Nursing Home, Medicaid & Asset Protection Strategies

A. What is Medicaid

Medicaid is a federally mandated, state regulated and locally administered program that provides medical assistance to eligible individuals, based on both an asset test and an income test. Medicaid will pay all of the medical care, homecare and nursing home expenses for qualifying individuals. Community Medicaid basically covers all medical bills for individuals who meet the asset and income levels, including homecare and many waivered programs that encourage the delivery of health care in the community setting. Chronic Care Medicaid covers long term nursing home care for eligible individuals. The proficient Elder Law attorney is able to assist a person in need of nursing home services or homecare services access Medicaid benefits by implementing a variety of strategies that will lawfully protect a substantial portion of their assets so that they can qualify for Medicaid. As a general rule, the Elder Law attorneys at Lacy Katzen, LLP can protect approximately 40% to 70% of a single person's assets should they need nursing home services. For married couples, with proper planning, we can often protect substantially all the assets. There are exceptions to these general rules, and in some instances we can protect all of the assets and income.

B. Who Needs Medicaid

Nearly 45% of Americans will spend some time in a nursing home if they live beyond the age of 65. Once nursing home care is required, there are 4 options. (1) Privately pay for care, that in the Rochester region costs approximately $10,500/month, until all the assets have been spent down at which point Medicaid will pay those costs; (2) Use long term care insurance policies that must have been purchased prior to illness; (3) combine 1 and 2; or (4) Contact your Lacy Katzen, LLP Elder Care planning attorney and under take lawful asset protection planning and access the Medicaid program.

C. Resources and Income Limitations for the Medicaid Applicant

The personal income and resource allowances for individuals and married couples are beyond the scope of this elder law summary. The resource amounts and income limitations that a Medicaid applicant is allowed to keep are often misunderstood and are distinct from the total amount of assets and income that can be protected depending upon the age of the Medicaid applicant, the specific program the applicant is seeking admission to, the age of the applicant, whether the applicant is married, the applicant's precise asset mix, etc. The distinction of what Medicaid allows an applicant to retain as opposed to what a spouse or children are lawfully permitted to retain, is at the core of an awful lot of poor advice we have corrected over the years by attorneys, accountants, financial advisors and many well intentioned people trying to help those struggling with the challenges of caring for a sick spouse or parent.

D. Look Back Period and Penalty Period

One of the greatest sources of confusion produced by the Deficient Reduction Act of 2005 is the application of the 60 month "Look Back Period" and the new method of imposing a "Penalty Period" for asset transfers. Upon application for Medicaid benefits, a 60 month review of all account statements occurs. Medicaid caseworkers then rigorously review the financial documentation looking for asset transfers or gifts. The review of documents over this period of time is the "look back period". Assets that have been transferred or given away for less than fair market value are subject to a 60 months look back period. "Transferred" is broadly defined to mean, "Did you give anything away, or buy something for somebody else, for which you did not receive equivalent value in return". If the answer is yes and planning measures are not implemented prior to application, Medicaid will impose a penalty period. This means that for a certain period of time Medicaid will not pay the nursing home for the care it is providing to the Medicaid applicant. Since poverty is a condition of applying for Medicaid and since the penalty period will not begin until after the sick person is poor, how will the nursing home get paid if such a penalty period is imposed? Big gifts within the look back period will create long penalty periods and small gifts will result in little penalty periods.

Thus, if a single elderly male nursing home resident gave his children $28,000 within a few years of his being admitted to the nursing home to help fix a roof, payoff some debt, help a child with school, and if nursing home resident then spent the last of his $100,000 on his care at the nursing home until he was otherwise poor, and if he then applied for Medicaid to pay for his nursing home care, Medicaid would impose a 4 month penalty period meaning that it would not pay for dad's care for a period of four months after he ran out of money. This is a substantial problem for the nursing home, the nursing home resident and the children that received the $28,000. Depending upon the timing of $28,000 gift or transfer, as well as the nursing home documents that the child or children may have signed upon the father's admission to the nursing home, the nursing home may have a private cause of action against the children for the value of the gift the children received and/or the value of the services it provided the father. Since 4 months of care in a nursing home costs approximately $40,000, the children may be liable for that sum even though they only received $28,000. Had these people visited with an experienced Elder Law attorney, knowledgeable in this complex area of the law, the father's prior gift of $28,000 as well as an additional $36,000 could have been protected and Medicaid could have been seamlessly accessed paying for dad's care at the nursing home.

E. Medicaid Strategies

Many asset protection strategies can be employed to assist an individual qualify for Medicaid. It is particularly important to note that the adoption of these strategies will have no impact on a Medicaid applicant's quality of care or quality of life. Federal law and New York law require as much. The Medicaid Applicant will receive the same care as that of someone privately paying for nursing home care, with one exception: a Medicaid recipient is not entitled to a private room.

The last point we wish to emphasize is that each case is fact intensive and two families with identical fact patterns will often choose different solutions that are tailored to meet their specific objectives. Some Medicaid techniques include:

A controlled gift and spend strategy;
Control and guide the timing of the Medicaid application process;
Protect the family residence and other real estate interests such as the cottage or family camp through the transfer of fractional interests in real estate;
Thoroughly review all financial documentation necessary to process a Medicaid application;
Use of Medicaid trusts;
Transfers of assets to disabled children outright or in trust;
Proper application of exemptions;
Proper assessment of existing annuities;
Proper use of private or commercial annuities;
Proper application of the intricacies of placing an IRA or qualified account into "pay status";
Use of promissory notes;
Use of "spousal refusal" and the proper allocation of marital assets;
Use of traditional estate planning documents, such as Wills, revocable trusts and powers of attorney to further insulate assets and avoid ruinously expensive guardianship proceedings;
Proper review and alignment of beneficiary designations for IRA's, life insurance, pension benefits or other assets that can pass by contract;
Use of Personal Service Contracts;
Preparation of estate planning documents effectively using Wills to further insulate and protect a family's wealth.

F. Guiding The Medicaid Application Process

What separates Lacy Katzen, LLP from most all other Elder Law planning professionals or law firms with elder law practice attorneys, is our dedicated team of attorneys and paralegals who work exclusively in the area of getting our clients on Medicaid. With very few exemptions, we will not apply for Medicaid until we have reviewed all of the financial documentation necessary for us to form an opinion as to what transactions, gifts or transfers have occurred within the relevant look back period and do what is necessary to account for or fix the problems created by the transfer, that has a dramatic affect on the overall asset protection strategy. We then script out with precision in a Plan Letter, exactly what needs to be done to accomplish the asset protection goals our clients want us to accomplish. We prepare the Medicaid application and all estate planning documents, including Wills, powers of attorney, trusts, deeds, etc. We attend the Medicaid interview and interface directly with the local county department of social services on your behalf. We are willing to gather all of the documentation necessary to prosecute the application, but find it just as easy to work with a spouse or a child or the power of attorney. We are often directly involved in making sure all of the tasks outlined in the Plan Letter get accomplished. We then review the Medicaid determination, work directly with the county to correct the determination as appropriate and outline the Medicaid applicant's or the community spouse's duties going forward.

Over the years, we have assisted hundreds of clients access the Medicaid program all across New York State and provide financial security with routine success. We also see all too often, many well intentioned attorneys, accountants and financial advisors who are simply unaware of the lawful asset protection strategies available to their clients. We are happy to work with any trusted family advisor, in whatever capacity, to review with them the lawful rules surrounding these tested, proven, asset protection strategies.