Medicare Vs Medicaid Roles In Nursing Home Care
Medicare does cover nursing home careup to a point. If you are sent to a skilled nursing facility for care after a three-day inpatient hospital stay, Medicare will pay the full cost for the first 20 days. For the next 100 days, Medicare covers most of the charges, but patients must pay $185.50 per day unless they have a supplemental insurance policy. For day 101 and beyond, the patient pays all costs.
These rules apply to traditional Medicare. People on Medicare Advantage plans likely have different benefits
Some nursing homes wont accept Medicaid patients outright, but the law forbids them from throwing you out if you become dependent on Medicaid when you are in their care.
What Is The 5 Year Medicaid Lookback Rule
Posted by Tim McNamara,August 12, 2011Medicaid Planning
During the process of applying for Medicaid, Massachusetts will look at all of the applicants assets including any major transfers occurring in the past five years. If the assets are deemed countable, and if owning them would have disqualified the individual from Medicaid benefits, then the state may require the applicant to take them back or else impose a penalty. In this process, we usually ask our clients for bank records to look for transfers of $1000 or greater. Sometimes, if sizable gifts exist, well even request these statements for the entire 5 year lookback period. The rule can be very burdensome in that way, and many others. Still, even in troublesome situations we can explore alternative strategies
But the purpose of this rule is to ensure that funds are available for those truly unable to pay, and to make sure that those who can pay for their healthcare do so privately for as long as possible. But with the average monthly cost of Massachusetts nursing home care falling within $8,000-9,000, it is very important for every family to have some Medicaid plan in place just in case.
So what happens if the applicant made a gift that MassHealth believes disqualifies the applicant for benefits? Below are some hypothetical scenarios to illustrate what occurs in practice. Note that the examples below use the penalty divisor of $300/day , the Massachusetts penalty divisor as of October, 2013.
How Is A Medicaid Lookback Penalty Calculated
The lookback penalty is based on the total amount of ineligible transfers and the average private patient rate for nursing home care in your state. This average rate is also known as the penalty divisor. The Medicaid lookback penalty is calculated by taking the total of the ineligible transfers and dividing that by the penalty divisor. The result is the number of months that the senior is excluded from receiving Medicaid payments for their long-term care.
Heres an example that illustrates how the lookback penalty works. A senior makes $66,000 in ineligible transfers over the last five years. In their state, the average private patient rate is $6,000. When you divide the transfers by the penalty divisor, their penalty period is 11 months. The penalty period is the time in which the senior is ineligible for Medicaid and there is no maximum penalty limit.
Also Check: Is Weight Loss Surgery Covered By Medicaid
Converting Assets To Income
It is often the case that a married person needs nursing home care but their spouse will continue to live in the community and will need income to live on. Annuities and reverse mortgages are two financial tools that can, under the right circumstances, provide the community spouse with income while preserving Medicaid eligibility for the spouse in the nursing home.
With a reverse mortgage, a person age 62 or older, after meeting with an approved reverse mortgage counselor, can receive a monthly payment while retaining title to the home. The loan does not become due until the last borrower dies, sells or permanently moves out of the home. Income from a reverse mortgage can be used for home expenses without being counted toward Medicaid eligibility. An annuity is a financial contract where a person pays a lump sum in return for a future income stream. A properly structured annuity can reduce resources that are counted by Medicaid, while providing an income for the community spouse, which does not count toward the Medicaid income limits. Both reverse mortgages and annuities are complex financial arrangements that must be structured properly in order to adhere to Medicaid regulations.
Dont Spend Down To $2000 And Then Apply
Medicaid is one of those words that can bring out powerful emotions in people. No one wants to go on Medicaid, but here is the reality, it provides health coverage to more than 4.6 million low-income seniors. And part of that healthcare is paying for seniors to live out their lives at home, in Assisted Living or Skilled Nursing facilities.
Our goal is to keep mom at home, so early in her care planning I started thinking about how we could use Medicaid to keep her there. You see, the good news is mom is in relatively good health for someone that is 85. The flip side, with any luck, she will outlive her money.
This post does not explain the Medicaid program, or what it takes to qualify, because each state manages its Medicaid offerings. This post shares what we have learned about the five years look back requirement. In simple terms, it means that in applying for Medicaid, I must prove that mom did not gift someone with $500.00 or more in assets over the last five years.
Given this restriction on gifting and the look back period, if there is a possibility you may need Medicaid at some point, then start planning and acting as if you WILL apply from day one. It will save you a world of trouble in the end.
Pulling together the five year look back:
Tips on how to prepare for applying:
Additional resources:
Also Check: Dentist In Charleston Sc That Accept Medicaid
Can You Still Qualify With Excess Income
You may be able to work with the Medicaid 5-year lookback period by placing some funds in an trust called a Miller Trust. This must be irrevocable and when the beneficiary passes on, must go to Arizona Medicaid. While Medicaid states that you may not have over a certain amount of assets, some assets are exempt and wont result in being denied benefits.
If you have assets that arent exempt, you must liquidate them and apply the funds towards long-term care before you may receive benefits through Medicaid. To qualify under the Medicaid lookback rules, you may not transfer assets, give away property or money, or sell your assets for less than theyre worth.
How Themedicaid5 Year Lookback Period Could Cost You
When Edna turned 82 she felt like she had enough money and she wanted to help her kids now rather than wait until later. She began to give the maximum legal amount, according to the IRS, that she could give tax free to each of her three children, $15,000 per year . She did this for each of the last five years totaling $210,000 passed to her children tax free.
What Edna didnt know will cost her. She was unprepared for the surprise period of ineligibility that she would get from Medicaid.
This past year Ednas health declined. She began to forget simple things and had difficulty taking care of herself. After a neurological exam, Ednas doctor diagnosed her with dementia after which she was determined to meet the functional requirements for Long-Term Care Medicaid.
Also Check: Medicaid Fraud Cases In Louisiana
Can Nursing Homes Take Your Annuity
Annuities are of less benefit for a single individual in a nursing home because he or she would have to pay the monthly income from the annuity to the nursing home. … Income from an annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer.
Who Pays During Medicaid Penalty Periods
Keep in mind that there is no limit to how long a penalty period can be. Many families wonder what happens when a senior needs care, has spent down all their assets and wound up ineligible for coverage. Who pays for their care? If a senior has gifted countable assets during the look-back period and requires a nursing home level of care, they will have to pay for this care out of pocket somehow until either the look-back period has passed and the senior can apply for Medicaid without issue or until the penalty period runs out and they become eligible for coverage.
For example, if you live in a state with a $5,000 monthly penalty divisor, use a gift deed to transfer ownership of your home worth $350,000 to your daughter, and then apply for Medicaid four years later, you would be facing a 70-month penalty period! Ideally in this scenario, you would wait one more year until the asset transfer was just outside of the look-back period to apply for Medicaid. Yes, you and/or your family would have to pay for one year of nursing home care out of pocket totaling approximately $60,000. But, it would make far more sense than applying for Medicaid as soon as you need long-term care and incurring a nearly six-year penalty period during which you would still be responsible for paying your own long-term care costs. Remember, any gifts that take place outside of the five-year look-back period do not count against ones eligibility.
Recommended Reading: Medicaid And Children’s Health Insurance Program Chip
To Protect My House I Should Give It To My Children Right Away
This is almost always untrue. Before you give your house to your children, you should consider the tax and Medicaid ramifications of such a gift. A common mistake is for a person to give a house to a child after the house is significantly appreciated in value. When the child sells the house, the child must pay the capital gains tax on the gain. If the house is sold by the parent, capital gains tax is usually avoided. Often the solution is to transfer the house into a trust. Each case must be analyzed individually.
The Medicaid Look Back Period Explained
One of the most misunderstood aspects of Medicaid is the look back period for asset transfers and how that affects eligibility for elderly people in need of long-term healthcare.
Lets start with a quick explanation. Medicaid is different from Medicare Medicare is an entitlement program paid for through payroll withholding. Medicaid is a form of social welfare designed to help people in need. Medicaid is administered by each state and sometimes by each county within a state which means the rules and benefits can and do often vary.
Generally speaking, Medicaid is designed to pay for long-term care once the individuals funds and assets are extinguished. In simple terms, if you have $200,000 in savings, you are expected to use those savings to pay for your care once your savings are gone, then Medicaid will kick in.
Thats why many people engage in long-term planning to protect at least some portion of their savings and assets so that those assets can be used to support a spouse or children while still allowing them to qualify for Medicaid under program guidelines.
Say, for example, you wish to leave $10,000 to your daughter when you pass away. If you need to enter a nursing home, you may be required to use that $10,000 to pay for your care before Medicaid steps in. One way to protect those funds is to gift that money to your daughter now.
Thats great but beware the look back period.
Hence the five-year look back period.
You May Like: Family Of 5 Medicaid Income Ohio
Will I Need Long
There is a lot of variation in the duration and level of long-term care that different people will need.
Some people will age without ever needing long-term care, but they are in the minority. In fact, nearly 70 percent of people turning 65 today will need some kind of long-term care in the years to come, whether that care is provided in a nursing home or in the persons home. The need for skilled nursing services is not a possibility, but a probability.
The probability of such a large expense simply must be planned for. Just as we maintain savings for emergencies and insurance policies for events that may never happen, it is important to have a financial plan in place if long-term care is needed.
Long-term care is expensive. According to the U.S. Department of Health and Human Services, the average nursing home cost is approximately $75,000 per year for a semi-private room, or $91,000 per year for a private room. Nursing home costs in Pennsylvania are higher than the national average, ranging from $89,000 to $139,000 per year for a private room, according to the Pennsylvania Health Care Association. The average person who enters a nursing home receives care for approximately three years. Other types of care, such as assisted living or home health aides, are less expensive, but still a significant cost.
Example : Marie Adds Her Son On The Deed Of The Home:
Putting someone elses name on a home is actually a gift. So in this situation, Marie is giving her son half the home. The same result as before would therefore take place, but the penalty would only affect Maries eligibility for Medicaid for half as much time. Here the gift went as follows:
$53430 /$300 = 178 days.
How Mass Health Treats the Lookback Period
Please note that in Massachusetts the MassHealth agency implements the greater federal law requiring a 5 year look back on all transfers. Thus it is the MassHealth regulations that the applicant must observe when applying for benefits. Unfortunately, these regulations require what amounts to a guilty-until-proven-innocent position with regard to all transfers made. In practice, this means that a $1000 expense made 4.5 years ago might disqualify the applicant from Mass Health benefits! In such situations the applicant should prove why the expense was unrelated to qualifying for MassHealth, often upon appeal at a Fair Hearing.
Of course transfers falling within the 5 year lookback rule are not the only factors affecting eligibility for Medicaid. The most dependable and cost-effective way to guarantee you are prepared to apply is to consult an experienced Massachusetts Medicaid attorney.
You May Like: Does Medicaid Pay For Teeth Whitening
When A State Can Recoup Benefits
After the Medicaid recipient dies, the state can try to recoup whatever benefits it has paid out. The home is usually the only major claimable asset. Currently, the state can only put a lien on it if it is part of the deceased’s probate estate. If the asset is jointly owned with a spouse or in a life estate or trust, then it can escape recovery.
In most states, the government can place a lien on the home after the death of both spouses, unless a dependent child resides on the property.
Meeting Medicaid Disclosure Requirements
Failure to disclose gifting is not a permissible way to avoid the 5-year look-back. The agency is adept at reviewing financial records, and they will ask questions whenever they suspect more information is required.
All of the above transfers are exempt from the transfer penalties and are fully disclosed to the PA Department of Human Services during the application process if the transfers fall within the 60 months prior to the filing of an application for Medicaid long-term care benefits.
If you need to apply for Medicaid benefits now, you may realize gifts occurred within the look-back that you fear may cause problems during the Medicaid application process. In another article, we will discuss what to do when gifts have already occurred and you think its too late. There may still be help our office can provide to reduce or eliminate the Medicaid transfer penalty in your case. Give us a call and well see what we might be able to do to help.
If you have additional questions, contact Gerhard & Gerhard, PC to discuss your options.
Disclaimer: We recommend that you have ongoing legal advice from an elder law attorney before attempting to navigate the Medicaid application process. If you have questions or wish to secure our services, please contact Gerhard & Gerhard, P.C.
Still unsure, need more direction?
Read Also: Pregnancy Medicaid Texas Phone Number
What Is The Medicaid Five Year Lookback Rule
Medicaid is supposed to be a means-tested benefits program. Its use is supposed to be restricted only to people who have very limited incomes and few financial resources. The problem is, Medicaid is also the only way for most seniors to pay for nursing homes. As a result, lots of people want to take advantage of Medicaid benefits, especially as they have paid taxes over their lives to support Medicaid and they believe it should be there for them when they need it.
Since Medicaid has resource limits and wont provide coverage if you have too many assets, it is possible for people to simply give away their money and property so they no longer have assets. The problem is, Medicaid does not want this to happen. As a result, Medicaid has created a five-year lookback rule. The rule requires that an assessment be made of your financial behavior when you apply for Medicaid coverage. Medicaid looks at transactions you entered into and transfers of money or assets over the five years before you applied for Medicaid coverage. If you transferred assets by giving them away or charging a lot less than market value, Medicaid disqualifies you from getting benefits.
The period of benefits ineligibility that is triggered when you have transferred assets is based on the value of transferred assets divided by the average nursing home monthly cost in your area. This number is equal to the number of months of disqualification.
