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Medicaid Planning? It Should Protect YOU, not “your assets”
I call this treatise on Medicaid Planning your Encyclopedia of Medicaid Planning. Here I try to give you an overview, with an in-depth option, of this complicated and often misrepresented subject. My goal is that You have the best possible outcome.
In my opinion, Medicaid Planning is NOT “protecting your assets.” Medicaid Planning is protecting You. I have written on bad “Medicaid Planning” in a blog post here. In short bad Medicaid planning ties up all of your “assets” so you can enter an uncaring nursing home while your hard-earned savings leaves an inheritance.
The problem is almost all retirees do Not have enough savings to live an independent retirement. Just do a simple search: “Do Americans have enough saved for retirement?” You will see many, many articles answering with an emphatic “No!” There is only one conclusion: If you are facing long term care for yourself, your spouse or your parents, you need “your assets” to protect the Medicaid applicant or spouse.
Medicaid benefits stretch those scarce dollars. And so, may you go to sing with the angels from the comfort of Your home with a peaceful smile on your face.
Definition: Medicaid Planning.
In short it means arranging your affairs so that you can have the best care possible and apply for the Medicaid benefits to help fill out your care plan.
Who Needs Medicaid Planning?
Average retiree taxpayers who are facing long term care. Let’s make this clear: you have been a Taxpayer for more than a half century. You need a plan to “spend down” your “assets” to Medicaid eligibility. In Michigan that means $9,660 for the applicant and a “Community Spouse Resource Allowance” for an at home spouse. These concepts are covered here.
When Do I Need Medicaid Planning?
For most people, Medicaid Planning comes out of a crisis such as post-hospitalization recovery from a fall or injury or from a serious disease. In these cases the patient is discharged from the hospital to a skilled nursing facility. While Medicare has a 100 day post-hospital full-time skilled nursing benefit, few folks receive more than 30 days and even after that they are not able to return home. They need more time in 24 hour care in the skilled nursing home to recover enough to return home with assistance. That means months of very expensive “private pay” in the nursing home. But if they have patient centered Medicaid planning they will be able to return home with a full care plan in place. See below for more.
How Can Good Medicaid Planning Protect Me?
Your goal is to get out of institutional care and return home. Medicaid does include limited in-home benefits. Once you need to apply for Medicaid assistance you will want to spend down your non-excluded assets. (Topic covered here) Smart spend-down means arranging you to live in-home with assistance. It often includes home improvements.
What Does Medicaid Planning Involve?
Here are some typical components.
Advance Planning
If you know that long term care is in your future you need to authorize trusted others (family members or friends) who will act with integrity for your best interest. This is accomplished most often with Powers of Attorney for healthcare, financial and property management. See articles here.
Smart Spend Down Before Applying For Medicaid
Broadly speaking there are two categories of Medicaid planning.
The first is crisis hospitalization. We know that not all hospitalizations for an elder end up in long term care. Many have recovered from falls, had surgery and returned home. On the other hand repeated hospitalizations take a toll to the point an elder cannot return home without much assistance and home modification.
The second is foreseeable long term care resulting from a disease such as Alzheimer’s or Parkinson’s and so on. These involve common stories of spouses not able to provide sufficient care or the single elder getting to the point that he or she is unsafe to live alone.
Such events often result in the elder needing daily assistance with ADLs, such as toileting and bathing, and financial management including dealing with insurance companies! Here is where smart spend down comes into place. In most states a helpful child etc. can be paid for rendering commercially valuable services. After all the rich can have an executive assistant, why can’t you. (Don’t try it without first hiring your Elder Law Attorney – Medicaid lawyer.)
You should be able to leave the nursing home and return to your home with the assistance you need.
Pay for medically necessary expensive items
You want your “spend down” to make your home suitable for you even if you are in a hospital bed. You want to be able to pay for expensive home modifications so that it is completely accessible for you and your caregivers. That includes your entrances, stair lifts if your home has more than one level, “handicap accessible” bathroom, kitchen, living spaces and entrance. You want your home wheelchair accessible. You want to be able to afford all the Medical equipment and devices that Medicare does not pay for such as a “hoyer lift.” You might need a handicap accessible vehicle.
Paying for “Assisted Living” in a family member home
This component may not be available in your state, but it should be. The components include: an assessment and plan completed by a geriatric nurse, geriatric social worker who may be an Aging Life Professional. The plan must be recommended by the treating physician and carried out with the assistance of an Elder Law Attorney – Medicaid lawyer. For example, under such a plan you may be able to pay “assisted living” rent to live in a child’s home. Or you may be able to pay your child the commercial fair market value for her/his services. You will need to work with a CPA on the tax issues.
Medicaid Annuity?
Maybe. The standard annuity does not help the person applying for Medicaid since the annuity payments must first go toward paying medical expenses then Medicaid picks up the remainder. An “IRA annuity” may work if your state plan will “allow” annual payments. (It should). For example with one annual lump sum payment the nursing home or in-home medical care will be paid for and then you have funds that may be sheltered. See your Elder Law Attorney on this point.
A spouse non-IRA annuity? It can be a good idea since it converts assets into income. It may not be good for low income spouses who would otherwise receive income from the spouse Medicaid applicant. It is good for high-income spouses who would not receive a spousal income allowance by Medicaid.
Court Order of Support
One requirement for all states Medicaid programs is that the at-home “community spouse” asset and income allowances be no lower than the amount specified in a court order of support against the Medicaid spouse. You will need an Elder Law Medicaid Attorney – Medicaid Lawyer (whatever title you prefer!) to file the papers in court and convince the judge that you need ALL the retirement resources you and your spouse have since American retirees do not have enough savings! However, be advised some judges are not in favor of couples saving their money for future needs.
Half a Loaf Gifting?
I am not a big fan of this one since it involves paying the nursing home for a set period of time. It’s called half a loaf based on the easy to grasp idea that a single applicant give away half of his/her savings and with the other half pay the nursing home. But to be fair, here is a link to a proponent of such a plan. As you can see it involves staying in, not leaving, the nursing home. “Hey, if the shoe fits. Wear it!”
Sole Benefit Transfer to Spouse
This can be one of The Best strategies for married couples. It works the best when “assets” are transferred “to another for the sole benefit of the spouse.” The strategy calls for the transfer to an “irrevocable trust for the sole of the spouse.” It is set up for annual payments, like an IRA annuity, and can only make payment for the benefit of the community spouse. See my article written for and published by the National Academy for Elder Law Attorneys here.