1. Myth: Medicare and Private Insurance will cover the cost of long term care
Medicare only pays for limited coverage in a nursing home and only after a hospital stay of at least 3 days. The care must be “skilled care” and the program only pays the full cost for the first 20 days. Days 21 through 100 of skilled care require payment of a deductible. In many cases, Medicare pays nothing because only “custodial” care, not skilled care, is required. And these 100 days are not guaranteed. In order for Medicare to continue there must be continuing progress in rehabilitative care and or the health issue of the patient.
Various types of insurance are available to cover the shortfall of Medicare. Although long term care insurance will pay for covered services in a nursing home (or, depending on the policy, for custodial or skilled services delivered in the home, or often in assisted living or adult care facilities), generally private health insurance will not pay for long term care services. A supplemental Medicare (“Medigap”) health policy will pay for the deductible skilled care expenses during a Medicare approved spell of illness. Long term care coverage is often limited to a specific amount daily. This amount is not guaranteed to cover the entire cost of care.
2. Myth: If my spouse needs long term care, I have to lose everything before he becomes eligible for Medicaid.
When a couple separates because one must enter a nursing home, to prevent impoverishment of the “community spouse” (the spouse not entering the nursing home) the community spouse may keep a share of the couples’ assets. The “community spouse resource allowance,” or CSRA, is one half of the “countable resources” the couple (and each member of the couple) owns as of the first day of the month in which the ill spouse enters a facility, subject to a minimum amount of $23,844 and a “maximum” of $119,220. The “maximum” amount can be increased when necessary to provide the community spouse with additional income or to prevent impoverishment. There is no cap on the amount that can be set.
The home, most expensive automobile, most tangible personal property, and many burial arrangements are excluded from countable resources. They are protected for the community spouse and are not divided. For example, if a couple owned the farm on which the residence was situated, a car, and had an investment account worth $140,000, the community spouse would be entitled to retain the farm, the car, and $70,000 while the ill spouse receives Medicaid benefits to help pay for his care in the nursing home.
The remaining $70,000 would have to be reduced to not more than $2,000. It need not only be spent on the ill spouse. It can be spent or converted for the benefit of both the community spouse and the ill spouse.In addition to the lump sum protection of the CSRA, the community spouse is generally entitled to retain all of her monthly income. If her monthly income is less than $2,003.00, she is entitled to a supplement from the ill spouse’s income to make up the difference. If she is paying rent or a mortgage, under certain conditions she is entitled to up to $2,980.00 per month in income (this is known as the Minimum Monthly Maintenance Needs Allowance, or MMMNA).
3. Myth: If my spouse needs long term care and qualifies for Medicaid, the state will take my house after his death.It is true that Kentucky has the an aggressive policy of estate recovery (taking assets from the estate of a deceased Medicaid beneficiary) permitted under the federal law. However, estate recovery is permitted against the estate of the beneficiary, not the spouse of the beneficiary. As long as the home (and other assets) are titled in the name of the wife (at the time the spouse begins receiving Medicaid benefits), the state cannot take it to satisfy its claim for him.
Suppose the wife dies first? If the home was jointly owned with her husband, then it will immediately become his sole property. In most cases, this will cause the husband to be made ineligible for Medicaid, and cause him to sell the house to pay for his nursing home bills. Any funds left from the sale at the time of his death will be subjected to estate recovery. To avoid this outcome, the home could have been transferred to the wife, and her will written to leave her assets in a way that does not cause the assets to be “counted” in determining her husband’s eligibility.
4. Myth: I could go to jail if I give away assets to become eligible for Medicaid.
In 1996 Congress made it a crime to transfer assets to qualify for Medicaid if the transfer triggered ineligibility for Medicaid benefits. In 1997, following criticism of this “Granny Goes To Jail” statute, Congress changed the law to eliminate any criminal penalty for these transfers. Under the changed version, only persons who for a fee counsel or assist in transferring assets when the transfer results in a period of ineligibility may be prosecuted. The “Granny’s Lawyer Goes To Jail” law, as it has come to be known, was ruled unconstitutional in a federal case in New York, and the Justice Department (which admitted the law violated the Constitution) has been enjoined from enforcing it.
There are several ways in which a person entering a nursing home can lawfully transfer assets without becoming ineligible for Medicaid benefits. An applicant for Medicaid paid long term care can transfer any assets to a spouse, a dependent child, a disabled child of any age, or to a trust for a disabled person under the age of 65. In addition, he may transfer his home to a brother or sister who has lived in the home with the applicant for at least a year (and owns any interest in the home), or to a child who cared for the parent for two years immediately before the parent entered the nursing home, when the care kept the parent out of the nursing home for those two years.
5. Myth: I have to be in a nursing home before I can receive long term care
benefits under Medicaid.
When a person needs nursing home care but wishes to remain at home, if the care can be delivered to the person in a cost effective, safe manner, he may qualify for benefits under the Community Based Care Medicaid Waiver program. This permits the resident to remain in her home with assistance provided by community based nurses. However, the funding of Community Based Waiver Programs in Kentucky is very limited making them all but impossible to receive. Very specific groups, such as those with development illness or acquired brain injury, do receive waiver benefits regularly.
6. Myth: No matter how much property I give away, I have to wait at least 3 years before applying for Medicaid.
Prior to 2006 the “look back” period was 3 years in Kentucky. However, substantial changes have been made regarding Medicaid eligibility pursuant to the Deficit Reduction Act of 2005 (DRA 2005), which went into effect on February 8, 2006. Medicaid requires that all transfers of assets made within five years before the application be reported. When a non-exempt transfer is made within five years of the Medicaid application (examples of exempt transfers include transfers to a spouse, a minor child, a trust for a disabled person under the age of 65, etc.), regardless of whether it is made to a person or to a trust, an ineligibility period for Medicaid payment of nursing home care will be imposed. The ineligibility period will not begin to run until the time of the Medicaid application, or when the person would otherwise have been eligible for Medicaid, whichever is later. The term “look back” is the 5 years immediately preceding the application for Medicaid benefits over which the Department of Medicaid Services requires all financial transfers to be reported.
The ineligibility period is designed to be for the length of time that the person in the nursing home could have paid for nursing home care if he had simply used the asset to pay for his nursing home care. To determine the period of ineligibility, the Commonwealth of Kentucky divides the value of the asset given away by the average monthly cost of nursing home care in the state of Kentucky (as of 2016 $199.46 per day, or approximately $6,066.90 per month).Under prior law, the resulting ineligibility period was rounded down the nearest whole number. Under DRA 2005, the ineligibility period is not rounded down, resulting in partial months of ineligibility. Thus, mother’s payment of daughter’s surgery of $12,000.00 3 years ago, would incur a 62 day penalty period of ineligibility. And, the penalty would not begin to run until mother either applied for Medicaid or was otherwise eligible for Medicaid, whichever is later.
7. Myth: There’s no Medicaid disqualification if I sell my house to my child for $1.00 and apply for Medicaid to help pay for my nursing home bills.
Kentucky uses the tax assessed value of the real estate to determine its value for Medicaid purposes, regardless of the over-valuation or under-valuation. If the parent’s house has a tax assessment of $60,000 and is sold to the child for $1.00 on September 1, 2014, then the “uncompensated value” of the transfer would be $59,999. Unless the transfer met an exception to the anti-transfer rules (i.e., the child was disabled, under 21, or provided care to the parent, etc.), the transfer would cause a period of 10.02 month period of ineligibility for Medicaid long term care benefits.
8. Myth: I can transfer all my assets to an irrevocable trust and as long as I wait 3 years, I’ll be eligible for Medicaid.
The “lookback” period for all transfers is now five years. If there are any circumstances under which the trustee may deliver assets to the trust maker and funder, even when the trust was created more than five years before applying, Medicaid can attribute the assets or income that could be distributed to the creator or funder, even if the trustee does not actually distribute anything! These rules do not apply when the funder is disabled and under 65 and the trust is a “special needs trust” in which he has an interest, or when the creator / funder is not the beneficiary of the trust created and the beneficiary is disabled and under 65, or is a disabled child of any age. In these cases, the “lookback” period does not apply.
These Myths persist because Medicaid planning is ever changing and extremely complicated. Information you find on the internet may be out of date. New rules are published regularly, Court decision change the how the agency applies the rules, and the overall Medicaid program is governed by Federal Law interpreted and applied through State rules, laws and agencies. We highly recommend that you seek the counsel of a skilled Elder Law Attorney before making any choices, transferring assets, or applying for Medicaid. This is why we offer consultations, free of charge to help you determine if you can benefit from our guidance.
What to do?
The Federal rules governing Medicaid provide substantial options for you to preserve your assets, prevent impoverishment of you spouse, and care for you loved ones as well as yourself. Passing assets that you have worked for all of your life to the next generation is possible with careful planning. It is essential that you work with someone that is skilled and thoroughly knowledgeable in this area of law. To learn more about service that our Law Firm offers in these areas, please contact us.
*This document is not intended as a substitute for legal advice. It is distributed with the understanding that if you need legal advice, you will seek the services of a competent Elder Law attorney. While every precaution has been taken to make this document accurate, we assume no responsibility for errors or omissions, or for damages resulting from the use of the information in this document.