Law Offices of  David C. Slade

Planning for long term health care is an important issue for every family.  Live-in home care, assisted living facilities and nursing homes are a fact of life that will affect about half of all people over 65.  And the stark reality is that these facilities and care cost an average of $3,000 to $5,000 per month!  This poses a spectre of financial ruin if your future is not well planned and considered.

Medicare. In simple terms, MediCare is public health insurance for those over 65, of with a disability.   Medicare pays for primary care including doctors visits. Every senior who has paid into the MediCare system during their working years is eligible for Medicare.
 
There are two "parts" to Medicare -- Part A and a Part B. The "A" part pays for hospital visits while the "B" part picks up part of your outpatient doctor visits and some other medically related services. It will even pay for nursing home care. The catch is, it will only pay for nursing home care under some very limited circumstances, and even then for no more the 100 days.

Medicaid.  Medicaid is a "needs based" program, with a three part eligibility test:

    (1) Medical test.  The applicant must have some form of health care (medical) impairment that limits the activities of daily living to a point where a skilled care facility (e.g. nursing home) is needed;
 
    (2) Age and Disability test.  In  order to be eligible for benefits you also need to be either suffering from some form of disability or you need to be over 65.   For example, a 55 year old with Alzheimer's
would meet this test as the Alzheimer's qualifies as a disability.  A 70 year old, on the other hand, need
not have a disability, so long as he needs a skilled care facility, such as a nursing  home; and
 
    (3) Financial test.  This is where things get more complicated.  The first question is whether the applicant is married or single.  A married couple may keep up to $86,120.00 in countable assets. ($84,120.00 for the spouse and $2,000.00 for the applicant spouse.)   A single person,               including widows, may only have $2,000.00 in countable assets. (This number increases to $5,000.00
when the income of the individual is under $638.00.)  If the person or couple is over this amount, they may want to transfer some of their assets to get down to these limits.  This is where problems set in.

Asset Protection and Medicaid.   The reason the person or couple wants to transfer assets is to decrease their estate in order to qualify for Medicaid.  Thus, they would like to make a gift of their assets.  This, however, may result in temporary or permanent disqualification from Medicaid.   Only transfers that are for fair market value do not affect the eligibility requirements.

There is a three year "Look Back" period for any transfer of assets by an applicant for Medicaid.  That is, any transfer, whether a gift or sale, three years or more from the time the applicant applies for Medicaid, is outside of the "Look Back" period, and is not taken in to account.

Gifts and transfers for less than fair market value within the three year Look Back period, however, will cause a delay in when the person may get Medicaid benefits.  In simple terms, the number of months that the applicant will be ineligible for Medicaid is calculated by taking the value of the asset transferred and dividing it by the average monthly cost for nursing home care.

For example, let's assume in Maryland the average cost of nursing home care in the state of Florida is determined to be $3,500 per month.  If an applicant or the well spouse gives away assets worth $50,000, that amount is divided by $3,500/month, and results in a 14-month period of ineligibility.  If the applicant or well spouse sells $50,000 in assets for fair market value, however, there is no affect on the timing of elibigility.

The Look Back period for living trusts has been extended to 60 months. Therefore, it is imperative, if the situation involves a living trust, that a person plan well in advance if Medicaid benefits are sought.

This discussion is a great simplification of the Medicaid eligibility and asset transfer rules.  You should seek consultation with an attorney experienced in Medicaid programs in your State.  Nonetheless, despite the strictness of the rules, many legitimate transfers can reduce the size of a your estate, qualify you for Medicaid benefits, and protect your family inheritance.

Health Insurance.  Once a person reaches 65, generally Medicare is considered the primary insurance.  However, there are many forms of insurance that cover what Medicare does not.  These policies are commonly known as "Medi-gap" insurance.  Depending upon your personal health situation and needs, different health insurance policies could be the protection you need to avoid great financial loss.