A health condition that requires a family member to receive permanent, long-term care often does not occur with a great deal of advanced notice, particularly if the health event occurs suddenly such as in the case of a stroke or an automobile accident in which the patient sustains a brain or other neurological injuries. In these cases, families are often forced to make significant decisions regarding their loved one’s care. A situation such as this is often referred to as a Medicaid crisis. Like any other crisis, a Medicaid crisis is something to avoid. Although in most cases, a medical condition resulting in the need for permanent, long-term care cannot be avoided or even planned for, the crisis that can ensue when a family is not prepared to pay for long-term care can be prevented with Medicaid planning. Medicaid planning involves structuring assets to make an applicant eligible for benefits.
According to government figures, long-term care can cost on average between $6,965 per month for a private room in a nursing home and $3,293 per month for care in an assisted living facility for a one-bedroom unit. For those who are eligible for Medicaid, the costs of long-term nursing home care are covered and under some circumstances, Medicaid will also cover the cost of long-term assisted living care. However, Medicaid is what is referred to as a means-tested benefit program, which means applicants must meet certain income and asset limits in order to qualify in addition to showing that the applicant is either 65 years or older or disabled. In New Jersey, an applicant for Medicaid who is unmarried or widowed can have a monthly income up to $2,199 with $2,000 in “countable assets,” which generally exclude the applicant’s primary residence. A married couple with a single spouse applying, are allowed, $2,980 per month in income and keep $3,000 in countable assets and shift up to $119,220 in assets to the non-applicant spouse. Therefore, given these limits Medicaid planning’s goal is to, make sure an applicant attains financial eligibility for long-term care while preserving as many assets as possible.
Avoiding a Medicaid Crisis Through Medicaid Planning
The problem most families encounter and the issue that forms the foundation of a Medicaid crisis is the fact that most families end up paying for long-term care out of their savings or being forced to deplete assets to reach the countable asset limit so the patient will qualify for Medicaid. In cases where the beneficiary exceeds countable assets or transfers assets in a way that violates Medicaid regulations, the beneficiary may be prevented from receiving benefits for a set amount of time. In this case, a patient who is deemed ineligible must pay for care out of their pocket until assets and/or income have been depleted to the point that the applicant becomes eligible. Further complications can occur due to what is referred to the look back period which entitles Medicaid programs to review asset transfers up to five years prior to the application. If an individual transfers money or property during the five-year look-back in a manner that could be construed as avoiding exceeding Medicaid asset requirements they will be deemed ineligible for a set amount of time.
Medicaid planning can help families avoid paying out of pocket for care and beneficiaries being denied benefits by structuring and transferring assets to help a beneficiary become eligible and to protect assets from being subject to Medicaid liens down the road. Medicaid planning adopts similar principles to estate planning in that plans are put in place and assets are structured so as to preserve assets for future use.
One of the most common Medicaid planning strategies involves exchanging countable assets for exempt assets. For example, a family may opt to pay off the mortgage on a family home or pay off debts with funds in savings rather than paying for long-term care with cash so as to provide a positive benefit to the beneficiary’s estate and qualify for benefits. However, it is important to note that Medicaid planning strategies need to be conducted carefully to avoid disqualification from benefits which can prevent an individual from receiving benefits for extended periods of time. Further, some families may benefit from transferring money into irrevocable trusts; that will not be construed as providing a financial benefit to the applicant or his or her spouse so as to exceed the asset and income limit. However, if trust assets transfer back into the estate after the death of a Medicaid beneficiary, Medicaid may place a lien against the estate to recover costs of care.
Based on the complexity of Medicaid regulations concerning asset transfers and the definition of countable assets and income, families are encouraged to contact counsel experienced in Medicaid planning to assist an individual or their families in asset preservation strategies.
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