Qualifying for Government Assistance for Nursing Home Care
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Government assistance for nursing home care, usually referred to as Medicaid in most states, or Medi-Cal in California, is a combination of state and federal aid provided to qualified state residents. Requirements vary somewhat from state to state, but most require a single individual to have no more than about $2,000 in cash and other resources before they can get benefits.
Certain assets, such as a home, a car, and some trusts are not included in this amount, so you will not lose where you live in order to qualify, and married couples are allowed additional resources. Under the qualification rules, an individual must spend virtually all his or her income on nursing home care.
Medicaid allows you to reduce or “spend down” your assets to reach the qualification level of $2,000 by paying off debt, making home modifications, buying a car and prepaying funeral expenses. Other methods of reducing your assets, however, such as giving gifts, transferring property and creating certain annuities, can trigger a penalty or disqualification for benefits if done too close in time to your application, or in too great an amount.
A measure signed by President Bush in 2006 puts a heavier onus on families to save for an elderly loved one's stay in a nursing home. The law aims to clamp down further on these “forbidden” types of transfers. In addition, a person with more than $500,000 in equity in a home may now be declared ineligible for Medicaid, though each state has the option of raising that equity ceiling to $750,000.
Disposing of the Assets.
While the old rules allowed officials to review an applicant's financial transactions from the preceding three years, the 2006 law extends this "look-back" period to five years. The gist of the law is that the government does not want you to give away your assets for the sole purpose of Medicaid qualification. If it looks like that’s what you were trying to do, you will not qualify, and you or your family will have to bear the burden of paying for your nursing home care. The key, then, is to plan well ahead of time, and not to wait until an advanced age to start transferring your assets.
- In 2000, Anna, caregiver for her father, William, arranged for him to enter a nursing home in their state of Maryland. She quickly realized that the cost of the care, about $5,000 a month, would gobble up his life savings. Her elder law attorney recommended a legitimate and commonly used asset spend-down plan where William was to give his three children a total of about $100,000 over a two-year period while also paying the nursing home bills totaling about $120,000. Under the old rules, William qualified for Medicaid in his state a year after his assets were depleted. Medicaid picked up the nursing home bill thereafter until William died in 2004.
Under the 2006 rules as they apply in his state, William’s gifts to his children would make him ineligible for Medicaid coverage for two years. And while the old rules allowed officials to review an applicant's financial transactions from the preceding three years, the new law extends this "look-back" period to five years.
- Julie, a low-income stroke patient, was prevented from entering a nursing home even though there were no alternatives simply because she helped her grandson with college tuition four years earlier.
- Max, a private pay nursing home resident, was forced out of the home for a period of time after all his assets were exhausted simply because he made a sizable donation to a hurricane victim.
Supporters of the 2006 law say that it is designed to deter aggressive estate planning, not to trip up those who tithe to churches or give away money for other legitimate reasons. If you transfer assets without the sole purpose of qualifying for Medicaid, you might be eligible for benefits, but you had better document it, because you will be asked for proof. It is imperative now for people to keep detailed financial records going back five years. At the same time, it is best to plan for the possibility of nursing home care by saving, purchasing a long-term-care insurance policy if you can qualify for one, and/or possibly applying for a reverse mortgage on your home where the lender pays you cash for your home’s equity.