Medicaid Crisis Planning - It's Never Too Late to Plan for Medicaid
By Don Drake, Connelly Law Offices, Ltd.
As we approach the Medicare open enrollment period, which runs from October 15 to December 7, the advertising campaigns by health insurance providers are in full swing. In order to avoid any confusion with the open enrollment period, we wanted to reiterate the importance of Medicaid planning. It is crucial to understand that Medicare and most health insurance plans, including Medicare Supplement Insurance (Medigap), do not cover long-term care. Remember, plan ahead and explore Medicaid options to ensure you or your loved ones receive the necessary care while avoiding financial strain.
"In our last blog, we discussed advance planning for Medicaid in order to protect assets," said RJ Connelly III, a professional fiduciary and certified elder law Attorney. "Obviously, it is ideal to have a crisis plan in place to avoid any last-minute scramble or financial strain on your family when you need to arrange long-term care for a loved one due to sudden illness or injury. Again, planning for Medicaid ahead of time can help safeguard your family's finances and time, but sometimes, planning is not even considered until an emergency arises."
In the event a single individual (no spouse, divorced or widowed) requires long-term care in a nursing home and has assets or resources exceeding the amount permitted for Medicaid nursing home eligibility, a crisis plan involving the implementation of Medicaid is often the most financially prudent solution. However, this requires the assistance of a highly experienced elder law attorney to ensure compliance with legal requirements.
Carlos and Rosa, a couple in their mid-fifties, were living a healthy life after their son moved to Texas. One day, after finishing some yard work, Carlos expressed to his wife that he wasn't feeling his best. He soon collapsed and was unable to speak. Rosa quickly called the emergency services, and he was transported to the local hospital. After a few hours, it was 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. However, the nursing facility asked Rosa to sign an admission agreement accepting personal liability for her husband, which made her worried about losing their savings and house. Rosa was confused and needed help.
The couple's son, Jose, arrived 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.
More on Crisis Planning
A Medicaid crisis plan involves gifting approximately 40-50 percent of one's assets to children or other loved ones. Concurrently, the remaining balance of assets is transferred to the same individuals who received the gift in exchange for a promissory note or annuity agreement.
The transferred assets are considered a loan, which will be repaid during the period of ineligibility for Medicaid. Once the gift and loan have been made, the application for nursing home Medicaid is filed. Since an uncompensated transfer has been made, the application will be denied, and Medicaid will calculate the period of ineligibility created based on the dollar 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.
The calculation involves a variety of factors, such as the private pay cost of the nursing home, the monthly income of the applicant, and an actuarial calculation of the promissory note and/or annuity payment to be made during the period of ineligibility for Medicaid. The amount paid to the nursing home must always be less than the nursing home’s private pay rate, pursuant to 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 crisis plan must be done by an experienced and knowledgeable attorney. Remember, preemptive Medicaid asset protection planning can better safeguard life savings, so pre-planning is still the best strategy."
Please note that the information provided in this blog is not intended and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise that you consult your attorney, professional fiduciary advisor, or medical provider for advice.