The Medicaid program is relied upon by most senior citizens who are receiving long-term care in the United States. This is true even though Medicaid is a program that is thought of as being a safety net for people with virtually no financial resources.
Many of the people who ultimately utilize Medicaid to pay for assisted living were qualified for Medicare coverage. They worked throughout their lives, they were never financially needy, and they had some retirement savings.
The problem is that Medicare does not pay for long-term care. A stay in a nursing home or assisted living community is considered to be custodial care rather than medical care.
Medicaid will pay for custodial care.
Medicaid is a need-based program. Basically, it will start paying for long-term care once you truly have financial need. You could potentially become eligible after you have used virtually everything that you have paying for long-term care out-of-pocket.
This is one possibility, but you could take a different approach. What if you were to give away assets to your loved ones in advance of applying for Medicaid?
This practice is called “spending down.” Many people do in fact divest themselves of resources in advance of applying for Medicaid. However, if you are going to do this you must be aware of the five year Medicaid look back.
Five Year Look Back Period
The Medicaid program has certain rules. You are not allowed to find out that you need long-term care on Monday, give away your assets to your children on Tuesday, and qualify for Medicaid the following week. To prevent this type of thing there is a five year look back.
If you give away assets within five years of applying for Medicaid the program will impose a penalty. This penalty will delay your eligibility for Medicaid benefits.
The exact length of time is calculated based on the cost of long-term care in the state of your residence as it compares to the amount of money that you gave away within this five-year interim.
It is possible to mitigate the damage if you plan ahead effectively. You could potentially preserve a significant store of resources for the benefit of your loved ones while still being able to obtain Medicaid coverage.
Medicaid Planning Consultation
Anyone who is serious about being prepared for the future should certainly consider the matter of long-term care costs. The majority of people are going to need living assistance at some point in time. This is not something that only happens to “the other person.”
If you would like to learn about Medicaid planning in detail, contact our firm to schedule a free consultation. We will provide you with an explanation, answer any questions that you may have, and help you put a plan in place if you want to go forward.
Parman & Easterday