3 Common Myths About Medicaid Planning

Medicaid planning is an important part of our law practice at BRMM. We are amazed that no one has ever informed the public that they do not have to lose all of their assets if they or a loved one is in a nursing home or entry into a nursing home is imminent. No one has any idea that you can seek governmental benefits and still preserve their assets for themselves, their spouse, and their children. There is a substantial gap between what the law is, and what people believe the law to be.

Misunderstanding runs rampant in this area. Most people do not take the time to consult a specialist. They listen to their friends and believe all hope is lost. The truth is that people can pay for their care by planning. They can either be rich and spend their money, be poor and go on Medicaid, be insured and look at long-term care or stay-at-home insurance, or plan and put their financial affairs in order.

With proper planning, we can save hundreds of thousands of dollars for our clients. People work a lifetime to accumulate assets.When a husband and a wife have to consider a nursing home, they are looking at $120,000 a year for the care of one spouse and the cost of living for the other. These costs can easily amount to a quarter of a million dollars in a couple years. It all boils down to people working with an expert such as BRMM to get quality information and make an intelligent choice, as opposed to taking their chances. And of course, when you leave things to chance and circumstance, it just breeds disaster.

Medicaid is an extremely complex program administered jointly by the federal and state government. In addition to paying medical costs for low-income families, the program helps seniors with limited resources cover long-term health care needs, including nursing home care. In certain circumstances, it can subsidize the cost of home care. Unfortunately, misunderstandings and confusion about planning for Medicaid long-term care benefits abound. This article addresses three common myths about Medicaid planning.

Medicaid Myth #1: I can wait to plan for Medicaid benefits until I need to go into a nursing home.

This misconception reflects a serious mistake that seniors often make aboutMedicaid benefits. Anticipating long-term care needs in advance throughMedicaid planning often provides more options and strategies for protecting your assets and qualifying to receive Medicaid benefits. If you wait until you need to go into a nursing home or need other long-term care, your options likely will be more limited.

The need for advance planning is due largely to the complex rules and regulations that apply to eligibility for Medicaid benefits for long-term care. The rules provide specific strategies that applicants can use to protect assets and still qualify, but some of those strategies require anticipating the need before it exists. The limitation is due in part to the Medicaid five-year look-back period (not a five year penalty) for certain types of asset transfers, in connection with asset eligibility for benefits. Simply put, Medicaid looks back from the time one applies for benefits. If there are any transfers (gifts) for less than fair value, you are penalized for one month for every month you could have paid for care had you not made the gift.

The reality is that the best time to plan for Medicaid benefits or for long-term care needs is when you are still healthy and do not need nursing home or other long-term care. To accomplish that goal, potential long-term care needs, including Medicaid planning, should be addressed as part of your estate plan objectives shortly after you celebrate your 50th birthday. The most critical documents that everyone needs are a financial durable power of attorney and a durable power of attorney for health care.

Medicaid Myth #2: Medicaid will automatically pay for my nursing home care.

This belief exposes another truth about Medicaid benefits. No one receives them automatically. To get the benefits, you must meet strict asset and income eligibility requirements, qualify medically, and submit an extensive application. The process is complicated and takes time to complete.

Another aspect of the mistaken belief that nursing home costs are automatically covered by Medicare benefits, which are very different from Medicaid benefits. While Medicare covers a lot of health care expenses, it does not provide custodial benefits for nursing home or long-term care. To be clear, Medicare does not protect you from the high costs of nursing home care. (Private health insurance also typically does not cover those costs.)

Often, even if you think you cannot qualify for Medicaid because of your income and assets, the rules provide ways that you may be able to meet the eligibility requirements. To use those strategies, you should get assistance from an elder law attorney with extensive experience in Medicaid planning strategies. Trying to navigate the complex rules on your own in most cases will create serious problems that affect your ability to meet the eligibility requirements and may preclude eligibility for many years.

Medicaid Myth #3: I need to sell or give away everything to qualify for Medicaid.

Often, individuals think that receiving Medicaid benefits means that you must give up all your property, including your home. That belief simply is not true. Medicaid eligibility rules provide certain exemptions for assets and income, including rules that apply to your home. The rules also provide options for protecting assets and income through specific strategies. In many cases, you can keep your home and still receive benefits.

Married couples have special worries about the impact of Medicaid benefits on assets and income when one or both spouses need nursing home care. For eligibility purposes, Medicaid differentiates between married and single individuals. In addition,protections are available for a spouse when the other spouse goes into a nursing home or needs other long-term care. However, taking advantage of the available options to protect the spouse who does not receive the benefits often requires advance Medicaid planning.In most cases, married couples can protect substantially most of their assets. On the other hand, single persons can utilize advanced strategies to protect 50-70% of their assets.

Whether you are single or married, it is critical to talk with an experienced elder law attorney who understands both Medicaid planning and long-term care planning, before you evaluate your eligibility or take any steps toward receiving Medicaid benefits. Your lawyer can make certain that you protect your assets and protect your spouse by taking advantage of the permissible strategies under the Medicaid rules and regulations.

Talk with our BRMM Estate Planning and Elder Law Attorneys About Medicaid Planning

Medicaid planning andlong-term care planning are important parts of the assistance our BRMMestate planning andelder law attorneys provide to individuals and married couples. We’ve been providing legal services to clients for more than 40 years. Our compassion, credentials, and commitment set us apart. Call us at (248) 641-7070 to talk with us about matters relating to estate planning, elder law, or other areas of concern. We serve clients in Troy, Oakland County, and surrounding areas, as well as out-of-state clients with matters arising in Michigan.