Crisis Medicaid Planning - There Are Options When an Emergency Strikes
By Don Drake, Connelly Law Offices, Ltd.
"Crisis planning is necessary to prevent your family from getting into a time crunch or financial bind when a sudden illness or injury demands immediate long-term care placement," said professional fiduciary and certified elder law Attorney RJ Connelly III.
"Obviously, preparing for Medicaid before an emergency is best to preserve your family’s time and finances, but there are times when planning is not even on the radar screen."
Carlos and Rosa, a healthy married couple in their mid-fifties, lived alone after their son graduated college and secured a job in Texas. One day, after finishing some yard work, Carlos expressed to his wife that he wasn't feeling his best. He took to the couch and dozed off, but soon after, he called out to Rosa. He was feeling dizzy and had collapsed, rendering him unable to speak. She responded swiftly, calling the emergency services, and he was quickly transported to the local hospital. After a few hours, doctors confirmed that Carlos had suffered a severe stroke and needed to be moved to Boston for further treatment.
Carlos was stable after several weeks but required long-term care. He would be discharged to a nursing home on the south coast of Massachusetts. Rosa panicked when the nursing facility asked her to sign an admission agreement accepting personal liability for her husband, worried about losing their savings and house. With everything that had occurred in just a brief period, Rosa was confused and needed help.
The couple's son, Jose, arrived, provided clarity, and connected Rosa with an elder law attorney who helped her make informed decisions about signing agreements, paying for care without losing their assets, and securing government benefits. This is an example of when Medicaid crisis planning is needed.
Crisis Planning Strategies
Simply put, a crisis plan gifts approximately 40-50% of one's assets to loved ones before filing a Medicaid nursing home application. The remaining assets are transferred to the same recipients in consideration of a promissory note or annuity agreement, which complies with the requirements of the law. This transfer is a loan that will be repaid during the period of Medicaid ineligibility.
After making a gift and loan, filing the application for nursing home Medicaid results in denial due to the uncompensated transfer. Medicaid calculates the period of ineligibility based on the value of the gift.
For instance, if an applicant has $500,000 in resources and gifts $250,000, and the Medicaid regional rate for nursing home care is $10,500, then the gift amount is divided by the regional monthly rate resulting in 23.8 months of ineligibility for Medicaid coverage ($250,000 divided by $10,500 equals 23.8). Therefore, the Medicaid applicant must privately pay for nursing home care for 23.8 months.
This calculation considers private pay cost, monthly income, and actuarial calculation of promissory note/annuity payment during the Medicaid ineligibility period. The nursing home payment must be less than the private pay rate in accordance with Medicaid regulations.
After the Medicaid ineligibility period ends, the applicant can update and resubmit their application for nursing home Medicaid approval. As you can see, a Medicaid crisis plan can protect a significant amount of the applicant's savings.
"Implementing a Medicaid crisis plan is an invaluable tool in preventing the unnecessary depletion of life savings for nursing home care," stated Attorney Connelly. "But such a plan must be done by an experienced and knowledgeable elder law attorney. Remember, preemptive Medicaid asset protection planning can better safeguard life savings, so pre-planning is still the best strategy."