 Aloha. Welcome to Finding Your Piece of the Rock on Think Tech, Hawaii. I'm your host, Abe Lee. I've been a licensed real estate agent since 1973. I'm the owner of Century 21 Eye Properties, Hawaii, and work with close to 100 wonderful agents in real estate. I started Abe Lee seminars in 1980. I have taught over 10,000 students to help them get their real estate licenses and have taught continuing education for licensees to renew their license every two years. Our show is dedicated to helping buyers and sellers understand the process involved in a real estate transaction. Our special guests will talk about legal issues, escrow, title, getting a loan, surveys, home inspections, insurance, contracts, rules and trusts, and much, much more. Today, we're privileged to have a return guest. Ethan Okura from Okura & Associates is a law firm that specializes in rules and trusts estate planning and also focuses on Medicaid, which is a highly not understood topic. So Ethan is going to talk to us about the secrets of Medicaid and your real estate. But Ethan, thank you so much for being with us. Second time. You're welcome. Thanks for inviting me again Abe. It's good to be here. Yep. Very much so. So the first time we met, we talked about rules and trusts, which is basic. But today, I want to get into what is Medicaid. And so can you tell us what's the difference between Medicaid and Medicare? Sure. And that's a really great question. A lot of people have heard these terms Medicare and Medicaid, and they sound similar. And so a lot of people confuse them for each other. But there's a big, big difference. And it's not just the air and the aid ending with Medicare. That's your social security retirement health insurance program. So everybody who's retired can get on Medicare to pay for some of their health needs. Medicaid, on the other hand, is a needs based program. So like welfare health insurance, and there are asset and or income limits, depending on which program in Medicaid you're qualifying for. Medicare, on the one hand, does not pay for long term care for nursing home. But Medicaid can pay for long term care in a nursing home. That's the big difference. Okay, so really, we should be more concerned about Medicaid because everybody gets Medicare. Correct. Right. Because my wife and I are over 65 now, and we're on Medicare, and they take out several hundred dollars a month for Medicare insurance. But Medicaid, we wouldn't qualify unless we had certain specific, I guess, income limits or whatever. So tell us, Ethan, you talk about top form lists about qualify for Medicaid. What are those myths? Sure, the first one we've already alluded to, the myth number one is that Medicare can pay for my long term nursing home costs. And that's not true. Some people have come to me, clients have approached saying, well, but I know that my nursing home was paid for by Medicare. I remember if a nursing home cost is covered by Medicare, it's not for long term care. They can only cover for short term rehabilitation purposes. So if you had an accident or an injury, a fall and broken hip or stroke or something happened, and you had to go to the hospital for at least three days. And on the fourth day or later, you're discharged from an acute weightless bed to a nursing home so that you can go to rehab and you can try to improve, then Medicare can pay for rehabilitation costs. But there's a maximum of 100 days that it can pay for. So there's no more than about three months. And on average, it only pays for about 26 days of rehabilitation before they cut you off. So that's one of the myths is that I can get Medicare to pay for my nursing home. But if you're in long term care, you need Medicaid. The second myth is that I don't want to go on Medicaid because I don't want the government to pick which nursing home I go to. I don't want to have to go to a poor quality nursing home. Some people have heard that, that you don't get to choose. That's not true either. When you're in long term care, if you're in a facility that can handle skilled nursing facility level of care or intermediate care facility level of care, so this long term care 24 hour care that's needed, most of the facilities that are what they call ICF or SNF capable here in Hawaii do accept Medicaid. And whether you privately pay or qualify for Medicaid, you can be in the same facility for most of those. There are a handful that either don't accept Medicaid at all. Or they limit the number of beds that are Medicaid available. For example, Kahalanui is pretty well known in town as one of the nicest nursing homes around. And they only have a couple of beds available for Medicaid patients, two for men and two for women basically. And other than that, they have to be private pay. But almost all of the other major nursing homes in town that you'd hear about that do long term care can also qualify for Medicaid. Now some of these are more of assisted living facilities. And those often do not get Medicaid because you can't get Medicaid for assisted living. It really has to be for intermediate care or skilled nursing care level of care. But the government doesn't pick which nursing home you go to, you choose the nursing home. And if it is a Medicaid accepting facility, then you can qualify for Medicaid and they can pay for your care there, no matter where it is. The third myth is that you have to use up all of your assets on your own care before you can qualify for Medicaid. Sometimes people hear it as the requirement to quote unquote, spend down. And I think that that's often the worst advice people can get. They think that they have to spend all of their assets before they can qualify for Medicaid. And that's not true. There are asset requirements or limits. But with careful planning, there are often ways to qualify for Medicaid without having to spend everything on your care. And you could save some of your assets for family members, especially for a spouse or for your kids. And it really is a highly technical area of the law and specialized. So many times, even lawyers I know have given advice to people or people who are specialists, maybe not lawyers, but a consultant for Medicaid that have given advice to people or social workers at the nursing homes or whatnot. And a lot of them have some experience with helping people qualify for Medicaid. But they're not Medicaid specialists in protecting assets from nursing home costs and qualifying for Medicaid. So I often have people come to me where they've gotten bad advice from someone else that caused them to lose all their assets or that would have cost them to lose all their assets if they followed it. So that's a third thing that's a myth is that you have to use up all of your assets before you can qualify for Medicaid, not necessarily so. The other, the fourth myth, and this is another big one, is that if you gave away any assets, you can't qualify for Medicaid for five years. And that's not exactly true either. And the reason why a lot of these myths are so prevalent is because there's maybe a kernel of truth to them or they're close to the truth. But they get misinterpreted and misunderstood by most people. So there is a five year look-back period to say when you apply for Medicaid, if you did give away assets, we have to look at what the value of those were to see if there was a penalty for giving it away and how long that penalty would be. But it doesn't mean you can't qualify for Medicaid for five years just because you gave away some assets. In fact, sometimes a penalty could be shorter than five years, one month only, or the penalty might be many, many years, 10 years. So you have to be very careful in just assuming that, hey, if I just give away asset, I only have to wait five years before qualifying for Medicaid or I can't get it before five years. Sometimes you could qualify much sooner than five years. And sometimes it might be much longer depending on how you failed to plan. Wow, Ethan. That is a mouthful. And for most people, it goes over our head. All right? So let's get to a little more detail then. Sure. What are the requirements to qualify for long-term care Medicaid? And what's the financial requirements? Yeah, so to qualify for long-term care Medicaid, there's two components. One, you have to have a medical need. So you need to be medically needed. I in my current health state, even if I were flat broke and met all of the financial requirements, I couldn't qualify for Medicaid because I don't have a medical need for it. Right? So you do have to hit that. But assuming you meet the medical need, then there's a financial need requirement. And this is a part that gets a lot of people confused. There are limits to the amount of assets you can own and still qualify for Medicaid. And a lot of people get confused between assets and income. And part of the confusion here is because of the different types of Medicaid programs. Or someone who's not in long-term care, someone who just has low income and they need this welfare health insurance, they have income restrictions to see whether they can qualify for Medicaid to pay for their nurse to pay for their health insurance. But their assets are not counted. So someone who's not in long-term care who just wants Medicaid regular health insurance, we don't even look at their assets, we just look at their income to see if they qualify. And if you're poverty level income, you can qualify. However, if you are going for a long-term care, the opposite is the case. We look at what your assets are and it almost doesn't matter what your income is. Even if you have a lot of income above poverty level, five, six thousand a month, if your income is not enough to pay for your care, as long as you meet the asset requirements, then you could qualify for Medicaid for long-term care. And they just make you use some of your income to pay for your care, and Medicaid will pick up the difference. So that's one confusing point is the income versus assets. Should I move on to what are the assets and the asset requirements and the types of assets? Let's talk about the medical need first. You're saying that somebody really needs help and they can't do it themselves. What are the tests of what you can or cannot do to qualify for the long-term care need, just say a physically disabled person or mentally disabled person? Sure. If you're comatose in a coma, you automatically qualify. We need you. But short of that, there's an assessment done by your physician or sometimes the admitting nurse in the nursing home or the physician affiliated with a nursing home, and they fill out this form that the Department of Human Services here with the state of Hawaii, they have a form 1147 and that's an evaluation of your abilities. They will look at your hearing, your vision, your short-term memory, long-term memory, your ability to communicate your needs and wants, whether you can go to the toilet by yourself, whether you can bathe yourself, whether you can dress yourself, your ability to transfer in and out of bed to a chair, to a wheelchair if you need one, whether you can walk, do you need a cane or a walker or assistance or supervision or wheelchair, whether you can eat by yourself or someone has to feed you, whether you can prepare your meals. So there's this whole list of things that they go through and will assess points, zero, one, two, three or four, depending on the categories. Some of them have fewer than four. But when you add up all the points, you need to meet a certain level that's determined to be at least intermediate care facility level of care before you can qualify for Medicaid and being medically needy. Generally, if you hit 15 points on the 1147 form, you're in good shape that you will be considered intermediate care facility level of care. And then you've met the medically needy requirement. So as a pun or as a joke, you have to qualify to not be capable. And then you qualify. Exactly. Okay. So that's the one side on the physical need. Now, on the financial need, it's a little more complicated. So can you go into that? Sure. On the financial side, like I mentioned, there's a difference between income and assets. So income is what comes in every month. That's why they call it income. If you ever think about that. So social security, pensions, salaries, investments, rents, any of that would be income. But if we set that aside, and we just look at your assets, it's what's in the bank, right? What you own, what you have in your bank accounts or stock accounts, even your retirement funds, your IRAs, your 401ks, your real estate, your cars, all of those things are considered assets, anything that you own is an asset. And when you're trying to qualify for Medicaid, we make a distinction between exempt assets, and non exempt or countable assets. So we have two categories. And there's a long list of exempt assets, and 90% of it doesn't apply to most people. For one example that could apply in Hawaii is if you had been held in an internment camp in World War II as a Japanese-American citizen, and you got a reparation payment of $25,000, which started in the 70s, then you kept that money separated, and you could say, this is that $25,000 that I got as a reparation payment for being an internment camp, then that's considered exempt. But that doesn't apply to most people. So the ones that do apply that we usually look at are a home. If you own a home, that's an exempt asset, and you don't have to sell it before you qualify for Medicaid, it fits your home that you're residing in your residence. If you have a car or cars, the cars are exempt, and you can own those and still qualify for Medicaid. And when we say motor vehicles or cars, it could be a passenger car, a truck, a van, a bus, even a motorcycle. But unfortunately, the category of exempt motor vehicles does not include a boat or an airplane or a helicopter. So if you have one of those, you're out of luck. So you have to give up the airplane, Ethan. Yeah, that's right. And besides that, you could have a wedding ring and an engagement ring, assuming you're married, and you could also have a funeral plan and a burial plot. So those, like if you had a prepaid funeral plan, right, when you purchased it to say, hey, this will take care of my funeral when I pass away, or a burial spot, which could be a cemetery gravesite or it could be a niche for Buddhist style, that any of those would count as an exempt asset. But if you have more than one burial plan or burial spot, then those would be considered not exempt if you have more than one for each person in the household. So those are the exempt assets that most people would, that would apply to most people, right, what they can have. Anything other than that is non exempt. So all of the stocks and bonds and bank accounts and cash and gold coins and money in your mattress stuff at home, that's still a non non exempt or countable asset, and you have to declare that when you're applying for Medicaid. How much can you have? You can only have $2,000 in countable non exempt assets when you're applying for Medicaid. If you're a married couple, and one of you is going to a nursing home, then the one in the nursing home can have $2,000. And the healthy spouse could have up to $148,620. So that's called the community spouse resource allowance for the one who's healthy, so that they can keep from surviving right while their needs aren't being met by Medicaid. But if you're a married couple and both of you are trying to get long term care Medicaid in the nursing home, you can only have $3,000 combined. So that's the assets in terms of exempt and non exempt and how much you can have. So let me get this straight. If the husband is needy, he cannot have more than $2,000. Correct. The wife can have up to $148,620. If she's healthy living at home, in a nursing home herself. So if she has more than that, what happens? If she has more than that and you apply for Medicaid, husband will be denied. Sorry, you have too much in assets. Come back when your assets are under the limit. So how do you take care of that then qualify? That's the secret sauce and it depends on what types of assets you have. But I can give you one simple strategy and one quick warning here is this is not legal advice. This is not financial advice here for anyone because your specific situation might require a totally different plan or there could be something that's much better to do that's different from this. But one possibility is there are certain types of annuity contracts that you can purchase for the healthy spouse that does not count as an asset as long as it meets several strict requirements. And most insurance companies don't sell an annuity that qualifies for Medicaid. So a lot of people got buy an annuity thinking that they could do it for Medicaid and it doesn't work. In fact, it could actually backfire and be worse. In fact, count as a penalty for you for Medicaid because you bought this annuity. But if you can buy the right kind of annuity for the healthy spouse, you could put all that money in that annuity for the healthy spouse and it doesn't count as an asset. It counts as an income stream for the healthy spouse and the healthy spouse can keep all of their own income. So we've had clients with a few hundred thousand extra in the bank. Maybe let's say there's 500,000, but they're only allowed to keep the 148. So we could take the extra 350,000 or so put into an annuity contract for the healthy spouse. The healthy spouse gets all that money back after well month by month in an equal payments over four to five years. And when that money's coming back, it counts as income for the healthy spouse. So we don't have to contribute it to the nursing home. Like the needy spouse would have to pay their income, but the healthy spouse can keep all of their income. And so for one moment when we're ready to apply for Medicaid, we have less than 148,000 for the community spouse. And all the money that went into the annuity doesn't count as an asset. We apply for Medicaid and get approved. Once we're approved, the healthy spouse can keep their income and grow their assets over 148,000 and they're not penalized. So that's one technique to temporarily reduce your assets and yet get it back for the healthy spouse within a few years. Ethan, is this 148,000 annually? No, the 148,000 is not an income. It's an asset that look that's when we're applying for Medicaid. We look at what your assets are at that point in time, a snapshot of assets at that point in time. And if we're under that amount, 2,000 and 148,000, 620, then we're approved. If we're over, we're denied. And if you're approved, then even if the healthy spouse invests their money and grows over 148 or gets more income or annuities pay out and it grows back to 500,000, the healthy spouse can keep that money and it doesn't get the nursing home spouse kicked off. Okay, how about a home? You said there's no limit if certain conditions occur. Right. So we said your home was an exempt asset. Well, that's only partially true. The home is an exempt asset, but there's two caveats there. One is there can be an equity limit on how much value or equity you can have in your home. And current it was set at $750,000 adjusted for inflation back in 2006. So currently you could have a million $33,000 home. And that's all exempt. And if you have a million if your house is worth more than a million 33 and you don't have any mortgages to reduce the equity, then it would not be an exempt asset because anything above the million 33,000 is accountable asset. But there's an exception. If you have your spouse living in the home, the equity limit doesn't apply. So you could have a $2 million or $10 million home. And if your spouse is living there, the whole thing is exempt, you can still qualify for Medicaid. Wow. If it's not the spouse, you can have a minor child, or a blind or disabled child of yours, not someone's child or any child, but your own child who's an adult who's blind or disabled, or your own child who's a minor. And in this case, it's federal law minor, so under 21. And then in that case, you could have a house worth more than a million $33,000. And it's still exempt to get you qualified for Medicaid. I heard somewhere that if an adult child moves in to your house and takes care of you, then is that house exempt? That's a good question. That's not true, actually. It's the exempt and you wouldn't qualify for Medicaid. But the adult child with two years living with you and helping to take care of you, this is actually an exception to the five-year look-back rule where there's a penalty for transferring assets. So if you transfer your asset to your child, let's say you own a home that's worth $2 million and your spouse has passed away, you're a widow or a widower, and you don't have a minor child or a disabled child, then you try to give your house to your child to say, now I don't have an asset. Well, that gift would create a penalty with a five-year look-back period. But there's an exception if you give your home to your adult child who lived with you for two years and helped provide care to delay your entry to the nursing home, then there's no penalty for giving your house to that child, whether it's a million dollars or $10 million or $2 million. Any value of home is no penalty on transferring it. But if you don't give it away to that child and you keep that home and it's worth more than $1,033,000, you can't qualify for Medicaid because your equity is too much. Wow, amazing. It's complicated, right? It is extremely. Now, you know, time is flying. We wouldn't have little under four minutes left. But you had five tips to qualify for Medicaid. So, can you tell us your tips? And then maybe at about a minute left, we're going to have to cut it and then bring you back again. Sounds good. And maybe we'll have to do another session to talk about strategies we can use or something. Sure. That'd be wonderful. Five tips. I would say first is when you're trying to qualify for Medicaid, work with a qualified specialist to maximize your chances of getting qualified for Medicaid without getting denied. And in this case, they're often social workers or Medicaid consultants who can be helpful. As long as you don't have a significant amount of assets, often they're really helpful to help you get qualified to make sure the paperwork's done correctly. Because if you submit your application and it's denied, the problem is you might have a nursing home bill of 10,000 or 12,000 or 15,000 a month that's racking up. And if you made a mistake in the application and then you get a denial 60 days later and you reapply, well, you just racked up two months of nursing home bill that you might have to come out of pocket to pay and you don't have the money for. And so get help when you're applying for Medicaid. The second tip would be don't necessarily just spend down your assets before seeking assistance from a qualified attorney who specializes in Medicaid qualification and protecting assets for nursing home costs. Sometimes the social worker or Medicaid consultant who's helping you will tell you to spend down so that you can qualify and that might be the wrong advice, but they don't know any better. Everyone that I've met and worked with the social workers or consultants are good-hearted people who are trying to help and they do a great job to help most people who just need help with an application to qualify for Medicaid. Sometimes they give advice without realizing that it's not the right thing for your situation because you have assets that could be saved and they don't know how to save it because it's really complicated as we can see. So I would say don't just spend down because you heard you have to qualify. It's worth getting some advice, a consultation from a specialist to see if there's something you can do to protect those assets. Number three, make sure you have a very good, durable power of attorney for financial matters that allows your agent to make gifts on your behalf if you become incapacitated. Because if you don't have special language allowing them to make gifts for you, they can't do that. And even if there is a legal way to give your assets away to your spouse or your kids to qualify for Medicaid, if you're incompetent, they can't do it for you even with a standard power of attorney. The state form, the default form, only lets you give 17,000 per person per year if you even allowed for that gift. So that's an important one. The most important thing I think is make sure you have a good power of attorney before you become incapacitated. Okay, we're at the well time and Marky said. Excited. So we're gonna have to bring you back for sure. Sounds good. Because there's a lot more stuff that you could go into detail without rushing. But man, this is just an amazing amount of information that the normal Joe public doesn't know, do they? No, almost everyone I see that comes for help with their Medicaid dining. Even if they've done research online, even if they've cut points, some of them even work in the business. In fact, we had someone who's a Medicaid eligibility worker who approves and denies people's application recently come to me for advice on how to plan for protecting their assets and qualify for Medicaid if they need it in the long term. So even the people whose job it is to prove or deny the applications don't necessarily know it all. Yeah, he didn't. Thank you so much. Let's have you back again for the continuance. Okay, I think people would like to know more about that. Folks, thank you so much for being with us. Go to abeliefseminar.com if you're interested in learning more about the real estate education side. And of course, Ethan is at Okura Law. And so he's on the website as well. Thank you so much, Ethan. We'll see you again. You bet. Take care. All good. Take care.