Nursing Home/Medicaid Planning
Americans are living longer than ever these days. Unfortunately, this also meansthat our bodies and minds will often begin to fail us long before we die. We end
up needing a level of care that our families are simply not equipped to provide us.
According to a Prudential long term care cost study, people aged 65 have a 70%
chance of needing long term care in their lifetime. The average length of care is
4.2 years for men and 4.9 years for women. According to Genworth, the average
annual cost to a nursing home resident in Massachusetts is $116,800. Since
2004, long term care costs have grown 4.7% to 6.6% per year.
We spend our lives working and saving so that we may pass wealth along to our
children and grandchildren. It is a shame when someone’s life savings are eaten
up by nursing home costs in a short amount of time, so there is nothing left to
leave to their loved ones.
Medicaid/MassHealth vs. Medicare
Medicare is a FICA funded health insurance program focused on helping pay for
short-term medical needs. It helps to pay for doctor visits, medications, and stays
in rehab facilities and nursing homes for up to 100 days. Medicare is an agebased
assistance program and anyone over the age of 65 automatically qualifies.
Medicaid is a public program funded equally by both the federal and state
governments and is focused on helping provide long-term care to those who
qualify. In Massachusetts, Medicaid is referred to as MassHealth, but the two
terms are often used interchangeably. It helps to pay for long-term and
permanent residency in nursing home facilities. Unlike Medicare, Medicaid is a
needs-based program and a person must meet both the financial and medical
needs tests in order to qualify.
How can I qualify for Medicaid/MassHealth?
In order to qualify for Medicaid assistance you must meet both the financial and
medical needs tests.
In order to meet the medical needs test a patient must have difficulties
independently performing at least two Activities of Daily Living (ADL). These
ADLs are:
- Eating
- Bathing
- Dressing
- Toileting
- Transferring (Walking)
- Continence
Difficulty in at least two of these areas will qualify someone under the medical
needs test. If a patient qualifies for Medicaid under the medical needs test it then
must be determined if they meet the financial needs test.
In order to meet the financial needs test a patient cannot exceed certain asset
and income limits.
To qualify financially, a person applying for Medicaid assistance is allow to own
the following:
- A home with up to $750,000 in equity;
- Up to $2,000 in other personal assets, e.g., checking & savings accts.,
- 401(k) plans, etc.;
- Irrevocable prepaid funeral contracts;
- Up to $1,500 in a burial bank account;
- Term life insurance;
- One motor vehicle;
- Permanent life insurance having a death benefit of less than $1,500;
Medicaid income qualifications are complex and based on the median incomes of
Massachusetts residents. Income limits are constantly fluctuating and the list of
incomes counted include:
- wages and tips;
- self-employment income;
- social security benefits;
- pensions and annuities;
- and many others.
What if my assets exceed the limits established by Medicaid?
In the event that a person’s assets exceed the limits established by Medicaid
there are several options available to help someone qualify. These options
include:
- Purchasing specially-designed annuities;
- Placing assets in specially-designed trusts;
Assets can also be “Spent down” in a number of ways. It must be done legally
and in such a way as to avoid monetary and qualification-based penalties, and
the 5-year look back period.
What is the 5-year look back period?
The 5-year look back period gives Medicaid the ability to look back 5 years into
the applicant’s past and see if any assets have been transferred for less than
their actual value - in other words, given away.
If a large asset such as a house, or significant amount of money was either gifted
to someone else or sold for significantly less than its actual value, this may
impact an applicant’s eligibility.
It is important to begin planning for your long-term care as early as possible by
consulting with us.