medicaid services, or it may force the sale of the home after the Medicaid recipient’s passing to pay itself back through its Estate Recovery program.
You could also spend down on exempt expenses like medical costs, personal care items, or funeral expenses. Our elder law attorneys can advise on the best ways to convert assets while meeting Medicaid’s requirements.
Using Medicaid-Compliant Annuities
Medicaid-compliant annuities can be a powerful tool for asset protection. These annuities convert a lump sum of assets into a stream of income, reducing your countable assets while providing a predictable income stream. The income from an annuity can be used to pay for care while you wait for Medicaid eligibility.
However, annuities must meet strict Medicaid rules to be considered exempt. Our Medicaid attorneys can help you select a Medicaid-compliant annuity as part of your overall asset protection strategy.
Implementing Asset Protection Trusts
Asset protection trusts, like irrevocable trusts, can hold assets while shielding them from long-term care costs. By placing assets in a trust, you can remove them from your name, reducing your countable assets. The trust then owns the assets, protecting them from Medicaid’s estate recovery program.
This type of trust is used as one tool in an overall strategy and should only be established for Medicaid planning purposes by an elder law attorney experienced in working with Medicaid’s rules and application process.
Asset Protection trusts allow you to maintain control of your assets while still qualifying for Medicaid. Our elder law attorneys can help you establish an asset protection trust as part of a comprehensive Medicaid plan.
Protecting Your Home
Your home is likely your most valuable asset, and protecting it from long-term care costs is essential. Medicaid has a program to recover assets from estates after death to reimburse the state for long-term care costs.
This program, called Estate Recovery, was mentioned earlier as well. This means your home could be at risk if you need to apply for Medicaid. However, proactive planning with a skilled elder law attorney can safeguard your home and other real property. Consider the following strategies:
Irrevocable Trusts
Transferring your home to an asset protection trust, which is a hybrid type of irrevocable trust, can also protect it from long-term care costs. The trust then owns the property, removing it from your name.
You can still live in the home, and the trust can sell the property and use the proceeds. Upon your death, the trust can distribute the remaining assets as you’ve directed, avoiding probate estate recovery and protecting your privacy. We can help you establish an asset protection trust as part of your overall asset protection plan.
Don’t wait until it’s too late – consult with an elder law attorney to determine the best way to protect your home and other assets from the high cost of long-term care. With proactive planning, you can safeguard your hard-earned nest egg and ensure your financial security.
Other Strategies to Consider
In addition to transferring assets and implementing trusts, several other strategies can help you protect your assets from long-term care expenses while qualifying for Medicaid.
Maximizing the Monthly Income of the Community Spouse
If one spouse requires long-term care (the “institutional spouse”), the other spouse (the “community spouse”) may keep a portion of the couple’s income and assets. Medicaid allows the community spouse to retain a Minimum Monthly Maintenance Needs Allowance (MMMNA) to ensure sufficient income for their living expenses. As of July 2024, the MMMNA will be at least $2,555 and up to $3,853 per month.
Our elder law attorney can help maximize the community spouse’s income while the institutional spouse applies for Medicaid. This can involve allocating income to the community spouse or using assets to purchase an annuity that benefits the community spouse.
Many community spouses worry that they’ll lose part of their income if their spouse accesses Medicaid for long-term care, but this is not usually the case. Meeting with an elder law attorney familiar with Medicaid’s income and asset rules can help you determine your situation if your spouse accesses Medicaid for long-term care needs.
Spending Down on Exempt Expenses
If you have excess assets above Medicaid’s limit, you can spend down on exempt expenses to become eligible. Exempt expenses include medical costs, personal care items, home modifications for accessibility, and funeral expenses. You could pay off medical bills, replace old medical equipment, or prepay funeral expenses.
You could also make your home more accessible by adding handrails, a walk-in shower, or a first-floor bedroom. The team at Jarvis Law can advise on the best ways to spend down on exempt expenses while meeting Medicaid’s requirements.
Long-Term Care Insurance as an Alternative
While Medicaid is a vital program for individuals who need help getting through the day, others may prefer to proactively plan for long-term care costs using private insurance. Long-term care (LTC) insurance allows you to pay premiums for a policy that covers future LTC expenses, potentially giving you more options for your care.
LTC Pros & Cons
LTC insurance policies vary, but most provide a daily benefit amount for a specified number of years. You choose the coverage amount, benefit period, and elimination period (deductible) when you buy the policy. Once you need long-term care, you file a claim and receive benefits to pay for care in your preferred setting, like home care, assisted living, or nursing home care. LTC insurance provides predictable payments to cover long-term care costs, helping preserve your assets.
Benefits and Drawbacks Compared to Medicaid
The main benefit of LTC insurance is that it allows you to access care in your preferred setting, like your home, while Medicaid has more restrictive eligibility and often prioritizes institutional care. LTC insurance also provides more flexibility in who can provide the care.
However, LTC insurance requires paying premiums, which can increase over time, and it won’t cover care needs after the policy’s benefit period ends. In contrast, Medicaid has no limit on the length of coverage for eligible beneficiaries. LTC insurance also requires medical underwriting, so those with health issues may not qualify for coverage at all.
Importance of Carefully Selecting a Policy
If considering LTC insurance, it’s crucial to carefully select a policy. Look for inflation protection to ensure the benefit amount keeps pace with rising care costs. Consider a policy with a shared benefit rider for couples, allowing you to tap into your spouse’s unused benefits. Be aware of the elimination period, as this is the number of days you must pay for care out-of-pocket before benefits begin.
Also, understand how the policy defines the need for long-term care, as some require cognitive impairment or inability to perform two or more activities of daily living.
If you are considering long-term care insurance as an option for your long-term care needs in the future, please meet with an elder law attorney prior to putting a long-term care policy in place. Some of the challenges we routinely help resolve include (varies by state and provider issuing the policies):
- Premiums increasing by 30% or more year after year.
- Agreements made to “lock in” the premium end up “freezing” the monthly and lifetime policy payment limits, leaving those insured with policies that often fall short of the cost of care. The insured must (A) spend down, (B) supplement from their spouse’s income, or (C) apply for Medicaid to make up the shortfall.
- Policies may not cover every care setting.
- The amount the policy is established to cover falls short of the actual cost of care, even when the individual’s income is added.
- The policy is terminated by the individual several years into the coverage as the premium payments are no longer manageable.
Navigating the Rules and Avoiding the Mistakes
Medicaid has complex rules and restrictions to qualify for benefits. Navigating these rules requires careful planning to protect your assets from nursing home costs and avoid costly mistakes. Here’s how to understand Medicaid’s asset rules, avoid unintended penalties from improper transfers, document transactions, and seek guidance from an elder law attorney with experience in Medicaid.
Understanding Medicaid’s Asset Rules and Restrictions
Medicaid has strict asset limits for qualifying for long-term care benefits. As of 2023, the individual asset limit is $2,000, and countable assets include cash, bank accounts, investments, and other assets that can be converted to cash. However, certain assets are exempt, like a life insurance policy with less than $1,500 in cash value, one vehicle, and personal property.
Medicaid also has rules for how much a married couple can retain in assets. An elder law attorney can help you understand these much more complicated rules and develop a plan to qualify for Medicaid while protecting your assets from nursing home costs. Likewise, certain assets are exempt here as well, which include the above and the primary residence as long as the spouse is still living there.
However, the State of Ohio will likely use its Estate Recovery arm to pay itself back by placing a Medicaid lien on the home if Medicaid does pay for any services.
Estate Recovery can be avoided. Talking to an elder law attorney will let you know if and how this may apply to your situation.
Avoiding Financial Gifts and Improper Transfers
Medicaid has a five-year look-back period to review all financial transactions before applying. If you’ve gifted assets or made improper transfers, you’ll face a penalty period, delaying your Medicaid eligibility. This can leave you to pay out-of-pocket for nursing home costs, putting your assets at risk.
To avoid this, refrain from gifting assets or making transfers without consulting your elder law attorney. They can help you implement a gifting strategy or trust plan that complies with Medicaid rules and safeguards your wealth.
Documenting All Financial Transactions
To avoid a Medicaid penalty, it’s essential to document all financial transactions during the look-back period. Keep detailed records of all transfers, purchases, and expenditures. If you’ve made gifts, be prepared to explain these.
If you’ve used assets to pay for care or exempt expenses, document these to show they were legitimate expenditures. Our elder law attorney can advise on what records to keep and how to document transactions properly.
Conclusion
Navigating Medicaid rules and avoiding mistakes requires guidance from an experienced elder law attorney with a thorough knowledge of Medicaid planning and asset protection.
Changes in Congress can have a big impact on Medicaid. Federal law and funding levels are constantly evolving, and these changes can affect eligibility rules, benefit levels, the program’s financial sustainability, and insurance plan costs. To stay informed, follow reputable news sources and advocacy organizations that specialize in healthcare and Medicaid.
Most importantly, don’t hesitate to reach out to legal advisors like the team at Jarvis Law Office for personalized advice and assistance. Our team focuses on elder law and can provide valuable insights and guidance on navigating the complexities of Medicaid. Whether you need help understanding eligibility rules, comparing plans, or finding the right providers, we’re here to support you.
Don’t wait until a nursing home stay is imminent – consult with the experienced elder law attorneys at Jarvis Law Office to create a personalized plan. They can help you navigate Medicaid’s complex rules, implement trusts or annuities, and maximize the income of a community spouse.
Long-term care is inevitable for many, so plan ahead to maintain your financial security and peace of mind. Contact the Jarvis Law Office today.
