03 Oct Ten Common Mistakes When Completing A Nursing Home Medicaid Application
The cost of long-term care is great (average is over $7,000/month in Texas). As a result, many apply for long-term care Medicaid for governmental assistance. It is not unusual for us to receive calls after either a facility or applicant has submitted an application and made a costly error that could result in ineligibility (resulting in financial responsibility ranging from the difference between the applicant’s income and the private pay rate to as much as the full monthly private pay rate plus drug costs for each month of ineligibility).
The following are some of the most common mistakes that we see:
- Intent to Return Home
A homestead is generally a non-countable resource if the applicant is either married or if an applicant is single and has an intent to return home (if single, the equity limit in Texas is $636,000 in year 2022). There is a box on the application asking if the applicant intends to return home. There is also a separate form (Notice of Intent to Return Home) to be signed. Many think the applicant will never return home – so they say there is no intent to return home by error or mistake. Each month that there is no proof of intent to return to the homestead would result in ineligibility. Furthermore, it usually takes the state over 3 months to respond. So, if an applicant didn’t realize his or her mistake until receipt of the letter of denial, this would result in an obligation to pay the facility privately for those months of ineligibility until the error is corrected.
- Homestead is in a Revocable Living Trust
As indicated above, a homestead is generally a non-countable resource. However, if the applicant has a homestead which is owned by the applicant’s revocable living trust, then it would count as a resource which often creates ineligibility – especially if the applicant is single.
- Failing to consider cash surrender value of life insurance policies
If the applicant has one or more life insurance policies with a total face value that exceeds $1500, then the cash surrender value counts as a resource. If the applicant examined that before applying, then there are many options to solve the problem so that eligibility could be obtained.
- Paying the bills of someone other than the applicant
Long-term care Medicaid is means-tested. So, if an applicant pays a child’s or grandchild’s bills within the 5-year look-back period, the government presumes this was purposefully done to reduce resources so that the government would pay for the applicant’s care.
- Paying your child as a caregiver
In most states, this is a common spend-down strategy. However, in Texas it is considered a duty of a child to take care of his or her parent. So, this could result in a transfer penalty creating ineligibility based on the amount paid. However, there are some Medicaid waiver programs where a child can be paid through a Medicaid managed care agency.
- Failing to identify all closed accounts
Since the government is concerned about uncompensated transfers, it checks with the IRS regarding all sources of income (including dividends and interest) within the 5 years prior to application. A failure to identify the closed accounts and where the proceeds went could delay eligibility.
- Making annual exclusion gifts
Although an individual can gift up to $16,000 annually per year, per person without reporting the gift to the IRS, this would be presumed to have been a gift (if applying for long-term Medicaid care) to reduce resources so that eligibility could be achieved if made within 5 years of the application.
- Failing to take IRA required minimum distributions
Under Texas Medicaid rules, a traditional IRS is not counted as a resource if it is in payout status. The timing of the required minimum distribution is also important in determining eligibility based on income.
- Looking at only the net (not gross) income of the applicant
Usually a Medicare B premium (often $170.10 in 2022) and sometimes a Medicare D premium is withheld before a Social Security income deposit is made into an applicant’s bank account. Some even withhold income taxes. Medicaid considers those premiums and taxes withheld as part of the gross income. If the gross income is over the income cap (currently $2523 per month), then there is ineligibility (unless a qualified income trust received that income). IRA required minimum distributions could also result in ineligibility since it would be income.
- Using the balances shown on a statement instead of reconciling for end of the month balances
Medicaid looks at end-of-the-month balances on all financial statements to determine
balances as of 12:01 am on the first day of the month to verify resource eligibility. If a statement cycle runs mid-month to mid-month, the ending balance shown on the statement may not be the balance as of 12:01 am on the first day of the month and could put the applicant over the resource limit.
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