Medicaid Planning

Medicaid Planning

Medicaid can be very confusing.  New clients often come to the initial meeting with information they have gathered online or from other sources, some of which is relevant or accurate, and some of which is not.  One source of confusion is the name Medicaid.  “Medicaid” is very similar to the word “Medicare.”  Without realizing it, many folks read or hear something about one program, and believe that it applies to the other, or to both.  So a good starting point for basic Medicaid education is: 
 

WHAT’S THE DIFFERENCE BETWEEN MEDICARE AND MEDICAID?

 

You may be somewhat familiar with Medicare.  It’s our federal government health insurance program, and it pays for Seniors’ (persons over age 65) medical expenses.  (Although adults with specific medical conditions can also qualify for Medicare, most Medicare beneficiaries are Seniors.)  Medicare is a lot like the Social Security program.  U.S. citizens earn the right to enroll in Medicare by working and paying income taxes for a minimum required time period.  Both Social Security and Medicare are entitlement programs.  After age 65, those who have become “entitled” to benefits receive Social Security, which pays some monthly income, and “entitled” to receive Medicare, which pays for medical care.

 

Many do not realize, however, that in general, Medicare does not pay for long-term care.  The costs of living in a nursing home, for example, is extremely expensive, and Medicare covers only a very limited number of days in a nursing home.

 

MEDICAID does cover nursing home costs.  Medicaid, however, is not an entitlement program.  No matter how long you have been working and paying taxes, you can only qualify for Medicaid benefits by passing strict income and asset eligibility tests.

 

The asset limit for a Medicaid nursing home applicant is $2,000* in countable assets.   If the nursing home applicant is married, and the spouse is still living in the community, the spouse can have approximately $120,000* in countable assets, in addition to the applicant’s $2000. *

 

*Note: All dollar figures are approximate, because they may change yearly.

 

What is a countable asset?  Basically, it is anything of value owned by the applicant or the applicant’s spouse that is not excluded as an asset, or is an exempt asset, according to the rules governing Medicaid eligibility in your state.  It’s very important to realize that the rules vary considerably from state to state.  Many of the examples I use here are only relevant to a Florida Medicaid applicant.

 

Examples of exempt assets include:

 

  • Your house (subject to equity limits)
  • A car
  • Pre-paid, irrevocable, funeral contracts
  • Burial plots
  • Small life insurance policies
  • Small accounts specifically designated for burial costs.
  • Your personal items, such as your clothes, furniture, etc.

 

Therefore, a Medicaid applicant could own the items on the above list in addition to owning $2000* in countable assets.

 

*Note: All dollar figures are approximate, because they may change yearly.

 

Also, in Florida, many assets that produce a regular income stream are not counted as assets, they are considered income.  The most common example of this is an IRA or 401-k account.  Above age 70.5, those accounts must distribute required amounts at least annually.  The principal balance of such accounts would not count as an asset, but the monthly amount received from the account would count as the applicant’s income.

 

So, in addition to $2000* in countable assets and items on the list of exempt assets above, an applicant could also own an IRA that is making income distributions. 

*Note: All dollar figures are approximate, because they may change yearly.

 

In Florida, Medicaid also has specific income limits.  The applicant’s income cannot be above approximately $1300* per month.  However, if the applicant has income above that limit, as long as the applicant’s medical expenses (including nursing home costs) exceed his/her income, the excess income can be put into a specific type of income trust, and the applicant will still be eligible for Medicaid.  As a practical matter, because of the very high cost of nursing home care, income eligibility is seldom a concern when applying for nursing home Medicaid.

 

*Note: All dollar figures are approximate, because they may change yearly.

 

Long-term care is very expensive.  The average cost of nursing home care for one month is currently approximately $8600.*

 

*Note: All dollar figures are approximate, because they may change yearly.

 

There are essentially 3 ways to pay for long-term care:

 

  1. Savings – yours and/or family members’;
  2. Long-term care insurance (which I highly recommend, if that is an option for you);
  3. Government assistance (Medicaid).

 

Obviously, a combination of two or three of the above methods is very typical.

 

MEDICAID PLANNING is the process of planning to use government assistance to help pay for your long-term care.   Using the Medicaid rules, my goal is to help the potential Medicaid applicant and the family make good decisions about assets, so the applicant can meet the financial eligibility requirements as early as possible.

 

Medicaid rules are complex. They change over time. They vary from state to state. So Medicaid planning is definitely not something that you can do without assistance from someone that is very familiar with the law and regulations.

 

My discussion here is incomplete. I have simply given some examples to illustrate the rules that you have to know in order to structure a financial situation to gain nursing home Medicaid eligibility as early as possible. If you wish to learn more, and wish to know how the Medicaid rules apply to your situation, please give me call (786-804-3456) or email (manning@miamiestateplans.com) to schedule an appointment.

Sheryl J. Manning, PL.
1104 Ponce de Leon Blvd
Coral Gables, Fl 33134
(786) 804-3456 Direct Line
(305) 445-3721 Receptionist

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