Medicaid Planning 2026 Part 1 - An Overview of Medicaid Planning and Options

Attorney RJ Connelly III Certified Elder Law Attorney Professional Fiduciary

"As a certified elder law attorney and professional fiduciary with decades of experience supporting individuals and families, I understand just how overwhelming the world of Medicaid planning can seem," said Attorney RJ Connelly III. "Each family’s journey is unique, and I know that the stakes are deeply personal—protecting loved ones, preserving dignity, and making choices that honor your values and hopes for the future. My passion lies in helping clients gain clarity and confidence as they navigate this complex process together."

"Over the coming weeks, we plan to share a special series of blog posts devoted to Medicaid planning and Medicaid crisis planning for 2026," continued Attorney Connelly. "My commitment to client education is at the heart of my practice, and I believe that empowering you with a deeper understanding of Medicaid planning is more than just helpful—it is essential. When clients and their families are equipped with knowledge, conversations become more open, honest, and compassionate. This, in turn, leads to more thoughtful decision-making, reduces stress, and brings everyone to the table in a spirit of collaboration and support."

These upcoming blogs will shine a light on both the well-known and lesser-known aspects of Medicaid planning, addressing common questions and uncovering overlooked strategies. Through these posts, you will find not only practical guidance but also reassurance that you are not alone on this journey. By learning together, we can build stronger communication bridges and create solutions tailored to your family’s needs and dreams. In our first post, we will present an overview of Medicaid planning and Crisis planning.

"I invite you—clients, families, and caregivers alike—to join us in this conversation. Let’s work together to ensure that knowledge becomes your greatest ally, fostering understanding, peace of mind, and the confidence to face the future with clarity and hope."

Medicaid Planning versus Medicaid Crisis Planning

Medicaid Planning and Medicaid Crisis Planning are two distinct strategies for addressing the financial realities of long-term care, each differing in its timing, available options, and the level of pressure involved.

Medicaid Planning is a proactive, thoughtful process that individuals or families undertake years before a pressing need for long-term care services arises. The goal is to organize and structure finances, assets, and income so that they meet Medicaid’s stringent financial eligibility rules while minimizing potential penalties or spend-down requirements.

Methods used in this approach can include creating irrevocable trusts, transferring assets in compliance with Medicaid’s look-back period (often five years), converting countable assets into exempt assets, and structuring income to fit within Medicaid’s limits. This careful planning enables individuals to preserve family wealth, ensure continuity of care, and avoid last-minute financial distress. Working with legal and financial professionals during Medicaid Planning allows for a customized strategy tailored to the specific needs, assets, and goals of the applicant and their loved ones.

Medicaid Crisis Planning, by contrast, occurs when an individual suddenly requires immediate long-term care—often following an unexpected health event, accident, or rapid decline in condition—and lacks the luxury of advanced preparation. At this stage, the focus is on urgent solutions designed to quickly achieve Medicaid eligibility while salvaging as many assets as possible.

Crisis planning may involve rapid asset transfers, the use of Medicaid-compliant annuities, spousal refusals, or the structuring of payments to exempt income sources. Because Medicaid imposes penalties for certain asset transfers made within the look-back period, crisis planning must navigate complex regulations and may require the support of attorneys well-versed in elder law and Medicaid policy.

The emotional and financial pressures of crisis planning can be intense, and the range of options is usually narrower than with proactive planning. However, with expert guidance, families may still be able to protect substantial resources and secure the care their loved one needs.

While both Medicaid Planning and Medicaid Crisis Planning share the objective of securing long-term care and protecting assets, Medicaid Planning is best done in advance and offers more flexibility and favorable outcomes. Crisis planning is reactive, offering fewer choices and requiring quick, strategic action under stressful circumstances.

Medicaid Versus Medicare

Medicaid offers a comprehensive array of long-term care services. This program finances extended stays in nursing homes and assisted living facilities in most states, as well as a variety of home- and community-based services for individuals who require assistance with daily activities such as bathing, dressing, and eating.

In contrast, Medicare is a federally administered program that primarily provides health insurance to individuals aged 65 and older and to certain individuals with disabilities. However, its coverage for long-term care is significantly more restrictive than Medicaid's. Medicare will cover short-term stays in skilled nursing facilities, but only after a qualifying hospital admission of at least three days and only for a maximum of 100 days per benefit period. This coverage is intended for rehabilitation or recovery following an acute illness, injury, or surgical procedure, rather than for ongoing custodial or personal care.

Consequently, Medicare does not cover extended stays in nursing homes, assisted living facilities, or long-term home care that solely entails assistance with activities of daily living. This limitation indicates that individuals in need of ongoing support for chronic conditions, dementia, or general frailty cannot rely on Medicare solely to meet their long-term care needs.

Given the substantial differences between Medicare and Medicaid, it is imperative to understand which program covers specific services when planning for long-term care. Individuals anticipating the need for assistance with daily activities due to aging or chronic illness should assess their financial circumstances and state-specific Medicaid regulations.

While Medicaid can offer enduring support, qualifying for it often necessitates careful planning. Relying exclusively on Medicare leaves significant gaps for those who require ongoing assistance outside skilled nursing facilities, underscoring the importance of considering Medicaid or other options as part of a comprehensive long-term care strategy.

Medicaid Versus Long-Term Care Insurance

Long-term care insurance is a private insurance policy that covers expenses for services such as nursing home stays, assisted living, or in-home care. Ideally, it offers policyholders the flexibility to select their preferred care environments. Nevertheless, achieving coverage comes with significant challenges.

In recent years, premiums for long-term care insurance have increased significantly due to rising care costs and longer life expectancies. Industry reports indicate that the average annual premium for a healthy couple aged 55 is approximately $3,000 to $4,500. For older applicants, rates can rise substantially, often exceeding $7,000 annually. These expenses tend to increase as policyholders age or seek inflation protection and enhanced benefits. Over 20 years, a couple may incur premium costs of $60,000 to $90,000 before receiving any benefits.

Most policies impose daily or monthly benefit caps, typically between $150 and $250 per day, while the average cost of a private room in a nursing home can range from $8,000 to $10,000 per month. Policies frequently include elimination periods—analogous to deductibles—requiring the policyholder to pay out-of-pocket expenses for the first 60 to 90 days.

Common exclusions for pre-existing conditions and restricted reimbursement for home care or assisted living services are also prevalent. Furthermore, inflation protection, a crucial aspect given the rising costs of care, may result in premium increases of up to double, yet this feature is often necessary to align with actual expenses.

Even those possessing the most comprehensive long-term care insurance may ultimately require Medicaid. The primary rationale for this necessity is that insurance benefits frequently fall short of covering the total cost or duration of care. For instance, if a policy provides coverage for three years while an individual requires nursing home care for five years, Medicaid may become the only viable option once both insurance benefits and personal funds are exhausted. Additionally, certain catastrophic health events or chronic conditions can lead to expenses exceeding policy limits.

Medicaid functions as a crucial safety net for individuals who outlive or deplete private insurance or personal savings. Consequently, Medicaid planning remains imperative—even for those who have invested in long-term care insurance—to ensure access to care when other resources are depleted.

Long-term care insurance is a valuable resource for those who can afford the premiums; however, its substantial costs and coverage limitations make it rarely an all-encompassing solution. Therefore, incorporating Medicaid planning into a long-term care strategy is essential to ensure that care will be accessible when all other resources have been exhausted.

A Final Note

"Understanding the differences between Medicare and Medicaid is crucial, especially for those planning for long-term care. Individuals anticipating the need for assistance with daily activities should evaluate their finances and learn about their state's Medicaid regulations," points out Attorney Connelly. "While Medicaid can provide lasting support, qualifying for benefits requires careful planning. Relying solely on Medicare may leave those needing ongoing assistance with gaps, underscoring the importance of including Medicaid or other options in a long-term care strategy."

"In our next blog, we will take a closer look at the intricate workings of Medicaid long-term care. We’ll cover the various types of Medicaid programs available, including Institutional Medicaid, Home and Community-Based Services (HCBS), and the eligibility criteria for each. Stay tuned for a comprehensive discussion that will help you navigate these important resources effectively."

The information presented within this blog is intended exclusively for general informational purposes and should not be construed as legal, financial, or healthcare advice. The content, materials, and insights provided may not reflect the most recent developments in these fields and, therefore, should not be relied upon for personal or professional decisions. Further, this blog may contain links to third-party websites, which are included solely for the convenience of our readers. It is essential to note that Connelly Law Offices, Ltd. does not automatically endorse or recommend the contents of these external sites. Given the complexities and nuances of legal, financial, or healthcare matters, we strongly encourage individuals to consult a qualified attorney, a professional fiduciary advisor, or a healthcare provider regarding any specific issues or concerns. Your well-being and informed decision-making are of paramount importance to us.