May is National Elder Law Month! Elder Law Attorneys across the country, including those at the Farr Law Firm, are taking the opportunity to educate seniors about their legal options in the communities we serve. Now is the perfect time to talk about one of our practice areas: Medicaid Asset Protection, also known as Medicaid planning and Life Care planning.
As a Certified Elder Law Attorney, I routinely help loved ones of those in need of long-term care to preserve assets while qualifying for Medicaid. Whether rich, poor, or somewhere in between, most of us cannot afford to ignore the potentially devastating costs of nursing home care and other types of long-term care. But what is Medicaid Asset Protection; how does Medicaid differ from Medicare; and is Medicaid Asset Protection legal and ethical? Find out the answers to these and some of the other most common questions we get as elder care lawyers:
1. What Does “Medicaid Asset Protection” Mean?
Medicaid is the primary method of paying for nursing home care in the United States. This means more people have their nursing home stay paid for by Medicaid, rather than paying privately or using long-term care insurance. Given the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Medicaid Asset Protection is vital for those who cannot afford the catastrophic costs of paying privately ($14,000 – $17,000 a month in the DC Metro area — Northern Virginia, DC, and areas of suburban Maryland). Fees are slightly less outside of these major urban areas, and we know because we help clients qualify for Medicaid throughout Virginia, Maryland, and the District of Columbia.
Life Care Planning and Medicaid Asset Protection is the process of protecting assets from having to be spent down in connection with nursing home care or in-home care, while also helping ensure that you or your loved one gets the best possible care and maintain the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home.
The main reasons for doing Medicaid Asset Protection include:
- Protecting The Spouse: With proper planning, a spouse who is able to stay at home can keep all of the couple’s assets and much or all income while Medicaid pays for the nursing home. The most important goal is typically to ensure that the spouse remaining at home is able to live the remaining years of his or her life with utmost dignity and not have to suffer a drastic reduction in his or her standard of living.
- Protecting Quality of Life: If you are a single or widowed client, the most important reason for you to engage in Medicaid Asset Protection planning is for you to be able to enjoy the highest quality of life possible in the event you are forced to enter a nursing home. Here’s how:
- Money that we protect for you in the process of getting you qualified for Medicaid can be used, once you are receiving Medicaid benefits, to provide you with an enhanced level of care and a better quality of life while you are receiving long-term care Medicaid, whether at home or in a nursing home.
- Families can use the protected assets to pay for your lost or broken hearing aids, dentures, eyeglasses, and electronic equipment; pay for your cell phone bill; replace outdated or soiled clothing; pay for streaming media services; hire a private “sitter” or “helper” – someone to keep you company, help you with meals, etc.
- protected money can also be used to purchase services or items for you that are not covered by Medicaid, such as some dental work, incontinence supplies, personal clothing, toiletries, nail trims, and haircuts.
- Protecting Children: Some parents have saved and sacrificed their entire lives and have a strong desire to leave a financial legacy for their children. With proper planning, this goal can be achieved while still qualifying for Medicaid.
- Protecting Disabled Persons: There are asset protection strategies that will allow you to protect certain assets for the benefit of a disabled child and sometimes for other disabled family members.
2. What is the Difference Between Medicare and Medicaid?
Medicare does not pay one penny, ever, for nursing home long-term care. Medicare pays for health care and rehab for people aged 65 years and older, people under age 65 with certain disabilities, and people of all ages with end-stage renal disease.
- Medicare only covers medically necessary care and focuses on acute care, such as doctor visits, drugs, and hospital stays.
- Medicare also covers short-term skilled nursing care or care for rehabilitation, such as physical therapy, occupational therapy, and speech therapy, to help you regain your function after an injury such as a fall or a stroke.
- Medicare’s coverage of short-term rehab care or skilled nursing care in a nursing home is quite limited. Medicare covers only up to 100 days per illness. To qualify, you must enter a Medicare-approved nursing home within 30 days of a hospital stay that lasted at least three midnights, and the care in the nursing home must be for the same condition as the hospital stay.
- Unlike Medicare, Medicaid is a means-based program. In other words, you are only eligible for Medicaid if you have very few “countable” assets.
As mentioned, for long-term care, the main government benefit is Medicaid. But Medicaid laws are the most complex laws in existence! There are strict financial requirements that you must meet in order to qualify for Medicaid, the main one being the requirement that you have very few countable assets to your name (below the individual resource allowance in your state). If you’re married and applying for Medicaid, the Medicaid agency will look at all assets owned by you and your spouse. Nevertheless, with skilled Medicaid Asset Protection planning done by an experienced Elder Law Attorney, almost everyone who needs long-term care Medicaid can qualify for long-term care Medicaid when medically needed without having to go broke by first spending down their life savings.
3. Is Medicaid Only for People with Low Income?
The thought that Medicaid long-term care is only for people with low income is one of the biggest myths around, and a big reason why more people don’t seek Medicaid Asset Protection Planning, because they assume they have too much income when in fact they don’t. The problem is that most articles written about Medicaid that catch the public’s attention are written by journalists who do not understand the difference between health insurance Medicaid and long-term care Medicaid, and they do a little bit of research and confuse the rules between these two types of Medicaid and therefore confuse the public.
This article, and all articles on our website, are about long-term care Medicaid (unless we specify that we are talking about health insurance Medicaid), but you must understand the huge difference between health insurance Medicaid and long-term care Medicaid. Health insurance Medicaid has very strict income limits and is generally only for people with very low income — up to 138 percent of the federal poverty level under the “Medicaid expansion” rules. Long-term care Medicaid (also called “LTSS Medicaid,” LTSS standing for “long-term services and supports”), on the other hand, is not a program for people with low income. Long-term care Medicaid is often called “middle-class Medicaid” because there is no strict income limit for long-term care Medicaid. If you have low income, you can of course receive long-term care Medicaid if you need long-term care, and from an income standpoint you will be deemed “categorically needy,” which is a Medicaid eligibility classification.
But what is vital to understand is that even if you have higher monthly income, you can still qualify for long-term care Medicaid. The income rule for long-term care Medicaid (which falls under the Medicaid eligibility category of “ABD” — aged, blind, and disabled — and under the eligibility sub-category of “Medically Needy”), is simply that your income must be lower than the cost of care, whether that care is in a nursing home or at home (or in some rare cases, in an assisted living facility). The reason for this is that almost all of your income, if you’re not married, must go to the nursing home each month, and Medicaid will pay the difference to the nursing home between your income and the monthly payment amount that Medicaid has approved for that nursing home. For example, if you as an individual have $7,000 a month of income, but you are in a nursing home that costs $15,000 per month, you will pay almost all of your $7,000 a month income to the nursing home, and Medicaid will pay the difference. Medicaid will allow you to keep a small monthly amount, called the personal monthly maintenance allowance, which varies by state. The rule is similar for in-home Medicaid under a state Medicaid waiver that provides in-home nursing services.
The income rule is different for married couples — if you are married and applying for Medicaid, the basic rules allow for some of your income to go to your spouse, depending on your spouse’s income and certain monthly expenses. There are also advanced Medicaid Asset Protection strategies (done by very experienced Elder Law firms such as the Farr Law Firm, which does Medicaid Asset Protection Planning throughout Virginia, Maryland, and DC) where your attorney can go to court in order to shift additional income from the Medicaid spouse to the “at home spouse.”
4. What Is the Five-Year Look-Back Period?
Medicaid applicants must meet strict asset limits to qualify for services. In addition, those applying for Medicaid to pay for long-term care in a nursing home are subject to a five-year look-back period. This includes a thorough review of asset transfers in the sixty months prior to the Medicaid application to ensure the applicant has not given assets away or sold them for less than fair market value to reduce their worth and meet Medicaid’s income limits.
The five-year look-back period begins on the date of the Medicaid application or the date which you request Medicaid to begin paying for benefits. States require that Medicaid applicants disclose any gifts and uncompensated transfers made during the five years before application.
- In most states, there are no blanket exceptions for charitable giving or gifts to children or grandchildren, but most states do have de minimis exemptions if you have made small gifts on a regular basis.
- If you have a caregiver, make sure you have a properly written agreement in place. If your caregiver is a child or other family member that you are paying, it is critical to make sure that the written caregiver agreement is prepared by an experienced Elder Law Attorney in order to avoid the presumption that you were making gifts to your family member.
- Loans to family members can trigger a penalty period if there is no written documentation. It is up to the applicant to prove that the transfer was not made in order to qualify for Medicaid.
Common actions that trigger a penalty under the five-year look-back rule include transferring a house to a child or other family member for less than fair market value (this includes adding the name of a child or family member to your deed), giving large gifts to loved ones or adding them as co-owners of brokerage accounts or other large financial accounts, donating assets to charity, or selling property for less than fair market value. We are of course fully cognizant of these rules and penalties and all other Medicaid requirements and are very careful to comply completely with the law.
5. Is Medicaid Planning Ethical?
If you or a loved one become a client of the Farr Law Firm, you may rest assured that everything that we do is 100 percent legal and ethical. It is no different from income tax planning when you try to get the biggest tax refund available by claiming legal deductions and tax credits. Medicaid Asset Protection is necessary to level the playing field so that you don’t get “taken” by our American health insurance system that discriminates against people who get the wrong type of illness, injury, or disease — meaning any medical condition that results in the need for long-term care as opposed to what our medical system deemed to be “medical care,” which is covered by health insurance. It is fundamentally unfair that somebody with a brain tumor should have all of his medical care covered under health insurance, while somebody with Alzheimer’s, which also involves something in the brain that is not supposed to be there (called plaques and tangles) must pay for all the care they need (long-term care) out of pocket until they go broke, and potentially until their spouse and children go broke. Whether it’s radiation, chemotherapy, and/or surgery, health insurance will gladly pay for cancer treatment even if it only extends the person’s life by a few months. But if you have plaques and tangles causing Alzheimer’s disease in your brain instead of a cancerous brain tumor, you are out of luck under our discriminatory American health insurance system.
Remember … long-term care Medicaid was NOT designed for poor people; it is a different type of Medicaid — health insurance Medicaid — that was designed for poor people, meaning people with very low incomes. Long-term care Medicaid was designed for people who can qualify for it, which includes many middle- to upper-class seniors who rely on long-term care Medicaid to cover the catastrophic costs of nursing homes so people such as you don’t have to deplete the assets it took you a lifetime to earn. With DC Metro area nursing homes costing $14,000- $17,000 per month, even wealthy people and those who spend their lives saving can quickly lose everything they worked so hard to earn.
In his personal finance column, “The Ethics of Adjusting Your Assets to Qualify for Medicaid,” and in a previous article about the same subject, “Plan on Growing Old? Then the Medicaid Debate Affects You,” New York Times reporter Ron Lieber explains how Medicaid has become the primary source of payment for long-term care services in the United States.
Lieber concurs with my description above on how “for most people who enter nursing homes or receive care at home or assisted living, if they pay for their care out-of-pocket, they’ll run out of money eventually and qualify for Medicaid coverage.” According to Lieber, “(w)e assume, incorrectly, that Medicaid is only for the younger poor or those with disabilities and that Medicare will pay for most nursing home care… When the first nursing home bills arrive, most people can’t pay… and certainly not for long, especially after 10 or 20 years of retirement spending. Ask around. Someone you know has quietly faced these facts and probably turned to Medicaid. Chances are, you, a family member or a close friend will someday, too.”
6. Will Your Firm Apply for Medicaid for Us?
Medicaid laws are the most complex and confusing laws in existence, and impossible to understand without highly experienced legal assistance. Without proper planning and legal advice from an experienced Elder Law Attorney, such as myself, many people spend much more than they should on long-term care, and unnecessarily jeopardize their future care and well-being, as well as the security of their family. Please read the Medicaid Complexity page on our website for more details.
It is extremely prudent to legally protect your assets in an effort to qualify for Medicaid nursing home benefits when needed, and to do so with the help of a highly-experienced Elder Law Attorney. Don’t ever hide your assets, and don’t make the mistake of attempting to protect your assets on your own. Make the wise choice, and call an experienced Certified Elder Law Attorney, such as myself, to make an appointment.
7. Do You Get Better Care if You Pay Privately?
Many people assume that you get better care if you pay privately. That is simply untrue. In fact, it is illegal to treat Medicaid patients differently than private pay patients, and it is illegal to discriminate against Medicaid patients. There may be no “Medicaid wing” and no public identification of a “Medicaid bed.” Typically, the staff does not know which patient is a Medicaid recipient. In actuality, the nursing home residents who get the best care are those who have done Medicaid Asset Protection, because a loving family member can then use those protected assets to provide a higher level of care for the nursing home resident. Elder Law, including Medicaid planning and Medicaid Asset Protection, is all about preserving dignity and quality of life for elders.
8. What Are the Advantages of the Living Trust Plus®?
The Living Trust Plus® irrevocable asset protection trust protects your assets from probate PLUS lawsuits PLUS Medicaid eligibility after five years, PLUS Medicaid estate recovery. Even though the trust is irrevocable, the term irrevocable does not mean that the trust is set in stone and cannot be changed. On the contrary, if you establish a Living Trust Plus Asset Protection Trust, you can remain in control of the assets even though you are giving up ownership to the trust. Remaining in control means that you can change the trustees and change the beneficiary of the trust. Remaining in control also means, in most states, that you can serve as the trustee if you are still competent, which means that you can decide how the assets in the trust are invested, you can decide if and when to sell your family home, and you can decide whether and when to make distributions of trust financial assets from the trust to a named trust beneficiary (which cannot be you or your spouse) or to a charity of your choice, and you can decide the amount of any such distributions.
The Living Trust Plus functions much like a revocable living trust and maintains much of the flexibility of a revocable living trust, but protects your assets from the expenses and complexities of probate PLUS lawsuits PLUS the devastating costs of nursing home expenses while you’re living.
For many Americans over age 65, a Living Trust Plus is the preferable form of estate planning because it includes asset protection for the person planning, and not just for that person’s children or other descendants. For purposes of Medicaid eligibility, this type of trust is the only type of self-settled asset protection trust that allows a settlor to retain control over the assets in the trust while also protecting the assets from being counted by Medicaid and by the Veterans Administration.
Plan Ahead for Long-Term Care
Medicaid planning can be started while you are still able to make legal and financial decisions or can be initiated by an adult child acting as agent under a properly drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care. In general, the earlier someone plans for long-term care needs, the better. But it is never too late to begin your planning.
To begin long-term care planning, Incapacity Planning, Estate Planning, Medicaid planning, or Alzheimer’s Planning right away, please call us now to make an appointment:
Medicaid Asset Protection Fairfax: 703-691-1888
Medicaid Planning Fredericksburg: 540-479-1435
Elder Law Rockville: 301-519-8041
Elder Care DC: 202-587-2797
About Evan H Farr, CELA, CAP
