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Planning for Your Second Half of Life

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Nursing home care can cost more than $125,041.68 per year, which can quickly deplete an individual or couple’s life savings. Medicare does not pay for long-term care, so when this type of care is needed, if you do not have long-term care insurance, you must either pay out-of-pocket or apply for Medicaid. 

The Medicaid program that pays for nursing home care has specific eligibility requirements for individuals and couples. Generally, people think they have to be impoverished before Medicaid will begin paying for their care. However, in many situations, with careful planning, property and assets can be saved from the cost of care both prior to and after nursing home admission.

Qualifying for Medicaid benefits for long-term care has always been confusing; however, the Deficit Reduction Act of 2005 (“DRA”) made this cumbersome process even more difficult. The DRA, which was signed into law by former President Bush on February 8, 2006, imposes many restrictions on when and if you will qualify for benefits to cover your long-term care expenses.

Prior to the DRA, an applicant for Medicaid benefits could give away assets in order to qualify for long-term care benefits. The general rule was that for every $6,700 you gave away, you were ineligible for Medicaid benefits for one month. This “ineligibility” period began the month in which the gift was made.  For example, if you had transferred $67,000 in January 2006, you would have been ineligible for Medicaid benefits for long-term care for 10 months. This ineligibility period would have started on January 1, 2006, and continued through October 31, 2006. 

Under the DRA, transferring assets makes a person ineligible for Medicaid (for long-term care services) for one month for every $10,420.14 given away during what is known as the “look-back period” (the period immediately before a person applies for Medicaid).

Currently, the maximum look-back period is five years. The ineligibility period does not begin until the Medicaid application is filed and the applicant is determined to be eligible for Medicaid if it were not for the transfer(s). Transfers (or gifts) are subject to the Medicaid ineligibility period described above. For example, if you transferred $100,000 today, a Medicaid ineligibility period of approximately 9.6 months would be created ($100,000 ÷ $10,420.14= 9.59). If you would need long-term care within the five year “look-back period,’ the $100,000.00 would need to be reported to the county assistance office at the time of the application. This 9.6 month ineligibility period would begin on the date when the Medicaid application is filed and you are determined to be eligible for Medicaid if it were not for the transfer. This means that you would be required to privately pay for your in-home or nursing home care for at least 9.6 months. However, if you did not apply for Medicaid for at least five years from the date of the transfer, you should not have to disclose the transfer.

Despite the numerous restrictions the DRA has placed on Medicaid eligibility, our office is able to assist individuals and families in developing long-term care plans to avoid depleting their assets should they become ill and need long-term care. For those individuals who are already in a nursing home, despite the harsh new Medicaid rules, our office is continuing to help nursing home residents qualify for Medicaid benefits while maximizing the amount of money they are able to protect.

Keep in mind that Medicaid planning is very fact specific and not all planning techniques work in every situation. Before spending down all of your assets, contact our office to schedule a FREE consultation to discuss Medicaid benefits and review your planning options.

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