The last thing a typical 50 or even 60 year old is thinking about is planning ahead for Medicaid eligibility. It seems like something that is way off in the future, until the time arrives suddenly and you are not ready. The problem is, if you have no assets, Medicaid will pay for nursing care. But if you have any assets, Medicaid will pay only after you have exhausted most of your assets.
The US News article, “What to Consider If You May Depend on Medicaid for Nursing Care,” says that trying to qualify for Medicaid can be tough, and it may leave your spouse or heirs with less than you’d imaged. For that reason, you should plan for the possibility that you’ll outlive your assets for years or decades. Your planning should start while you’re still young.
Almost every American, regardless of income or assets, is eligible for Medicare to cover his or her health care in retirement. Medicare covers doctor visits, treatments, hospitalization, and drugs. It also covers a short-term stay in a nursing home for rehab, but it does not pay for any type of long-term care.
The cost of nursing home care averages $225 a day for a semi-private room, which will quickly consume a modest estate. Medicaid covers medical care for poor people of any age and will pay for long-term care in a nursing home. However, this is only for those who meet specific asset and income guidelines, which vary by state. Medicaid is designed to protect those with limited incomes, but planning could be the difference between keeping the family home for the next generation and being forced to sell.
Planning for end-of-life care should be part of retirement and estate planning. Talk with an attorney who specializes in Medicaid planning.
Remember that not all facilities accept Medicaid patients, and they’re not required to accept it. Some facilities only have a certain number of beds for Medicaid patients.
Eligibility rules and asset limits vary by state, and most let you keep your house and some assets and still qualify for Medicaid. However, the state will look back five years to determine your eligibility for Medicaid, meaning the state will analyze the assets you’ve given away or otherwise disposed of in the past five years.
Also, if you sell assets at less than market value to heirs or otherwise give away assets, it might delay your Medicaid eligibility. The asset calculations will consider a healthy spouse. Typically, a healthy spouse can keep half of the joint assets up to a certain ceiling plus enough income to live on when his or her spouse qualifies for Medicaid. This amount may vary by state and situation.
In addition, the state may try to recoup its cost after your death, either through filing a claim against the estate or filing a lien against property; however, the property usually is safe as long as the surviving spouse is living.
A frequent knee-jerk reaction from those who are unfamiliar with Medicaid qualification is to start transferring assets to children, but this is can have disastrous consequences. In addition to the tax consequences, including capital gains tax and gift taxes, there are time limitations that may make this a lose-lose situation. Start with a conversation with an elder lawyer with experience regarding the Medicaid rules in your state, along with an understanding of the tax implications for you and your heirs. Consider purchasing a long-term care insurance policy if you do not already have one in place. There are new hybrid policies that combine life insurance and long-term care, and they may make more sense for you and your family.
Reference: US News (June 9, 2016) “What to Consider If You May Depend on Medicaid for Nursing Care”