In order to grasp the concept of emergency Medicaid and nursing home planning, you have to understand why this program could be relevant to you. After all, you will be a senior citizen if you ever need nursing home care, and you will qualify for Medicare when you reach the age of 65. Plus, Medicaid is for people with very sparse resources, so you would not be able to gain eligibility anyway since you will likely retire comfortably.All of the above may sound logical, but there is a very good reason why a significant percentage of seniors that are enrolled in the Medicare program ultimately seek Medicaid eligibility.
Long-Term Care Void
Medicare will provide a solid health care insurance safety net, but it does not pay for everything in full. You have to pay 20% of covered costs for visits to doctors and outpatient care, and there is a deductible and a premium that must be paid for this portion of the coverage, which is Part B. There are premiums, deductibles, and co-payments for the prescription drug component, and there is a per benefit period deductible for hospitalization. Very significant co-payments must be paid by the benefit recipient for especially long hospital stays.
All of these out-of-pocket expenses should be carefully considered when you are creating a retirement budget. However, for most people that have planned ahead with some degree of diligence, they are manageable. There is however one uncovered healthcare related expense that can take a heavy financial toll.The Medicare program will not pay for a stay in a nursing home. It will cover convalescent care after an injury or illness, but it will not assist with nursing home costs, because these facilities provide custodial care.
The Medicaid Solution
Medicaid will pay for a stay in a nursing home if you can obtain eligibility. This is easier said than done, because the asset limit is just $2,000, but some things that you own are not counted. We will get into the details in the next section.When it comes to countable assets, people that are preparing for possible nursing home costs in advance with future Medicaid eligibility in mind typically “spend down” their assets. This would involve funding an irrevocable trust or giving direct gifts to loved ones.
They would essentially be receiving their inheritances in advance.Though this approach sounds easy enough on the surface, it takes advance planning to get it just right. In order to receive immediate eligibility, all gift giving must be completed at least 60 months before you submit your application for Medicaid. If you violate this rule, you are penalized, and your eligibility is delayed.The duration of the penalty depends on the amount that you gave away as it compares to the cost of nursing home care in our area. For example, if you divested yourself of enough to pay for three years in a nursing home, your eligibility would be delayed by three years.
Now that we have set the stage appropriately, you can immediately see what emergency Medicaid planning is all about. If you find out that you need nursing home care suddenly before you can plan ahead in light of the five-year look back period, what do you do?Though the circumstances are less than ideal, all is not lost. As we have stated, some assets are not countable, and your home is one of them. There is an equity limit, and it changes annually to account for inflation, but suffice to say that it is around $600,000. One vehicle that is used as a primary source of transportation is not counted, along with wedding rings, engagement rings, and heirloom jewelry. Unlimited term life insurance is exempt along with $1,500 of whole life insurance.
Prepaid burial plots and as much as $1,500 set aside for burial or cremation expenses would be permissible.In many if not most cases, a person will enter a nursing home while their spouse is still capable of independent living. When these circumstances exist, there is no home equity limit at all. The healthy spouse can also keep half of the shared countable assets with a limit of just over $100,000. If it is needed to maintain a reasonable standard of living, the independent spouse can also continue to receive income that is brought in by the spouse that will be entering a nursing home.
We Are Here to Help!
As you can see, even if the need for nursing home care is sudden, it is possible to keep a significant store of assets in the family. The ideal way to proceed will depend upon the circumstances. If you ever need to discuss emergency Medicaid and nursing home planning with an elder law professional, contact us for a free consultation or give us a call at 312-753-6000.