AN OLDIE BUT A GOODIE
In recent columns, I’ve written about fairly recent developments in the field of elder law – court decisions that strength, and reaffirm, the rights of seniors. In this column, I’d like to write about a subject that I have written about before, yet it is a subject that, quite frankly, people either just don’t understand or don’t believe. So, the subject is well-worth writing about again, because if you’re interested in elder law issues, then you’re interested in this subject.
Almost universally, people believe that they are ineligible for Medicaid for three years; furthermore, people believe that they cannot plan for Medicaid eligibility once they enter a long-term care facility, such as a nursing home or assisted living residence.
Combined, these two misconceptions prevent many people who otherwise might qualify for Medicaid benefits in a relatively brief period of time from even attempting to plan for Medicaid eligibility. The result, these people spend tens of thousand of dollars – if not hundreds of thousands – more than they have to on their care.
Now, some people don’t want to plan for Medicaid eligibility. I have met several people who believe that planning to qualify for Medicaid benefits is immoral. In the opinion of these people, planning for Medicaid is foisting their financial burden on others.
On the other hand, most people if faced with the devastating costs of long-term care do want to plan to qualify for Medicaid.
As I’ve mentioned before, this moral conundrum is not something that I can resolve. What I can tell people is that Medicaid planning, like tax planning, is legal. Like the tax code, the laws governing the Medicaid program create and allow for all of the techniques that attorneys employ to qualify individuals for Medicaid.
My personal – as opposed to legal – opinion is that our government needs to get involved, in some meaningful way, with curbing the costs of health and long-term care. For those without health insurance, health care costs can quickly devastate a family’s finances. As for long-term care, while there are companies that offer long-term care insurance, few people believe that they can maintain the premium costs, which are often high.
Yet, there is no one answer to the moral conundrum: Should I plan to qualify for Medicaid. Certainly, few people wish to voluntarily impoverish themselves by divesting themselves of their life savings. But faced with an $8,000 a month bill, most people will do what it takes to stop the financial bleeding.
Once a person decides to plan for Medicaid eligibility, the problem becomes the misconceptions under which they labor – I’m ineligible for three years, I can’t plan anymore because I’m in a nursing home. Reality is, neither of these statements are true.
The “three-year lookback rule,” the source of the “I’m-ineligible-for-three-years” misconception does not state that an individual is ineligible for Medicaid benefits for three years. There is a five-year lookback rule for transfers to and from certain trusts, but that does not mean that an individual is ineligible for five years, either.
The lookback rule deals with the time-period that Medicaid is looking at to see if the person made any gifts. Only gifts made during or after the lookback period – as opposed to before the lookback period – can be penalized; however, a gift made during the lookback period may, and often does, have no affect on an individual’s eligibility for Medicaid at the time the person is seeking eligibility for Medicaid.
A gift made during the lookback period can result in a “penalty period.” A “penalty period” is a period of ineligibility for Medicaid; however, depending on when the gift was made during the lookback period, the amount of the gift, and the time when the person is seeking Medicaid eligibility – the resulting penalty may have, and often has, expired long before the person needs Medicaid.
The key is planning correctly. And, quite frankly, the key is to retain an attorney who knows what he is doing. Frequently, I will meet with a person and tell them something about Medicaid, then two months later, the person will call my office and tell my staff that their neighbor, friend, a person at the Medicaid office, whomever told them something different. When it comes to Medicaid, it would seem that everyone is an expert. Proper legal advice can help you navigate this obstacle course.
And it is this obstacle course that created the “three-year” and “too-late-to-plan” misconceptions.
By the way, as for the “it’s-too-late-to-plan misconception” – most of my clients come to me after they have entered a nursing home or assisted living residence. It’s never too late to plan, unless you don’t have any more money. Once you’ve spent all of your money, it’s too late to save your money.