What is Medicaid Planning?

Medicaid planningA frequent misconception about Medicaid is that it is only for poor people. In reality, Medicaid is a government-run social program that is used to help people pay for nursing home expenses. However, to qualify for Medicaid, you must meet certain income and asset thresholds.

An elder law attorney can help people to position their assets and income such that when they apply for Medicaid, they will be approved for benefits while at the same time retaining as many of their hard-earned assets as possible.

Here is the thing about Medicaid… One way or another your loved one will have to go on Medicaid at some point.

The difference is whether they end up on Medicaid after spending all of their assets to pay for their nursing home care, or whether you can help them to protect their assets now so that when they apply for Medicaid, they can safeguard their assets to use for their own benefit (i.e. to purchase medical devices they might need in the future but which may not be covered by Medicare), for the benefit of their spouse (if they are married), or to leave to their loved ones after they are gone.

But Isn’t Medicaid a Government Handout?

No. Absolutely not.

If you have worked and been a productive member of society during your lifetime, then you have paid taxes. Those taxes, at both the state and federal level, fund government programs like Medicare and Medicaid.

Currently, 1.45% of each paycheck you earn goes to support the Medicare program. An additional 6.2% goes pays for your future social security benefits.

The Medicaid program is paid for and administered by the states with a mixture of both Federal and State funds, which are generated through the payment of taxes.

So no, this is not a government handout. This is a program that you have paid for throughout your working life.

Nobody should feel ashamed if they have to apply for Medicaid to assist with the payment of their nursing home care. The alternative is to drain your life savings and/or have your families pay the bill for you.

Who Is a Good Candidate for Medicaid Planning?

Medicaid planning is appropriate for anyone that anticipates needing nursing home care in the foreseeable future (i.e. within 5 years). The earlier you start Medicaid planning, the more flexibility and choices you will have available to you.

This is because the case-worker assigned to your Medicaid application will closely scrutinize your finances for the 5 years prior to your application date. If you made any gifts to anyone that was not your spouse (this could be a charity, a trust, a child, etc.), they could be used as a basis for penalizing your by extending the time period for which you would otherwise be eligible for Medicaid benefits.

For every $6,300 you gave away within 5 years of your Medicaid application, you will be penalized 1 month. That is, Medicaid will delay paying for your care (or the care of your loved one) for 1 additional month.

This is what is known as the Medicaid penalty.

As an example, let’s say that your Father just suffered a stroke and needs to go into nursing home care. However, four years ago, he made a sizeable donation to his alma mater of $250,000. As a result, if you were to apply for Medicaid now, he would be penalized 39.6 months or just over 3 years in which he would have to pay for benefits out of his pocket.

However, if he waited 12 months to apply, then this gift would no longer count against him. Assuming his social security is $2,000 per month and his nursing home care is $6,500 per month, then he would have to pay $54,000 for care for the next 12 months. Without proper planning, he would have to pay the cost of care for the next 39.7 months, or $178,000.

In this situation, proper Medicaid planning would have saved this family approximately $125,000.

How to Get Started With Medicaid Planning?

If you are interested in learning more about Medicaid Planning, please feel free to call our office at (919) 460-5422, or complete our online contact form here. We would be happy to answer your questions and schedule a no-obligation consultation to go over your options.