Planning for Medicaid Eligibility

Medicaid is a government health payment plan for needy individuals.  In order to qualify for Medicaid benefits, an individual must have a very limited amount of assets and income insufficient to pay for her care.  If a person qualifies for Medicaid benefits, Medicaid will assist with the payment of long-term care costs, such as care in a nursing home or assisted living residence, or care at home.

I have assisted hundreds of clients in qualifying for Medicaid benefits over the past twenty years, perhaps over a thousand.  Quite frankly, I’ve never kept track, but I know how things begin to add up when you do it day-after-day.

Most of my clients never expect to or wanted to qualify for Medicaid benefits.  But faced with the prospect of paying $12,000 a month for their long-term care, my clients found themselves in a position where they needed to qualify for Medicaid.

Applying for Medicaid is a process.  I tell my clients that the actual application process will take between four to six months.  On top of that, I like to begin planning, at least, two months prior to filing the application for benefits.  This means that I am working with a Medicaid client for six to eight months, at a minimum.

A typical Medicaid client of mine owns total assets valued at anywhere from $50,000 to $800,000.  With proper planning, I can save a large portion of these assets for the client’s family.

Sometimes clients or the client’s family says something such as, “We aren’t interested in saving any of mom’s money.  As far as we are concerned, all the money should go for her care.”

I understand that sentiment.  When mom needs care, the family just wants her to get the care that she needs.  The family is frightened.  Mom was the one who cared for them when they were little.  They never had to care for mom.  They are also frightened by the fact that mom may spend the remainder of her life in a long-term care facility.  The normal reaction to all this fear is to be unconcerned with mom’s money and to ensure that mom receives top notch care.

The thing is, throwing money at a problem isn’t necessarily the way to ensure the best results.  When a nursing home accepts Medicaid benefits, the facility must treat the Medicaid beneficiary resident exactly the same as a resident who is paying privately.  Assisted living residences can place Medicaid beneficiaries in smaller rooms, but the care provided to Medicaid beneficiaries must be exactly the same.

Some people don’t believe me.  They think that the workers at the facility know who is on Medicaid and who isn’t, and the staff treat the Medicaid residents differently.  While I somewhat see the logic of this conclusion, this is inaccurate and would be illegal if it did happen, which it doesn’t.

Furthermore, it actually could benefit mom if she transferred money to her children.  Once mom transfers her money to her children, the money belongs to the children.  The children are free to do with the money whatever they want.  While they could use the money mom gave them to take a trip around the world, the children could use the money to supplement mom’s care.

For instance, as I pointed out above, once mom goes on Medicaid, if she were residing in assisted living residence, the residence could move mom to a smaller room; however, the children could supplement the cost of mom’s room and keep her in a larger room.

If a person is going to need long-term care, she typically needs the care in her eighties.  The Medicaid program has a five year lookback period for asset transfers, meaning that if a person transfers assets to her children, the Medicaid program can penalize the person for that transfer for a period of five years following the transfer.  Because of this, I recommend clients begin planning for Medicaid benefits around age seventy.  While a person could plan later than age seventy, planning around that age means there are many different planning opportunities still available to the client.