When a person requires full nursing home care, is in a qualified care facility and has insufficient funds to pay for care, Medicaid becomes an immediate reality. The care recipient (a) requires long-term care, and (b) meets all eligibility criteria for Medicaid coverage because of the limited financial means. Since nursing home Medicaid has no income limit (Social Security, Supplemental Security Income (SSI), pensions, etc.), and does not require low income, income level is irrelevant to state Medicaid eligibility, so a person qualifies whenever they have exhausted all of their assets in their bank accounts, other inveestments, etc.
Another level of preparation is required, however, when the loved one MIGHT need Medicaid eligibility in the future, because (a) the person has healthcare issues and clearly will likely require full custodial care services needs in the near- or medium-term future, or (b) currently has sufficient funds to pay for care, but will exhaust those funds in the near- or medium-term future. I.e., you can see a possible need for Medicaid programs in the future, but you are not quite there yet.
How do you prepare?
Medicaid planning, as early as possible in the process, can greatly increase the possibility that the process will run as smoothly as possible. The Medicaid planning term for a person whose financial circumstances do not quite qualify them for Medicaid benefits yet is SPEND DOWN. And the term is fully descriptive: the care recipient is “spending down” their assets, with the expectation that their assets will be fully depleted before they no longer require care in a nursing facility.
Spending down a person’s assets while in care is relatively easy to do. In fact, with the current high cost of long-term care, it is shockingly easy to do. But there are more things to consider than just spending down a care recipient’s funds. Once a person has been determined to be in “Spend Down”, it is vitally important to fully assess the full scope of the care recipient’s financial situation to ensure that no actions have already been taken that might violate eligibility requirements might jeopardize Medicaid services. Additionally, when Spend Down begins, it is of course also important to ensure that no current or future actions jeopardize a successful Medicaid application.
Restrictions on Gifting
When determining if any financial violations have occurred, the principal analysis is to investigate whether the care recipient has gifted any assets to other family members or other beneficiaries, and if so, do those uncompensated transfers violate federal government Medicaid regulations and thus risk a rejected Medicaid application. Unlike Medicare, Medicaid does have rules against giving assets away. Medicaid is joint state and federal funding, with full state and federal cost sharing; federal law contains regulations restricting gifting. These regulations apply to all state plans and state programs and to any Medicaid beneficiaries, as managed by Department of Health and Human Service (HHS) staffs.
The prohibition on gifting principally revolves around the restrictions imposed by the “Five-Year Lookback Period.” Under this federally mandated Five-Year Lookback Rule, any assets gifted to others within five years previous to a Medicaid application can create a penalty period before Medicaid pays for care. Assets can always be used to pay for anything the care recipient may needs: medical expenses, living expenses, medical care, rent, prescription drugs, insurance deductibles, Medicare premiums, mental health needs, health services, medical assistance, social services, home and community-based services care (HCBS), etc. But making gifts to others is prohibited.
If a person has made any uncompensated transfers within five years of the Medicaid application, that gift will create a penalty period before Medicaid enrollment will begin. The length of the penalty period is based upon the size of the assets transferred.
It is, therefore, vitally important to determine whether any recent gifts have been made in the recent past as the family contemplates Medicaid in the future. And it is equally important that no such gifts occur going forward.
Illiquid Assets
Another area to address during Spend-Down is the issue of illiquid assets. A person may have sufficient liquid funds (bank accounts, savings accounts, etc.) to pay for all care costs in the near future, but assets to pay for care down the line (but before becoming a Medicaid enrollee is needed) may not be so liquid (annuities, real property, etc.). It is important to develop a plan early to know how and when these assets can be liquidated to be able to pay for care when the need for the proceeds of these illiquid assets is necessary.
For example, real property: is the property readily marketable? Are there other individuals on title that may need to be contacted? Are they willing to participate in selling the property, and if not, are the willing to buy out the care recipient’s interest? If a sale of the property difficult to sell, can the care recipient obtain a loan on the property to secure funds to pay for care? And a host of other considerations arise when it comes to making illiquid assets available to pay for care.
Conclusion
It is vitally important to get properly organized and directed when the possible need for Medicaid arises, even well before that actual day comes. The professionals at QMC have assisted thousands of families navigate this journey, ensuring smooth sailing every step of the way.