Recently, news coverage has primarily focused on
Medicare, while giving very little attention to
Medicaid. However, Medicaid remains to be a mystery
to many people. Medicaid is the largest source for
funding nursing home care, but there are many questions
about who can qualify and what coverage it provides.
To try and clarify questions regarding Medicaid, listed
below are five of the most common myths regarding
Medicare’s and Medicaid’s long-term care coverage.
1. Medicare will cover my nursing home expenses.
Medicare’s coverage of nursing home care is quite
limited. Medicare covers only up to 100 days of
“skilled nursing care” per illness. “Skilled nursing care”
involves trained professionals who perform services
to a patient due to an illness or injury. Furthermore,
“skilled nursing care” will provide round the clock
care for patients, assist with meals, help with personal
hygiene, and provide a place to live when the patient is
no longer capable of living alone. To qualify for Medicare’s
coverage, you must enter a Medicare-approved
“skilled nursing facility” or nursing home within 30 days of a
hospital stay. The hospital stay must have lasted at least
three days. Lastly, the care in the nursing home must be for
the same condition as the hospital stay. Further, the 100
day coverage is not guaranteed. The patient must be shown
to be making improvement and benefiting from rehabilitation.
2. To qualify for Medicaid, you need to have no assets.
Medicaid helps needy individuals pay for long-term care,
but you do not need to be completely destitute in order
to qualify. Generally, a Medicaid applicant can have no
more than $2,400 in assets in order to qualify. However,
this figure is higher in some states and there are many
assets that do not count toward this limit. For example,
the applicant’s home will not be considered for eligibility
purposes to the extent that the equity in the home is less
than $536,000. In 2013, states do have the option of raising
this limit to $802,000. Moreover, the house may be kept with
no equity limit if the Medicaid applicant’s spouse or another
dependent relative lives there. In addition, the spouse of a
nursing home resident may keep one car, one half of the couple’s
joint assets up to $115,920, and his or her IRA or 401k assets.
There are a number planning considerations for the spouse at
home which should be reviewed in detail should the
circumstance arise.
3. In order to qualify for Medicaid, you can transfer assets
to your children just before entering a Nursing Home. Medicaid
law imposes a penalty on people who transfer assets without
receiving fair value in return. The penalty period is
determined by dividing the amount transferred by what
Medicaid determines to be the average private pay cost
of a nursing home in your state. A person applying for
Medicaid must disclose all financial transactions he or
she was involved in during a set period of time
(presently 5 years leading to application). This period of
time is frequently referred to as the “look-back period.”
The state will look-back at all transfers made within five
years before the application for Medicaid. Because of
this five year look back period, it is paramount that you
consider transferring assets well in advance of the actual need
for nursing care. However, this does not mean that all
transferred assets will cause a penalty because there are
exceptions. Plan now to protect your assets later!
4. Gifts should be made to your children individually:
While gifting may be a planning option for protecting
assets from the rising cost of long term care, large outright
gifts should not be made to your children. Instead, you
should make gifts to an Irrevocable Trust that will help protect
the assets from each child’s potentially poor spending habits,
lawsuits, divorces, creditors and death. The irrevocable trust
allows you to name the trustee in charge of the trust and the
distribution rules. Further, it greatly increased the likelihood
the assets will still be available should your child or children
deem it necessary to transfer assets back to you.
5. A prenuptial agreement will protect my assets from being
counted if my spouse needs Medicaid. A prenuptial agreement
only works to keep property and certain assets separate in the
event of death or divorce. It does not keep your property
separate for purposes of Medicaid eligibility.
6.I can give away up to $14,000 a year under Medicaid rules.
As previously discussed, the gifting rules for federal estate
and gift tax and Medicaid are often confused. You can give
away up to $14,000 a year without incurring a gift tax. Under
Medicaid law, a gift of $500 or any other greater amount could
trigger a penalty period if it was made within the five-year
look-back period. If there is a penalty period the application
process for Medicaid will be delayed. Therefore, before making
a substantial gift you should seek the advice of an elder
law attorney.
For more information regarding Medicaid’s long-term care coverage,
please contact Douglas L. Kaune, esquire at 610 933 8069
or email me at dkaune@utbf.com. Unruh, Turner, Burke & Frees, P.C.
is a full service law firm which has three convenient office
locations in Phoenixville, West Chester and Malvern, Pennsylvania.
The firm primarily services clients in Chester, Montgomery,
Delaware, Philadelphia, Bucks and Berks Counties, but can
represent clients throughout Pennsylvania.
