Long-term care is an eventuality, if not a reality, for many of us and our loved ones. Long-term care is a variety of personal care services for an individual in need of daily assistance, often provided in an institutionalized setting, such as a nursing home or an assisted living facility, or at home, through the help of aides. These services, while necessary for many, are expensive, so understanding how to pay for such services is important. Of course, you or your loved ones can pay out-of-pocket for long-term care costs, but that is simply not sustainable for most.
Medicaid is the only government benefit that helps qualifying persons pay for their long-term care costs. Much like any bureaucratic public benefits program, there are many myths associated with how to qualify for it, and what coverage it provides. Here are some Medicaid myths, followed by the real story:
1. Medicare will cover my long-term care expenses.
Medicare’s coverage of long-term care expenses is quite limited. Medicare covers only up to 100 days of “skilled nursing care” per illness. To qualify, you must enter a Medicare-approved “skilled nursing facility” or nursing home within thirty (30) days of a hospital stay that lasted at least three (3) days. In addition, you must be showing signs of improvement while in the facility or your Medicare coverage will be terminated. The care provided in a nursing home must be for the same condition as provided during the hospital stay. Once Medicare coverage for your nursing home expenses is terminated, you will need to either privately pay for long-term care expenses or qualify for Medicaid.
2. You need to be broke to qualify for Medicaid.
Medicaid helps needy individuals pay for their long-term care costs, but you do not need to be completely destitute to qualify. A single Medicaid applicant can have no more than $2,000 in assets in order to qualify for Medicaid, but there are some assets that are considered noncountable. For instance, in New Jersey, an applicant’s primary residence is considered a noncountable asset if the Medicaid applicant’s spouse, or another dependent relative, resides there. In addition, the spouse of the institutionalized individual, who is referred to as the “Community Spouse”, may keep one-half of the couple’s combined assets, up to a maximum of $130,380 (in 2021).
3. In order to qualify for Medicaid, you should transfer your assets to your children.
Medicaid imposes a penalty on an applicant who transfers or gifts assets out of his or her name to another person or entity without receiving fair market value in return. The penalty assessed is a period of time that Medicaid will not pay for the applicant’s care. The length of the penalty period is determined, in part, based upon the number of assets transferred within five (5) years of the date of the application for Medicaid. This does not mean that you, or your loved one, cannot transfer assets – there are exceptions (for example, applicants can transfer money to their spouses or disabled children without incurring a penalty). However, proper planning and consideration must be exercised if you or your loved one are considering transferring assets.
4. A prenuptial agreement will protect my assets from being counted if my spouse needs Medicaid.
A prenuptial agreement does not keep your property separate for purposes of Medicaid eligibility. The purpose of such an agreement is to keep spouses’ property separate, in the event of death or divorce. Medicaid does not honor the terms of prenuptial agreements.
5. I can give any person up to $15,000 per year and still qualify for Medicaid.
Unfortunately, the rule that says that you can give away up to $15,000 a year to any person without incurring tax is a federal gift tax rule, not a Medicaid rule. So, while you are able to gift $15,000 per year to any person without incurring a gift tax (and without needing to file a gift tax return), a gift of $15,000 (or any other significant amount) within five (5) years of applying for Medicaid will likely trigger a penalty period.
If you or a loved one are faced with decisions regarding long-term care, please contact us to discuss how to navigate your way through the planning process. We can help you protect assets and properly qualify for Medicaid.
