Kate Mewhinney
Medicaid is the largest source of government funding for nursing home care. Despite what many people think, the government health care program for the elderly, Medicare, covers very few nursing home costs.
But "Medicaid planning," or getting help paying your family member's nursing home costs through the Medicaid program, is not a do-it-yourself project. Even if you go to the terrific lawyer who handled all your speeding tickets over the years, you might find that she's in the slow lane when it comes to Medicaid.
Here are some of the more common "Medicaid myths" that make the process so baffling.
I have to give away everything I own to get Medicaid. In fact, you don't have to be completely destitute to get Medicaid. If your spouse or dependent children, for example, live in your home, you don't have to sell the home. You can also keep personal items, a car and some life insurance.
If I give away assets to family or friends, I won't qualify for Medicaid. It is true that some transfers of assets disqualify you from getting Medicaid. The value of the assets determines how long you will be disqualified. However, certain transfers will not disqualify you. Sometimes it depends on who receives the assets; other times, it depends on the type of property you're transferring. For instance, you typically won't be penalized for transferring property to your spouse. If you're single, you can even transfer your house to your child if that child has cared for you in that home for two years or more. The point is, not all transfers cause problems with getting Medicaid - ask your lawyer what applies in your state.
I have to wait three years after giving anything away to get Medicaid. Medicaid rules do penalize some transfers of property, and the Medicaid agency will examine financial records three years back to see if asset transfers are made. The government doesn't want people "planning to be poor." But the length of time you have to wait isn't always three years. It depends on three things:
- First, was this the kind of transfer that's penalized? (See above).
- Second, what was the value of what was transferred?
- Third, what is the state's formula for calculating the penalty period? Each state figures out how much it costs, on average, to pay for a month of nursing home care. They then divide that figure into the value of the asset that was given away. The cost of care figure varies from state to state and, in some states (like New York) there are different formulas depending on what part of the state you live in. So if you live in North Carolina and you give your kids $60,000 because you expect to be entering a nursing home, you will be penalized for that transfer based on the following equation: 60,000 divided by 3,000 (the monthly cost of the nursing home), resulting in a 20-month penalty. In other words, you won't be eligible for Medicaid assistance for your nursing home care for 20 months.
I can keep all our marital property and my inherited property when my spouse gets Medicaid. Medicaid rules generally consider all the assets in either spouse's name when one spouse enters a nursing home. However, there are certain property protections for the at-home spouse. Those protections vary by state and are usually based on a percentage of the couple's "countable assets," which generally consist of savings and investments, real estate other than the home and things like excess life insurance. It is important to remember that the amount an at-home spouse can keep can almost always be increased with expert legal advice, so don't despair as you read what follows.
If I put my property in my spouse's name, I will be eligible for Medicaid. Nope. See above.
Medicaid rules that applied to my neighbor when he went into a nursing home will also apply to me. This area of the law has changed quite a bit in the last few years, so don't assume the rules that applied to your neighbor are still in effect. For example, under federal Medicaid law, there's no longer a three-year "cap" on the length of a transfer penalty. So now, disqualifications resulting from large asset transfers can exceed three years. Also, people often confuse rest homes with nursing homes; the Medicaid rules that apply to one won't necessarily apply to the other.
If I enter a nursing home as a private pay resident, I must use up my assets before I can get Medicaid. I can only "spend down" my assets on medical or nursing home bills. This is wrong for several reasons. First, you are allowed to keep certain limited property, as we discussed earlier. Second, you may be able to protect some of your assets - by buying certain non-countable assets or by making certain transfers to family members, for example. Federal law prohibits nursing homes from selling you this myth if the facility is Medicaid certified. Unfortunately, some nursing homes try to force people to stay as private pay, since the rate is usually higher than Medicaid reimbursement rates.
My power-of-attorney automatically has the power to take property out of my name, if I ever need Medicaid. Most state laws require that you explicitly include a "gifting power" for your agent under the power of attorney to be able to retitle your property. If you want your agent to be able to transfer assets to provide more for your spouse and/or children, in particular, you should say so in your power of attorney.
I can only give away $10,000 per year under Medicaid rules. This refers to a federal gift tax rule that has nothing to do with Medicaid law. We're talking apples and oranges here! A gift of $10,000 per year will probably trigger a Medicaid penalty, however short-lived.
Remember, these are all myths. And keep in mind that the answers given above are general rules that apply in most states. Consult an experienced attorney to determine how the Medicaid rules apply to your situation.
Related Web Links:
Medicare NAELA
Kate Mewhinney is a clinical professor at Wake Forest University School of Law and is the managing attorney for its Clinic for the Elderly, which serves financially eligible residents in the Winston-Salem area of N.C. She is certified as an elder law attorney by the National Elder Law Foundation, a nonprofit organization dedicated to the development and improvement of the professional competence of lawyers in the areas of elder law.