Tuesdays with Elders - Jumping Through Medicaid Hoops, Part 1

Nursing home costs can vary from $7,000 to $11,000 per month or higher. Most Elders on fixed incomes and limited resources can't afford the costs, but someone has to pay. No one gets a free ride. Enter Medicaid, a Government entitlement program for families and individuals with low income.

When an individual going into a nursing home, a Medicaid application is filled out to see if the individual qualifies for Medicaid. Bank accounts, secondary real estate, stocks, bonds, are all looked at. There is also a "5 year look back period" to see if monetary gifts were given to family members.  the IRS does not tax gifts that are under $13,000 per year and such gifts do not have to be reported. Medicaid doesn't make a distinction so all monetary gifts must be paid back dollar for dollar.

This is why it is so important to protect your estate long before long-term nursing care is needed. Seek the guidance of an Estate Planning attorney. As an example at age 80, you had an estate plan done. You sheltered your assets, gifted your children and grandchildren and all was right with the world. That all changed when you turned 85 and found you needed long-term nursing care. Medicaid will expect you to pay all that money back. If however, you did your estate planning at the age of 79, or prior to the five year look back, no worries. Your estate becomes a legacy for your heirs.

Medicaid has a very simple rule to figure out the monthly amount a resident must pay to the nursing home:

Social Security Income, less health insurance monthly premium, less $72.80 for personal expenses. Yes, a measly seventy two dollars and eighty cents. For example:

$1,000.00     monthly Social Security benefit
-   200.00     monthly health insurance premium (like Blue Cross Blue Shield)
-    72.80      measly monthly personal expense allowance
  $627.20      monthly amount you pay to the nursing home.

In the above example,  you pay $627.20 each month to the nursing home and Medicaid pays the balance for your care.  Medicaid allows you to have no more than $2,000 in your bank accounts. This amount is if you and your spouse have individual bank accounts. At least in, Massachusetts. For joint accounts the amount is something like $2,300.

 If for some reason, you end up over the magic $2K number, you will have to make a private pay amount. At the nursing home where my parents are, the private pay rate is $379 per day. It's like paying for a hotel room. So you pay however many private pay days needed to drop below the magic $2,000 number. Clear?

The application process is fairly straight forward, if only one of your elderly parents needs nursing home care. If they have individual accounts, all money except $2,000 is transferred to the account of the parent not needing nursing home care. The money is to be used for the running of the home and living expenses: heating costs, utilities, real estate taxes, food, etc. The real estate value of the home is not counted.

My parents had individual checking accounts. It wasn't always like that. They had a joint checking and savings account for many years and Ma took care of the finances. That all changed when she got hooked into playing scam lotteries and psychics and whizzed through their nest egg. Bills weren't being paid. A few years earlier, Dad (with my urging) decided to open up his own checking account and to handle the running of the household accounts.

With Ma in the nursing home, and Dad not far behind, I also urged Dad to give me, The Brother, or someone he trusted Power of Attorney, a Healthcare Proxy, and to have a Will made. Dad agreed. Financially, everything was hunky-dory. Dad had plenty of money to run the house and live comfortably, but that all turned pear.

Next week: Jumping Through Medicaid Hoops, Part 2

I'm not an attorney, and I don't play one on television. What is described in this series, is my experiences. Your mileage in your state may vary. Seek the counsel of a qualified attorney for Estate Planning, Makes sure you find an attorney that understands Elder Care Law. Social Services at the Senior Center where your Elders live can make recommendations.