Many seniors may need the services of a nursing home or at-home care at some point in their lives. You might assume that government assistance or health insurance will step in and cover the cost if you can't afford these services. Unfortunately, neither health insurance nor Medicare covers long-term care. Because obtaining long-term care insurance can be very expensive, Medicaid could become your only option.
Understanding Medicaid Qualification
Medicaid coverage is not a given. If you have assets or recently transferred assets, Medicaid may determine you do not qualify for coverage until a certain amount of time has passed. If this happens, you and your family can face significant medical bills. If you can't pay, nursing homes may take you to court to get reimbursed.
What steps can you take to avoid this? First, before applying for Medicaid, get a better understanding of the timelines in your state – known as lookback periods – that can affect your eligibility. Then you can engage in proper Medicaid or asset protection planning in advance of these timeframes. A good age to begin planning is around age 65, although everyone’s situation is different.
Individual states run Medicaid programs, and every state has different rules regarding Medicaid eligibility. These programs were designed as a payor of last resort — in other words, to qualify, you must meet strict requirements. There are two primary types of Medicaid benefits: home care and skilled nursing home care.
Lookback Periods
You must submit an application to your local Medicaid office to qualify for benefits. As part of this process, the state will look at any money or property you may have transferred within a certain lookback period. In New York, for example, this period is 30 months for home care and 60 months for skilled nursing care.
Lookback periods can have serious consequences. If you have not engaged in appropriate asset protection planning, you may not be able to qualify for home care or nursing home care for many months. The result is that many elderly individuals must then spend down their savings and liquidate their assets to pay privately for their home care before Medicaid starts covering anything. If a person no longer has resources and is subject to a disqualification penalty period, family members may have to step in and bear these costs on their own.
So, what can you do? The answer is to start planning as soon as possible.
Options to Explore
Speaking with an elder law attorney can help you and your loved ones explore options and avoid being personally responsible for the costs of your care.
- Medicaid Asset Protection Trust — One common approach is placing assets in a Medicaid Asset Protection Trust. You may be able to use this to shelter various assets such as stock accounts, savings, a home with unprotected equity, and much more.
- Pooled Income Trust — Another option you may explore is contributing income that exceeds Medicaid allowances to a Pooled Income Trust. This can allow you to qualify for Medicaid while diverting excess income to a trust that pays qualified expenses on your behalf. This will enable you to benefit from the income and not spend it on things Medicaid could have otherwise covered.
- Spousal Refusal — Your spouse may also have options that can help you qualify for Medicaid. One such option includes exercising a right of spousal refusal — a process available in some states allowing the income and assets of your spouse to be removed from consideration for Medicaid eligibility.
Finally, an attorney can help you understand if certain transfers are permissible under Medicaid rules without triggering a penalty period.
Without proper planning, individuals with assets and income exceeding specific state-set thresholds would have to spend this income and their assets on their care or exempt items before they can receive Medicaid benefits. For assistance in planning, consult with a qualified elder law attorney in your area.