Your estate plan should accomplish more than simply creating a plan for the division of your estate after your death. For example, a well-rounded estate plan should also plan for your retirement years and ensure that your assets are not lost at the end of your life because of long-term care costs. To do that, you will likely need to include a Medicaid planning component in your overall plan. Like many people, you may be unfamiliar with the Medicaid program in general, and the need for Medicaid planning specifically. The cost of long-term care (LTC) is the reason why over half of all nursing home residents rely on Medicaid. To help you better understand the Medicaid program and why you need the need to incorporate Medicaid planning into your estate plan, the Medicaid planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC have prepared the following frequently asked Medicaid related questions and answers.
What is Medicaid?
Medicaid is a healthcare program for low income individuals and families that is primarily funded by the federal government; however, is administered by the individual states. For this reason, there will be some differences with regard to eligibility and benefits from one state to the next.
What is the difference between Medicaid and Medicare?
Although Medicaid and Medicare are often referred to interchangeably, the programs are not related. Both Medicaid and Medicare provide healthcare coverage and are funded by the federal government; however, the similarities top there. Medicare is what is referred to as an “entitlement” program because if you have paid into the program during your working years you are automatically entitled to benefits when you retire. Medicaid, on the other hand, is a “needs based” program, meaning you must demonstrate a financial need for benefits to be eligible to participate. Medicare comes in four parts with basic Medicare offered at no charge. If you wish to participate in the other three parts of Medicare you will pay a monthly premium. There are no monthly premiums for Medicaid.
Why would I need Medicaid as a senior?
As you age, your odds of eventually needing long-term care (LTC) increase dramatically. At retirement age (age 65) you already stand a 50 percent chance of eventually needing LTC and by age 85 those odds will have increased to a 75 percent chance. As of 2018, the average cost of a year in LTC over $66,000 – considerably less than the national average of $100,000, but still enough to deplete your retirement nest egg quickly. Making matters worse is the fact that neither Medicare nor your basic health insurance coverage will likely cover LTC expenses, leaving you to pay out of pocket unless you are eligible for Medicaid.
What are the basic Medicaid eligibility requirements?
Aside from proving citizenship (or other legal status) and residency, the primary eligibility requirements for Medicaid involve demonstrating the need for benefits. To do that, you must have income and “countable resources” that do not exceed the program limits. For many seniors who did not anticipate the need to qualify for Medicaid, the countable resources (asset) limit presents a problem. Although some assets are exempt from consideration, with an asset limit as low as $3,000 ($4,000 on 7/1/2019) it is easy to see how many applicants have non-exempt assets that exceed that limit.
Can’t I just transfer my assets to my adult children if I need to qualify for Medicaid?
There was a time when this was an option; however, Medicaid imposed a five-year “look-back” rule that now prevents an applicant from transferring assets in anticipation of the need to qualify for Medicaid. The look-back rule allows Medicaid to review your finances for the five-year period leading up to your application. Any transfers for less than market value will likely be discounted and Medicaid will impose a waiting period. The length of the waiting period is determined by dividing the amount of your excess assets by the average monthly cost of LTC in your area.
What happens if my assets exceed the limit?
If your assets do exceed the limit, Medicaid will deny your application. At that point, you will enter what people commonly refer to as the Medicaid “spend-down” requirement. In essence, you will need to “spend-down” your assets until the value of your non-exempt assets is below the program limit at which point Medicaid will approve your application and begin covering your healthcare expenses.
Are all my assets considered when determining my eligibility for Medicaid?
Some assets, such as a primary residence up to a certain equity limit, are exempt; however, it is very easy to exceed the asset limit if you failed to plan ahead. Each state decides what assets are exempt. Common examples of exempt assets include:
- Your primary residence
- Household goods and furnishings
- One vehicle
- Term life insurance
- Burial plot
Will my spouse suffer if I need to qualify for Medicaid?
There was a time when this was the case; however, the Medicaid Spousal Impoverishment Rules now prevent that from happening. The Spousal Impoverishment rules allow a community spouse to keep some of the marital assets and, in some cases, some of the nursing home spouse’s monthly income to ensure that the community spouse is not left with nothing.
What is Medicaid planning?
Medicaid planning uses legal tools and strategies to protect your assets and ensure that you will be eligible for Medicaid benefits if you need them in the future. Medicaid planning is perfectly legal and is a common addition to the average estate plan.
If you have additional questions or concerns about Medicaid planning, contact the experienced Missouri Medicaid planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.