 Personal Finance PowerPoint Presentation, Medicaid and Nursing Homes, prepare to get financially fit by practicing personal finance. Insurance is part of our long term risk mitigation strategy where we follow the adage of measure twice, cut once, put in a formal process in place, something like setting the insurance goals, developing a plan to reach them, putting the plan in action, reviewing the results, repeating the process periodically. So this information can be found at Investopedia, Medicaid and Nursing Homes. A quick guide to the rules which you can find online. Take a look at the references, resources, continue your research from there. This is by Alita Epstein, updated March 7, 2022. In prior presentations, we looked at insurance in general. We then moved to the medical insurance which can be a bit more complex due to the nature of the net medical field and the rules and regulations related to it. Then we moved to dental and vision and now we were looking at the long term care insurance and we're considering now Medicaid and the nursing homes at this point. So we got Medicaid and Nursing Homes, a quick guide to the rules. Medicaid was created in 1965 as a social health care program to help people with low incomes receive medical attention. So notice that Medicaid, it's kind of interesting to look at some of our social policies. We got Social Security, Medicare, Medicaid and which one of them we think about as kind of like retirement benefits to everyone kind of thing versus things that are going to be benefits or a safety net type of program. So notice that the Medicaid is still kind of designed as a safety net kind of program. Therefore to qualify, there's going to be these kind of income and asset level thresholds that are going to be in play as we think about the Medicaid. So it's useful to understand that because if you have a significant amount of assets and income, then you might want to be planning some other option rather than using the Medicaid option. It's useful to understand what is this program designed for? Is it designed to help everyone or is it designed as a safety net program and then help to tailor your plan from there? So many seniors rely on Medicaid to pay for long-term nursing home care. Most people pay out of their own pockets for long-term care until they become eligible for Medicaid. Though Medicare is an entitlement program, Medicaid is a form of welfare or at least that's how it began. So again, that kind of distinction with these kind of government programs is useful for us to keep in mind and those distinctions kind of change over time and they get a little fuzzy for us to think about what exactly was this set up to do and how should I be thinking about it? How should I be relying on it or not relying on it? So to be eligible, you must become impoverished under the program's guidelines says Laura M. Cron, a Rhode Island based elder law attorney. So let's look at how the economics works and how Medicaid can be used to pay for a nursing home. So we've got the Medicare versus Medicaid rules in nursing home care. So the Medicare, so now we've got Medicare and Medicaid. So Medicare does cover nursing home care up to a point if you are sent to a skilled nursing facility for care after a three-day inpatient hospital stay. Medicare will pay for 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. Get that 50 cents in there per day in 2021 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. So notice the Medicare is more similar possibly. You're going to compare it to possibly more similar, your insurance or medical insurance. So you might have the capacity for it to cover certain components if there's kind of a long-term emergency. But is it going to be there for the long-term care if you need day-by-day care for a long period of time as you get older? It's not really the design for it, such as it's not also generally the design for normal kind of medical insurance. That's where the long-term care and possibly Medicaid possibly could come in. Qualifying for Medicaid in all states, Medicaid is available to low-income individuals and families, pregnant women, people with disabilities and the elderly. Medicaid programs vary from state to state. And the Affordable Care Act, the ACA, allows states to provide Medicaid to adults under the age of 65 without minor children or a disability. Income standards are usually based on the federal poverty level. So then you got to get into, okay, this is now a safety net kind of program. So now what's going to be the safety net? We've got this term of the poverty level. And the poverty level is an interesting term because we measure it here to kind of measure whether they qualify. You might compare like the poverty level to other countries and stuff and think about what poverty is in general. What does the poverty level mean? So each state has its own guidelines and eligibility requirements. For example, in New York state, there is an income limit of $1,482 monthly in 2021 for individuals. But in Mississippi, the limit is $1,047 for individuals and $1,394 for couples. So clearly that might be influenced by cost of living in terms of where you're out, how expensive are just the living, how expensive is it to live there? So we've got the separate limits applied with regards to the amount of financial resources such as bank accounts, cash, real property. So these are kind of like the balance sheet types of things, your assets versus your income levels. Someone can have to be Medicaid eligible. So how your assets impact eligibility? Besides income, your assets will be counted toward meeting eligibility requirements. So if you look at your personal financial statements, we have two of them just like a business, two main ones. You think about one, how much income do you generate? What's your income level, your income statement in other words? And then your balance sheet, how much is your assets liability threshold, your net asset standpoint? So countable assets include checking and saving account balances, CD, stocks, and bonds. In most states, you can retain up to $2,000 as an individual and $3,000 for a married couple outside of your countable assets. However, these amounts may vary depending on the state in which you live. Notice that these requirements start to become quite restrictive, right? So if you don't have to do that, if you don't have to qualify and have your assets under a certain level and be reporting your assets to qualify for the Medicaid, that would be nice. That would be better. So, you know, you kind of want to think about and plan early to see where you stand in terms of is this an option that would be most beneficial for you or not the earlier you can plan possibly the better. So your home, your car, personal belongings, or your savings for funeral expenses remain outside of countable assets. If you can prove other assets are not accessible because they are in an irrevocable trust, for example, they too are exempt. And this is where like the financial planning comes in. So you could get the lawyers come in and say, okay, let's set up a trust here or something like that. Let's see if we can work something out so we can put the assets somewhere out so you don't technically own them or we can gift them or something like that. And all these kind of plans could be useful. They possibly might be helping you to do that, but it would be nice if you didn't have to go through that situation of trying to lower your assets to qualify for the benefit program if you didn't have to. So a house must be a principal residence and does not count as long as the nursing home resident or their spouse lives there or intends to return there. So the home, you might think that's a significant asset to most people. But because you live in the home, you can't really use the home to spend money on other things unless you move out of the home. If no one's living in the home, then that you would think that they might say, okay, now it's subject to something that you could possibly sell and we're going to count it in this countable assets thing, which would push a lot of people possibly over being able to qualify if their home was counted in there because it's a significant asset. So upon becoming eligible for Medicaid, all of the applicant's income must be used to pay for the nursing home where the applicant resides. However, you may be allowed to keep a monthly allowance. They give you an allowance and a deduction for medical needs, such as private health insurance. So the amount of the allowance varies depending on your living arrangements, type of nursing facility and state rules. If you are married, an allowance may be made for the spouse still living in the home. Eligibility and asset transfer rules. So you might start thinking, okay, what if I start transferring my assets so I can qualify and get my assets under the threshold to qualify. So in the past, to avoid exceeding Medicaid's income limits, some families would transfer a patient's assets into the names of other relatives, such as the children. So you might say, and this comes in to play with, you might see a similar kind of like with a state tax planning, if they're trying to tax people, like if the government was going to come in and tax you when you die, then what you're going to do is say, I gave everything away. I don't have a penny when I die. That would be kind of like the plan. And of course, the government then plays rules and plays games to stop you from doing that and whatnot. So you got a similar kind of situation here. You can say, well, I want the care that they're going to give me. So how can I lower my assets below a certain threshold so that I could get the care but still let my assets do what the assets are going to do? Maybe I can try to give them a way to family members or something like that, although that's kind of risky still. So the Deficit Reduction Act of 2005 made such maneuvers much harder to manage. Now, when you apply for Medicaid, there is a five-year look back at all assets transfers. So now they're going to say, oh, I see that you transferred $500,000 to your son or something like that. And I don't like that because, you know, we want to, so that same kind of thing happens if they're trying to tax you when you're dead, right? I came to pick your pockets and you're telling me you don't have a penny. I see you transferred that $500,000, like, right? You get the same kind of thing happen. So if the Medicaid finds money was transferred within the past five years, a penalty period is imposed delaying the onset of Medicaid coverage. So Medicaid calculates the penalty by dividing the amount transferred by what Medicaid determines is the average price of nursing home care in your state. So for example, suppose Medicaid determines your state's average nursing home cost is $6,000 per month and you had transferred assets worth $120,000. So you're saying, okay, I don't qualify. I'm going to transfer these assets $120,000 to like my son or my daughter or something like that. And they see it and they're saying, okay, well, it costs $6,000 a month for the nursing home. So you will not be eligible for Medicaid assistance until you pay the cost of the nursing home for 20 months. That's going to be the $120,000 divided by $6,000 or 20. So they're basically saying, well, we're going to imagine that you took that $120,000 and spent it on the care you needed at the fair market value that we're saying is $6,000. So tell your son to pony up that $120,000. And then after you spent it, then maybe you qualify. It's kind of like the idea there. So there's no limit to the number of months for which someone can be declared ineligible. The penalty period begins on the day the patient enters a nursing home. Not all transfers are counted in the look-back period. Arrangements that are allowed include transfers too. The spouse of the applicant, a child under the age of 21, a child who's permanently disabled or blind, an adult child who has been living in the home and provided care to the patient for at least two years prior to the application for Medicaid, a sibling with an equity interest in the house who also has been living there for at least one year before the patient applied for Medicaid. Okay, so 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 assets. So then, so you got to obviously keep that into consideration in terms of the state possibly trying to recoup possibly then looking into whether or not the home would be applicable at that point. Currently, the state can only put a lien on it or any other asset 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. So in most states, the government can plan a lien on the home after the death of both spouses unless a dependent child resides on the property. What is Medicaid? Medicaid is a federal program administered at the state level that's designed to provide medical care assistance for low income individuals and families and people with disabilities. Medicaid is separate from Medicare, which is a federal program that pays certain health care expenses for individuals age 65 and older. Does Medicaid pay for nursing care? So Medicaid can help to pay the cost of long-term care in a nursing care facility. To qualify for assistance, you must meet the Medicaid eligibility guidelines established by your state. It's important to note that Medicare does not help with long-term care costs. What is a Medicaid look-back period? The Medicaid look-back period is a period of time, typically five years in which any transfer of assets to family members may be subject to scrutiny for Medicaid eligibility. So if it's determined that you specifically transferred assets during the look-back period in order to qualify for Medicaid, this can affect the benefits for which you're eligible. Can Medicaid take my assets? So to be eligible for Medicaid, you must meet certain guidelines for income and financial assets. If your assets are above the threshold allowed in your state, you may have to spend some of those assets down in order to qualify for Medicaid for long-term care. So what's the bottom line? Depending on Medicaid for your long-term care insurance can be risky if you have a sizable estate. So in other words, you want to make sure that you're understanding what Medicaid is there for. It's a safety net kind of program. If you have a substantial amount of assets, then it would be nice if you could plan. You want to take into consideration what your plan will be when you might look into other avenues. So and even if you don't, it may not meet all your needs. But if you anticipate wanting to qualify, review your financial situation as soon as possible and have an elder or senior care attorney set up your affairs in a way that will give you the money you need for now while rendering your assets and ineligible to count against you in the future. So if you're in a situation, you're saying, hey, Medicaid is the way to go. I think that I've looked at my other options. That's the way to go. Then you might want to talk to an attorney to make sure that you can structure your assets in such a way that you qualify for the Medicaid while still being able to have as much control over the assets as you can still in that situation. So you could talk to an attorney about that. So don't forget that asset transfers must be in place at least five years prior to your application to avoid Medicaid's look back period. Even so, plan to have enough assets to pay a facility privately or through private long-term care insurance at least for the initial six months to a year.