11 Jul 10 Long-term Care Medicaid Myths
Originally long-term care Medicaid (which often helps pay for care at nursing homes, some assisted living facilities and care at home) was for the indigent. As we are reaching the silver tsunami, the long-term care Medicaid rules for eligibility become more important since most Americans have no long-term care insurance or have inadequate income or assets to pay for care (often $7,000 to $10,000 per month in this area). As a result, many seek long-term care Medicaid to help subsidize the cost of care. The following are examples of Medicaid myths:
- Medicare pays for long-term care.
The only time Medicare pays for care in a nursing home is if there is a 3-day (and night) hospitalization stay and if there is short term rehabilitation. In that event, Medicare pays fully for the first 20 days. It could additionally pay for care for days 21 through 100 if the care stops the patient from declining. There could be an elimination in payment at any time between days 21 through 100 if the care fails to stop the patient from continuing to decline. Furthermore, the patient could be responsible for a copay (presently $194.50) if they don’t have a Medicare supplement.
- I can always give away $16,000 per year, per person.
The Federal gift tax laws and the Medicaid rules are different. Although you can give away $16,000 per year, per person in year 2022, this could be a transfer penalty under the Medicaid rules since it is presumed that most gifts made within 5 years of Medicaid application were purposely done to reduce assets since Medicaid is means-tested.
- If I am married, I can’t have more than $137,400 of countable resources.
Although this may be the case if the combined gross Social Security and pension income (and other non-countable resource income) is greater than $3435 per month, this is often not the case if the couple’s income is lower than that. The resource limit is often expanded to hundreds of thousands of dollars. Laws were passed in the late 1980’s to prevent spousal impoverishment and discourage divorce as a means to achieving eligibility.
- If single, I have to be indigent to get Medicaid.
Certain resources such as a homestead (equity value of $636,000 or less), personal property items, some IRAs (not applicable in all states), a pre-need funeral, one vehicle, etc., do not count. As a result, there is often a conversion of countable resources (i.e. cash) into a non-countable resource without being subject to the 5-year lookback period for gifts since the resource is still owned by the applicant.
- I have to sell my home and spend the proceeds before I apply.
As mentioned in 4 above, if the equity in the home is less than $636,000 in year 2022 (limit is increased annually), then it does not count as a resource assuming the applicant indicates there is an intent to return home.
- The State can always take my home after I die to get reimbursed for what it paid.
Although the State does have a right to make a claim against the home after death of the Medicaid recipient to the extent that Medicaid benefits were advanced, there are several exceptions to avoid a successful claim – not to mention the use of Ladybird Deeds or Transfer on Death Deeds.
- The laws of each state on Medicaid are the same.
The laws of each state are different in connection with long-term Medicaid. For example, in some states there is a lien against the homestead (unlike Texas which only has a right to make a claim). Most states do not permit Ladybird deeds and Transfer on Death deeds to protect against a successful claim against Medicaid for benefits advanced. On the other hand, most states permit payment to a caregiving child to reduce countable resources, but Texas does not permit this and considers that payment is subject to the transfer penalty rules.
- I have too much income to qualify.
Although Texas is an income cap state (ineligibility if gross income exceeds $2523 per month in year 2022), a qualified income trust could be created as long as the income of the applicant is less than the cost of care. Since average cost of a nursing facility exceeds $7,000 per month, most applicants have income that is less than that.
- All of the income of the Medicaid recipient must always be paid to the nursing home.
In spousal situations, if the combined income of the couple is less than $3435 per month, some or all of the income of the institutionalized spouse can be diverted to the community spouse.
Even if the applicant is single, there can be deductions (i.e. Medicare Parts B and D, Medicare supplemental premium, a personal needs allowance, 3 months of pre-eligibility incurred medical expenses, etc.) from the payment to the facility.
- A revocable trust protects assets for Medicaid eligibility.
Although revocable living trusts are often considered in estate planning for various reasons, this planning tool is generally ill-advised in planning for long-term care Medicaid.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming virtual or in person Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.