There’s the old adage, if it’s too good to be true, it probably is. The latest iPhone for $10? A 60” flat screen TV for $25? Your dream Hawaiian vacation for $100? Yes, it’s probably too good to be true.
The adage can be applied to just about every aspect of life. The amount of information and misinformation circulating out there on (insert your favorite subject) is enough to fill entire libraries. It’s no different in the world of Medicaid and nursing home facility care. Just Google ‘Medicaid’ and see what pops up. More than 24 million results with a reference to Medicaid. It’s enough to make your head explode.
If you’re pre-planning and have the time to sift the chaff from the wheat, that’s great. But if you find yourself in crisis mode, with a family member already in a nursing home or just days away from entering, what would be your reaction? Terror? High anxiety? Blood pressure going through the ceiling? You start grasping at straws and any bit of information – true or false – that’s out there. And this is where critical mistakes are made.
Pause and take a deep breath. Whether you’re in a position to pre-plan or in crisis mode, don’t prejudge your situation; help is available. But also stay diligent to what’s true and false. The Internet is a great tool for research, but, for the most part, takes what you read on it with a grain of salt. Don’t take one source as the gospel truth. Do the research, talk to people, do your homework.
The best way to circumvent problems is to seek professional help. There are people – financial planners, estate planners, elder law attorneys, health care professionals – in your community who are experts when it comes to dealing with these matters. These folks deal with these matters on a daily basis, and are up-to-date on changes to the law. The professionals have the expertise and know-how to back up your case in these circumstances.
If there were a top 10 list of myths and misconceptions regarding nursing home care and Medicaid, ranked number one would be: I’ve been told I have to spend all my money down to qualify for Medicaid. The answer, emphatically and unequivocally, is no. You don’t have to spend everything down.
A nursing home stay averages to about $200 a day, or $6,000 a month. That amount might be considered low; nursing homes with memory care units, for example, typically charge more per day. If both parents are in the nursing home, you can image what the monthly bill would be. And sometimes, the nursing home bill doesn’t include the cost of medication, and that adds more money to the monthly bill. You can only private pay for so long before going broke. Sticking with the $6,000 a month bill, studies show it would take the average person about six months to burn through his or her life savings on nursing home costs.
While it’s very easy to spend your entire life savings down for nursing home care, that’s far from the truth. Financial and estate planners, and elder law attorneys know strategies that will allow you to properly and position your assets so you don’t go broke, and allow you to apply and qualify for Medicaid. Now, your next question probably is, is that legal? Yes, it is! These aren’t loopholes in the system the experts are using; they’re using the rules and regulations mandated by the state to their clients’ best interest.
Medicaid rules are different for singles and couples. A single person (never married or widowed) isn’t allowed to keep their home or vehicle; it has to be sold off for Medicaid approval. In today’s housing market, where it may take months for a house to sell, the house has to be at least listed for sale. For couples, the community spouse, the spouse who’s not going into the nursing home, is allowed to remain in the home and have a vehicle and keep at least half of the couple’s money. The institutional spouse, the spouse in the nursing home, gets a small monthly allowance but the rest of his or her income (pension, Social Security) goes toward the nursing home stay, and he or she is required to spend their portion of money down to the Medicaid limit, which is normally $2,000.
Another big Medicaid misconception is, I can save money and submit the Medicaid application myself. You can, but no matter how much research and reading you do, there are bound to be mistakes in the application. When the state Medicaid caseworkers have the actual application in hand, they dissect it, literally tear your financial history for the last five years apart. In Medicaid jargon, this is called the Five-Year Look-Back. All asset transfers made within the last five years are reviewed. One allocation, such as a donation to your church’s building campaign, or a graduation gift to your grandchild, could be classified as an improper transfer and make you ineligible.
The IRS allows you to give away $14,000 a year to family members. But guess what? IRS rules are different than Medicaid rules, even though both are part of the federal government. If the $14,000 gift was made during the Five-Year Look-Back, you could be penalized. Here’s a different scenario: if the same gift was given away five years and two days before the date of Medicaid application, you’re in the clear.
How long is the ineligibility period? It varies on the amount of money involved. For math sakes, let’s use the $6,000 a month nursing home bill, and your improper transfer is valued at $30,000. End result, you’re ineligible for Medicaid for five months. But you ask, what do I do during that five-month penalty period? Private pay.
Here’s something that’s important to note: if you’re penalized for an improper transfer, that doesn’t mean you’re completely disqualified from applying for Medicaid. You have to wait out the penalty period, however long it is, before applying again. Think of it as being tossed into the penalty box in hockey: the player is there for three minutes but once the three minutes is up, he can play again. The same goes for applying for Medicaid.
And don’t even think about hiding your money in an undisclosed checking account, or an old coffee can in the backyard. Intentional misrepresentation in a Medicaid application is a crime. The IRS shares information concerning income or assets you have with the Medicaid office. These reports include interest income and sale of stocks or bonds. For example, you cashed in $20,000 in Ford stock, you need to document where that money went. The answer ‘I don’t remember’ won’t cut it, either.
When the topic of Medicaid comes up for the first time, you will get much advice from people: family, friends, co-workers. They are well-meaning and their hearts are in the right place, but a lot of their information could be deemed inaccurate and second-hand. Go straight to the source – the experts – and get the correct information the first time, before too much time and money is lost. The Medicaid maze is not a maze to get lost in. Keep that salt shaker handy, give it a good shake, and go to the experts.