The takeaway: Medicaid foots the bill for 62% of all nursing home residents. Everybody else is paying over $100,000 a year. To be one of the 62%, you need to know the following four things: 1) Medicaid’s financial requirements, 2) how to find legal help so you can potentially meet those requirements regardless of your current situation, 3) how much legal help will cost, and 4) what steps Medicaid takes to make sure you actually qualify. It’s all here!
After his dad had a stroke, my friend Joey and his mom were shocked to realize that Medicare only pays the first 100 days of nursing home care.
Shock turned to heartbreak when it was clear his dad would require nursing home care far beyond 100 days.
Then heartbreak turned to horror when they realized how much nursing homes cost—currently $108,405 a year, which is $9,034 a month.
Joey’s mom tried to get Medicaid assistance with the nursing home bills, but since neither she nor her husband were classified as indigent, her requests were denied.
When her husband finally died, Joey’s mom, who was still in good health, had little left financially. All the money she and her husband had saved for their golden years had gone to the nursing home.
I’ve lost touch with Joey. But I still recall the frustration and financial disappointment the family experienced trying to navigate the behemoth known as Medicaid. What happened to Joey’s parents could happen to any of us–if while hoping for the best, we don’t proactively prepare for the worst.
What could have prevented this scenario?
Although hindsight is 20-20, Joey’s parents might (or might not) have prevented this scenario had they taken two courses of action.
First, twenty years earlier, they could have rolled the dice with a traditional standalone long-term care insurance policy and, as we’ve already discussed:
- paid the premiums and maybe gotten the care they initially signed up for.
Second, five years earlier, they could have consulted an expert in Medicaid Planning so that, like 62% of other nursing home residents, their expenses had a chance of being covered by Medicaid.
Today, let’s discuss getting the costs covered by MediCAID. But first, let’s be clear. MediCAID is welfare, while MediCARE is health insurance. (We aid the poor and care for the elderly.) Among other things, MediCAID pays for nursing home care. MediCARE doesn’t — beyond the first 100 days after discharge from a hospital.
What four things do I need to know to get Medicaid to pay for nursing home care?
To be among 62% of nursing home residents whose care is paid by Medicaid, you need to know:
- what the general Medicaid requirements are;
- how to find an expert to help you navigate this massive government program;
- how much such expert help will cost; and
- how Medicaid qualifies you for the program and what financial penalties you’ll face if you try to out-smart the Medicaid program. (Hint: beware of the five-year look back!)
Navigating these four steps isn’t for amateurs, Boomer.
#1. Know the income and asset requirements to qualify for Medicaid.
Medicaid is a federal program operated in conjunction with each state, whose Medicaid requirements are specific to that particular state. It’s a program designed to provide health coverage for the disabled, children born into poverty, and the frail elderly. In short, Medicaid is a program for the indigent. (With nursing home costs over $100,000 a year, you—and your family—could end up indigent without advanced long-term care planning.)
Medicaid is a lot like the U.S. tax code–complex, badly written, and hard to understand. Folks with the fancy lawyers pay less.”
It’s hard to prepare for Medicaid eligibility in advance because Medicaid is a lot like the U.S. tax code. The requirements are hard to figure out. In addition, folks with fancy lawyers protect more of their assets. They suffer less financially than the rest of us.
I’m no lawyer, fancy or otherwise. But as a public service, here’s a general list of Medicaid’s requirements. I’ve relied on several sources, not the least of which is the work of Gabriel Heiser.
He just so happens to be a fancy lawyer and breaks it all down in his wonderful book, How to Protect Your Family’s Assets from Devastating Nursing Home Costs: Medicaid Secrets. (I receive no compensation for any of these referrals.)
If a woman has a salary of, say, $20,000 a month, Medicaid doesn’t require that that salary to go toward her husband’s nursing home care.“
There are many Medicaid requirements, perhaps the most formidable being those related to your finances. Specifically, these are Medicaid’s
- income requirements and
- asset requirements.
Income is defined as, among other things:
- Social Security;
- Supplemental Security Income (SSI) benefits;
- veteran’s benefits;
- annuities; and
Although dollar amounts in your state may vary slightly, the maximum income allowed is shown below.
- Single person—income from all sources no higher than $2,382 a month to qualify.
- Married couple both requiring nursing home care—combined income no higher than $4,764 a month
- Married couple, where one person is in a nursing home and the healthy spouse remains at home—Income for the spouse in the nursing home income can be no higher than $2,382 a month.
- For the live-at-home spouse who earns little or no income, Medicaid will transfer the nursing home spouse’s income to her/him—up to a maximum of $3,259.50 a month.
- In cases where both the nursing home spouse and the live-at-home spouse have little income, spousal impoverishment standards are applied.
- When the live-at home spouse has his/her own income, there’s no income cap–no matter how high the income. If the live-at-home spouse has income paying $20,000 a month, that money is his/hers to keep and use how ever he/she wishes. Medicaid doesn’t require it to go toward the spouse’s nursing home care. However, the check providing income must be from a company, organization, or government and made out only to her. It can’t be a personal check written by a private party.
Asset Requirements to Qualify for Medicaid.
The list below is for both singles and married couples. When one member of a married couple applies for Medicaid, the assets of both are considered in deciding eligibility—regardless of whether the assets are owned jointly or independently.
Assets are divided into two groups: countable and excluded.
“Countable assets” are the assets Medicaid includes (i.e., “counts”) when determining your financial eligibility for nursing home coverage.
Countable assets include:
- cash, Certificates of Deposit (CDs), checking and savings accounts;
- joint bank accounts;
- pre-tax retirement accounts, like the traditional IRA, 401(k), 403(b), and 457(b) as well as post tax retirement accounts like the Roth IRA;
- whole life insurance cash values exceeding $1,500;
- real property other than your primary residence;
- most annuities;
- all autos beyond the first car;
- trucks, tractors, boats, machinery, and livestock; and
- selected types of building and land.
“Noncountable assets” are not counted toward Medicaid eligibility if they don’t exceed the financial amounts noted below. (Remember, your state may vary slightly.) This means these assets don’t count against you in determining Medicaid eligibility.
Noncountable assets include:
- $2,000 in cash for the spouse in nursing home care;
- a primary residence if the non-nursing home spouse is living in it or the nursing home spouse intends to return to it;
- equity (not the home’s market value) in the primary residence, between $603,000 and $906,000–depending on your state;
- personal property like furniture, jewelry, and household belongings;
- one automobile of virtually any value;
- whole life insurance with a face value under $1,500;
- prepaid burial expenses;
- property used in a trade or business; and
- the first $6,000 of a non-business property used for self-support if the property generates at least 6% return, i.e., you can keep the first $6,000, but the rest becomes a countable asset.
“Community Spouse Resource Allowance.” The live-at-home spouse is allowed assets of up to a maximum $130,380.
The above are tough legal requirements and you’ll want help understanding what possibilities exist for you to meet them. Difficult or not, 62% of nursing home residents have their costs paid by Medicaid. If you want to be part of that 62%, a lawyer trained in elder law may be able to steer you in that direction.
No, frugal boomer. You don’t want your brother-in-law who’s an attorney handling this issue. There’s too much money at stake.”
Look for an attorney with the CELA designation–Certified Elder Law Attorney. The National Elder Law Foundation website lists CELAs in your area. (At top of home page, click on “Find a CELA.”) Lawyers with the “CELA” designation have met a host of requirements to become certified in elder law. This includes a full-day examination testing their competence on a variety of issues affecting you.
There are only about 400 Certified Elder Law Attorneys in the US. Call one up, ask their fee, and then get an appointment to discuss “Medicaid planning,” which is code for “sheltering your assets from Medicaid to the extent allowed by law.”
(No, frugal Boomer. You don’t want your brother-in-law handling this. There’s too much money at stake.)
If you can’t find a CELA attorney, then check out the two sites below.
- The National Academy of Elder Law Attorneys provides listings of attorneys who can help. (Verify they are skilled in Medicaid planning before you go in.)
- The ElderLawAnswers.com website also has attorney listings of those who can likely help. (Again, verify they’re skilled in Medicaid planning before you go in.) This group’s site has some literature and guides on Medicaid and Long-Term Care that you’ll find useful.
If you still can’t find an elder law attorney in your area, call your state’s Bar Association. Ask the Bar Association for a list of “elder law attorneys specializing in “Medicaid planning.”
You really don’t want to go this alone, Boomer.
Elder law attorneys cost less than the $8,800 a month–$105,850 a year—it costs for a nursing home.
#3. Know how much expert Medicaid advice costs.
I called CELA attorneys in the five different regions of the U.S. (i.e, midwest, north, south, east, and west.) I asked how much an initial Medicaid planning consultation would cost. Here’s what I found.
Table 1. Consultation Price for a Certified Elder Law Attorney.
The above isn’t chump change, but it beats paying $8,821 a month to a nursing home. Many of the attorneys I spoke with indicated that the intial consultation fee would roll over into any further fees if I retained their services. My calls went something like this:
I’m calling because I’m interested in scheduling an appointment with [name of CELA lawyer] to discuss “Medicaid planning.” I got your number from the NELF [National Elder Law Foundation] directory. Can you tell me what the initial consultation fee would be?
#4. Know the requirements and penalties; beware the five-year “look-back.”
It’s important to get expert help earlier rather than later for Medicaid planning. The good folks at Medicaid are on the look-out for Boomers relying on the government’s dime for their long-term care. As such, when you apply for Medicaid, government officials do a five-year “look-back” on your financial activity.
If you try to spend down your assets to qualify for Medicaid, you better have spent it on someone who can demonstrate need–like a child who is blind, permanently disabled, or under 21. If they see you’ve jettisoned your money by financing your granddaughter’s wedding in Tuscany, or paying your niece’s med school debts, they’ll impose a penalty on your eligibility.
This penalty will substantially delay your qualifying for Medicaid.
Here’s the penalty formula:
Total dollar value of all the assets you’ve gifted over the past five years ÷ average nursing home costs in your state = the number of additional months you must wait to qualify for Medicaid.
So, let’s put this in real terms. Consider the case of John. He’s widowed, and down to his last $240,000. As such, he decides to give the $240,000 to his brother, rather than let the government claim it for his nursing home care. Nursing homes cost $8,000 a month in his state.
Eagle-eyed Medicaid staff spot John’s generosity and immediately level a 30-month penalty on his eligibility ($240,000 / $8,000 = 30). (As already noted, your state’s figures may vary slightly.)
Too bad John didn’t realize this until after he’d spent down all his assets. Uncle Sam forgives almost anything except being stiffed out of the money he’s owed. (Think Al Capone.)
There’s no limit on the delay that can be imposed. At this point, John could leave this mortal coil before he qualifies for Medicaid. The larger the gift, the larger the penalty.
Moreover, if the folks at Medicaid decide to prosecute, you are liable for a host of penalties, including large fines, imprisonment, and a really bad hair day.
You’re likely no David to this Goliath. Work with an expert.
See you next time.
Until next time, Boomer, be optimistic and hope for the best.
But plan for the worst.
You got this..
PS. Boomer, if you think this post would help another Boomer, would you consider clicking the social media icons at the bottom of the page? Thanks.
Sources and Recommended Reading
Heiser, K. Gabriel. How to Protect Your Family’s Assets from Devastating Nursing Home Costs: Medicaid Secrets. Fifteenth Edition: 2021
(I receive no compensation for this referral. 🙂 )
Long Term Care Series