GOVERNMENT INTERFERENCE: A STATE OF MIND

“I had to place my wife in a nursing home,” says the man who has come to see me today. “I didn’t want to, but she just became too much for me to handle. I’d like to qualify her for Medicaid,” he continues, “but I don’t want the government interfering in my life. Will I be able to sell my house, if I want to?”

Few people understand the Medicaid Act, the law that established and governs the Medicaid program. Medicaid is a health insurance program for needy individuals; however, unlike traditional health insurance programs, Medicaid will pay for the costs of long-term, custodial care, such as care in an assisted living residence or nursing home.

In order to qualify for Medicaid, a person must be impoverished. When one spouse seeks to qualify for Medicaid, the other spouse can retain certain assets, such as the house, a car, and up to a maximum of about $93,000 in cash or cash equivalents (stocks, bonds, IRAs, etc.).

Given the fact that a house is often a couple’s most valuable asset – particularly nowadays in Monmouth County – the ability of the spouse who does not reside in the nursing home (known in Medicaid parlance as the “Community Spouse”) is rather generous. For instance, assume that the couple’s house is worth $350,000 and that the couple has $150,000 in cash or cash equivalent assets. Medicaid would allow the Community Spouse to retain the house and $93,000 in cash/cash equivalents.

Of the couple’s $500,000 in assets, the Community Spouse can retain almost $450,000 of those assets without any planning at all. If the Community Spouse were to retain an attorney knowledgeable in the Medicaid program, he could probably retain another $30,000 to $40,000 of the remaining $50,000, meaning that the Community Spouse could retain almost the entirety of the couple’s resources.

Not bad, considering that once the wife qualifies for Medicaid, Medicaid will pick up the $7,000 a month nursing home bill.

Notwithstanding the generosity of the Medicaid program, some people continue to fret Medicaid’s involvement in their lives. The Community Spouse often worries about being hamstrung by the Medicaid program. He often believes that he cannot sell the house and that Medicaid will somehow “take” his money.

First of all, when determining eligibility for Medicaid, Medicaid doesn’t “take” anything. A person either is or is not eligible for Medicaid. It is true that when a Medicaid beneficiary dies, Medicaid will seek estate recovery from her estate, but Estate recovery is only sought from the estate of the Medicaid beneficiary, not his or her spouse.

If a couple seeks qualified legal advise, the wife – the Medicaid beneficiary in my example – will have no assets in her name, so when she passes away, her estate will have no assets from which Medicaid can seek estate recovery. It’s as simple as that. It’s the “you-can’t-get-blood-from-a-stone” planning technique.

Furthermore, once the wife qualifies for Medicaid, whatever assets the husband has in his name are his assets and are not subject to re-determination or re-evaluation. So, for instance, if the husband were to sell the $350,000, the fact that he now has almost $450,000 in cash/cash equivalent assets – as opposed to the $93,000 that Medicaid, initially allowed him to retain – is inconsequential.

Or, if the husband were to inherit money or win the lottery after his wife is determined to be eligible for Medicaid, those fortuitous happenings would not alter his wife’s continued eligibility for Medicaid. Is that continuing interference?

I might be mistaken, but I don’t think so. Personally, as far as a couple is concerned, I think that the Medicaid is quite generous. With planning, the program becomes very generous – and that’s true for a couple or for a single person.