Should I Apply for Medicaid?

When mom (or dad) needs care in a nursing home, should she apply for Medicaid benefits? There are many factors that go into this answer; there is no one-size-fits-all answer.

Long-term care can last a long-time.  That fact is right in its name, long-term care.  And long-term care can cost a lot of money.  Care in a nursing home can cost anywhere from $10,000 to $15,000 a month.  Care in an assisted living residence can cost anywhere from $5,000 to $12,000 a month.  Care at home can cost anywhere from a few hundred dollars a month to $8,000 a month, depending on the number of hours for which you hire a home health aide.

Let’s assume that Mrs. Smith enters a nursing home and lives in the home for three years before she passes away.  The nursing home could cost her $540,000.  Add on incidental costs, and the total cost of her care for those three years could be in excess of $600,000.  That’s a lot of money, and for many people, that more money than they have accumulated over the course of their lives.

Medicaid is a federal and state government payment plan.  Unlike traditional insurance, Medicaid will pay for the cost of long-term care.  Medicaid will pay for care in a nursing home, care in an assisted living residence, or care at home.

The provider of the care (the nursing home, the assisted living residence, the home health aide agency) must provide the same quality of care to individuals private paying for care and for individuals paying through Medicaid, and those providers do provide the same quality of care. There are no “Medicaid nursing homes” where recipients of Medicaid benefits are warehoused and treated poorly.  Most every nursing home in New Jersey accepts Medicaid benefits and for those that do accept Medicaid (which is just about every nursing home) between 45% and 100% of their residents receive Medicaid benefits.

The nursing home staff—the people who actually care for your mother—do not know who is and who is not on Medicaid, and quite frankly, they don’t care who is or who is not on Medicaid.  The staff (the doctors, the nurses, the aides) are there to perform their jobs for all the residents; they don’t receive higher pay for providing a higher level of care to those residents who are private paying.

So, should you apply for Medicaid benefits?  It depends.  If your total assets are worth $2,000,000 or more, probably not.  If your income (pension, Social Security, investment income, long-term care insurance) is sufficient to pay for the cost of care, probably not. Individuals with substantial assets or high income or both do not need Medicaid benefits or probably could not qualify for Medicaid benefits without incurring painful adjustments.

Over the course of my nearly twenty-five-year career, I have assisted thousands of individuals qualify for Medicaid benefits.  The typical Medicaid planning client has between $30,000 and $900,000 of total assets including her home.

Some people view Medicaid through a morality lens.  Some people believe it is immoral to plan for Medicaid benefits. Some people seem to believe that qualifying for Medicaid benefits is a failure of some sort.

How someone feels about an issue is difficult to address.  Feelings are not necessarily logical.  I can say that Medicaid planning is legal.  The New Jersey Supreme Court has stated that Medicaid planning, like tax planning, is something in which competent people want to engage.

Few people would question planning to pay less income tax.  It is the “American way” to legally minimize the amount of income tax you pay.  Medicaid planning, seeking to qualify for Medicaid benefits while preserving a portion of your assets for your family, is similar to tax planning.