Medicaid and Long-term Care Planning: It's a Complicated Mess, But There Are Solutions

Article submitted by James R. Nici of the law firm of Cox & Nici.
For more information, he can be reached at 239-254-0706.

Over the past year or so, we at Cox & Nici have heard from many of our clients disturbing stories about relatives - a mother, an aunt, a sister or sometimes just a friend - who are facing the possibility, or even the inevitability, of entering a nursing home or long term care facility.

The problem, as reported by our clients, is this: these relatives have just enough hard-earned assets so that they do not qualify for Medicaid - and yet, all of those assets will be consumed by nursing homes costs, sometimes in as little as a year.

Unfortunately, in the United States the only "insurance" plan for long-term institutional care is Medicaid. Medicare only pays for approximately 7 percent of skilled nursing care in the United States. Private insurance pays for even less. The result is that most people pay out of their own pockets for longer care until they become eligible for Medicaid. While Medicare is an entitlement program, to qualify for Medicaid, you must become "impoverished" under the program's guidelines.

If you have been following the news lately, you will have read that President Bush has pushed more and more of the responsibility for Medicaid onto the individual states. In a further alarming trend, the states, under budgetary pressures, have declared their intention to make it as difficult as possible to qualify for Medicaid.

Yet, it is possible for you, your relatives, and friends to preserve hard-earned assets for loved ones and qualify for Medicaid to pay nursing home costs. Remarkably, it is even possible to do this after someone has already entered the nursing home or assisted living facility.

Despite the costs, there are advantages to paying privately for nursing home care. The foremost is that by paying privately an individual is more likely to gain entrance to a better quality facility. The obvious disadvantage is the expense; in Florida, nursing home fees can be as high as $7,000 a month. Without proper planning, nursing home residents can lose, the bulk of their savings.

For most individuals, the object of long-term care planning is to protect savings (by avoiding paying them to a nursing home) while simultaneously qualifying for nursing home Medicaid benefits. This can be done within the following rules of Medicaid eligibility.

Unfortunately those rules are complicated and, worse yet, are constantly evolving. Those rules include strictures including assets (generally anyone applying for Medicaid can have no more than $2,000 in "countable" assets to his or her name) and income (all your income must go to pay nursing home costs, except for a $35 allowance for personal needs).

In addition there are rules against giving away assets (a 36-month "look back" and transfer penalty period). There are rules concerning the use of trusts and annuities, and there are laws entitling the states to seek to recover from your estate, after your death, whatever benefits they have paid.

Applying for Medicaid is cumbersome and tedious. Every fact asserted in the application must be verified by documentation. The application process can drag on for several months as the state demands more and more verifications regarding such issues as the amount of assets and dates of transfers. If the applicant does not comply with these requests and deadlines on a timely basis, the application may be denied. In addition, after Medicaid eligibility is achieved, it must be re-determined every year.

Unfortunately, the knowledge that a family member is facing entering a nursing home or assisted living facility can throw an entire family into emotional and financial turmoil. This is a complicated area of the law and is full of pitfalls. You should be sure to consult with an attorney who is qualified in long term care planning, Medicaid planning, or elder law.