Introduction
Too many people lose too much money needlessly
because their decisions were based on half
truths, rumors, and myths. This booklet was
written with the specific purpose to prevent
someone, maybe you, from becoming the next
victim of needless impoverishment.
When faced with a nursing home stay, it is
crucial that you are completely informed of all
the pertinent facts so that you do not become
impoverished paying the nursing home for your
cost of care. Please be informed that YOU DO NOT
HAVE TO SPEND ALL OF YOUR MONEY PAYING FOR
NURSING HOME COSTS!
Hopefully by dispelling the myths and stating
the facts that this booklet will serve as a
beacon to help people successfully navigate
their way through the nursing home financial
planning maze.
Myth # 1
"All the information I need on Medicaid is
available from
my state Medicaid Office."
FACT:
That is like saying everything you need to know
about taxes is available from the IRS! Sure your
state offices can provide you with general
knowledge about Medicaid program requirements,
but what you need to know is usually not
available from the people employed by the state
to process applications. They are not in a
position to be your advisor or advocate. They
are paid to gather information and not give it
out.
It is usually prudent, when faced with a nursing
home crisis, to seek the assistance of a
professional advisor. Again, be sure that the
individual or firm that advises you is well
versed in Medicaid eligibility requirements and
long-term care issues. This will ensure that
your specific needs are addressed and that you
minimize the financial drain on your savings and
maximize the preservation of your estate.
Myth # 2
"My Attorney/CPA/Financial Advisor will be able
to help me
with my Medicaid Eligibility."
FACT:
Medicaid eligibility is a complex, ever-changing
arena that requires very specific knowledge of
federal as well as state program requirements
and guidelines. There are many sources of
general knowledge available to the public, none
of which should be used as a planning tool for
specific family situations.
The person you trust with your tax returns, your
investments, your checking and savings account,
or even your legal matters is probably not the
person that you should trust with your
eligibility for Medicaid benefits. These
disciplines are unique and require a great deal
of specific working knowledge and training in
taxes, investing, banking, and law. Medicaid
eligibility planning is another unique field of
estate preservation and management. Should you
need this type of information for yourself or a
family member, please seek out a professional
who specializes in this area of expertise.
You may want to test his or her qualifications
by asking a few questions like "What is the
current maximum income for a Medicaid
applicant?" or "What is the current maximum
Protected Resource Amount for a community
spouse? "If there is a hesitation, or a need to
go look up this information, then you're
probably talking to the wrong person.
Copyright 2001The Ladyman Law Office
Myth # 3
"Medicaid is like Welfare, isn't it?"
FACT:
Medicaid was created by Title XIX of Social
Security Act and is the healthcare safety net
for all senior Americans. Almost three quarters
of the people receiving long term care in
nursing facilities in the State of Texas are
Medicaid residents. Many of these people paid
for their own care until every penny they had
saved was gone (usually spending far more money
than necessary), and then qualified for
benefits.
There has recently been a great deal of proposed
legislation overhauling our nation's healthcare
system. The retooling of Medicare and Medicaid
with an emphasis on the purchase of long-term
care insurance does have its merits. However, it
also fails to address the dilemma of senior
citizens who either cannot afford care or who
cannot medically qualify for it. For those
families and individuals, Medicaid is the only
choice for financial assistance during a
long-term care or nursing facility stay. But as
you'll see, you do not have to be poor or go
broke qualifying for Medicaid benefits.
Copyright 2001 The Ladyman Law Office
Myth #4
"We have too much money to qualify for
Medicaid."
FACT:
One of the most widely circulated myths is that
a person with more than $2,000 in assets can
never qualify for Medicaid benefits. Not true.
Some resources and assets are not even
considered by the state Medicaid agency and are
exempt from counting toward the $2,000 resource
limitation. Such items include your home,
personal belongings, an automobile, certain
pre-paid burials contracts, and even some
business property. The value of some of these
assets can sometimes be without limit, yet
eligibility for benefits will be approved!
For married couples, $2,000 is the limit only
for assets in the name of the Medicaid applicant
- not the applicant's spouse. Medicaid will
currently allow $113,640 to be protected for the
healthy spouse still living at home. This
Protected Resource Amount (or P.R.A.) should be
established the first month of admission to a
hospital or long term care facility if a
continuous stay of more than 30 days is
expected.
Just remember that the 'spend down' to Medicaid
eligibility limits can include spending for
yourself and your spouse, not just to a nursing
home.
Myth # 5
"I can just gift my way to Medicaid
eligibility."
FACT:
Be very, very careful if you are considering
giving any of your money away, or selling
anything for less than what it is worth. In
either case, you have affected an 'uncompensated
transfer', as the state will call it. Any
transfers or resources within 5 years of
applying for Medicaid can make you or your
spouse ineligible for benefits for an unlimited
length of time.
Federal legislation in 1997 made it a criminal
act to make transfers and gifts within a three
to five year period. This 'throw granny in jail'
law levied monetary fines, called for
imprisonment, as well as imposing waiting
periods for benefits. This law has since been
modified, but gifting is still dangerous unless
you know what you're doing. Fortunately, there
are still methods of planned gifting (that
should be carefully designed) that are allowed.
If you have already made gifts in the pasts,
those may or may not cause difficulty with your
potential Medicaid eligibility. Each state has a
formula to determine the appropriate waiting
period for each gift. It is wise to have a
professional advisor in these matters to ensure
you didn't violate any state or federal
regulations with any gifts made.
Copyright 2001 The Ladyman Law Office
Myth # 6
"My income is too high to ever qualify for
Medicaid."
FACTS:
Until early 1994, many people could honestly
make that statement, but not anymore. The
Omnibus Budget Reconciliation Act of 1993 (OBRA
'93) brought about many changes in the
eligibility guidelines developed by the Health
Care Finance Administration (HCFA). One area
that OBRA '93 addressed is hardship cases where
an individual's income exceeds the state's
income maximum, but is still insufficient to pay
privately for nursing home care.
The Qualified Income Trust is the tool created
to help people with high income qualify for
Medicaid. Keep in mind that this specialized
income trust is only to solve the problem of
"too much income" - it does not help if you
still have too many resources. For married
couples, be aware that your Qualified Income
Trust should include stipulations that allow
payment to the stay-at-home spouse for protected
income under the Spousal Impoverishment
provisions of the Medicaid guidelines. With a
properly drafted Qualified Income Trust, all
income of the Medicaid applicant is deposited
into a separate trust account, then the trustee
(that you name) makes distributions. These
dispersals are to the nursing home resident for
their personal needs allowance, the spouse for
their protected income, and the balance to the
nursing home as applied income.
Myth # 7
"I will lose my house if I require Medicaid
assistance."
FACTS:
In most every state, your homestead is treated
as an exempt asset - meaning that it is not
considered in determining "resource
eligibility". In the state of Texas, your home
(including the land on which it is situated) is
exempt regardless of size or value. For single
applicants, the unoccupied home still can be
treated as an exempt resource if the nursing
home resident or his or her responsible family
member attests that there exists an intent to
return home. Some states require a medical
certification to accompany this statement as
well.
Because of its exempt status, it usually is not
wise to sell or give away such property. The
transfer of even exempt property is still
considered as an uncompensated transfer (as
discussed in a previous section), and can create
the waiting periods and potentially criminal
penalties. (There are instances where the
transfer of your homestead is allowable with no
penalty, but those conditions are too lengthy to
discuss in this format.)
Additionally, if you own a home, but still have
too many resources to qualify for Medicaid, you
are allowed to spend money on certain
maintenance, repair, and /or upkeep items.
Copyright 2001Senior Information Services
Myth # 8
"I just can't afford to have my spouse in a
nursing facility."
FACTS:
This is a real fear of many people whose spouses
may need full - time nursing care. Many times
this is an unfounded fear because of lack of
information about provisions that protect the
financial condition of the healthy spouse. The
Medicare Catastrophic Care Act of 1988 mandated
that spouses of institutionalized individuals
should have a protected spousal share of savings
(or resources) and income. The protected share
currently provides $113,640 of assets and more
than $2,841 of monthly income. And this is in
addition to the spouse's ability to have an
automobile and a home of unlimited value!
As stated earlier, the Protected Resource Amount
(or P.R.A.) should be established the first
month of admission to a nursing home - even if
you don't intend to apply for Medicaid benefits
for months or even years later. Keep in mind
that the P.R.A. can only be established from the
month that your spouse begins his or her
continuous, uninterrupted stay in a hospital or
nursing home.
The levels of protected assets and income
changes annually, so be sure to claim your full
rightful share if the need arises.
Myth #9
"I don't have enough money to need a
professional advisor."
FACT:
It is important for just about anyone with any
money or property to have someone with
specialized knowledge and experience help them
with important financial or estate planning
decisions.
Don't be intimidated by the thought that your
estate is not worth someone's time to talk to
you. A good financial advisor treats everyone's
estate with respect. You have worked hard to
accumulate your savings for retirement, and
those dollars should work hard for you after
retirement.
Think of an advisor as someone who is standing
on the other side of a minefield from you. You
now have to cross that minefield. Since it is
obvious that he or she didn't take a wrong step,
wouldn't it be wise to ask them where to step?
(or more importantly, where not to step!) My dad
once told me that experience is something you
get usually just after you needed it most!
Why make financial mistakes that others have
already made and paid dearly for, when you can
avoid them entirely?
Copyright 2001 Senior Information Services
Myth # 10
"Carrying the note on real estate can be a great
source of income
in my retirement years."
FACT:
Homes that have been seller-financed can provide
a source of monthly income, but can also cause
problems with qualifying for Medicaid benefits.
Remember that the financial qualifications for
eligibility involve an assessment of both the
income and the assets of the applicant.
Unfortunately, the note you hold in that sort of
real estate arrangement will be more than likely
considered as both - an income and as an asset.
Even though you have sold the home, the note
itself could be resold to someone else - making
it a source of available cash to you or your
spouse.
Real estate has many advantages as an investment
and may have many attractive tax benefits. As a
general rule, it can become quite an obstacle in
estate preservation planning because it is not
easily liquidated in emergencies. You may have a
desire to fund a burial expense plan, to repair
you exempt homestead, or to effect a program of
allowable gifting; all permissible under current
Medicaid guideline, but not achievable with an
asset as illiquid as a real estate lien note.
Think before you decide to become someone's
mortgage company.
Copyright 2001 The Ladyman Law Office
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