Are you worried that you’ll have to sell everything you own and be penniless before you or a senior loved one can qualify for Medicaid? Maybe someone told you to not bother applying for Medicaid because you own an expensive home and won’t be eligible. Or, maybe you’re leaving it to the government to sort Medicaid out for you and your family.
If you’re relying on friends and relatives for Medicaid advice and information, you’re probably getting a lot of misinformation. Read six of the most common Medicaid myths to see how they can affect your or a loved one’s care.
It’s “extremely common” for people to have misconceptions about Medicaid, says Abigail Wolf, an elder law attorney at the Elder & Disability Law Center in Washington, D.C. That’s because Medicaid rules are so complicated that people often don’t know where to begin.
“Even when we get other attorneys here as clients, it’s hard for them,” says Wolf. “For the average person… there’s a lot of information to learn about and digest, and it’s usually an emotional time on top of everything else.”
Here’s what you need to know about six common Medicaid misconceptions and how they can affect you or a senior loved one’s long-term care:
When you apply for Medicaid benefits, there’s a “look-back period” where Medicaid reviews things like account statements, deeds and tax returns looking for asset or cash transfers of non-exempt resources, including gifts to others. That’s because if you’re applying for Medicaid, the government program wants to make sure you didn’t give away money that could now be used to pay for skilled nursing or other services. If you gave away or transferred cash or non-exempt property exceeding your state’s limit, Medicaid will impose a penalty period during which you can’t receive Medicaid benefits. “People often mistakenly believe that a five-year look-back period means there is always a five-year penalty,” says Jeffrey Asher, an elder law attorney in New York, New York.
“The look-back period is merely the period of time during which Medicaid reviews account statements and other proofs of ownership when processing a Medicaid application for nursing home care. That is not the same as a penalty period,” says Asher. “The penalty period is the period of time a Medicaid application is disqualified for Medicaid benefits as a result of transfers discovered during the look-back period.”
When calculating the penalty period, Medicaid divides the amount of non-exempt assets you gave away or transferred during the look-back period by the average cost of a skilled nursing residence in your area. “The penalty period could be five years if the amount you gave away or transferred divided by the average cost of skilled nursing residence care equals five years, but the penalty could also be as little as a few months, depending on the amount,” says Asher.
While it’s true that one spouse’s assets (money and property owned) will count towards the other spouse’s Medicaid eligibility, income is generally treated separately, says Wolf.
Many states go by the “name on the check” rule, which means they only count the applicant spouse’s income toward eligibility. Examples of income include pension and social security.
“Typically, most of the applicant spouse’s income will be paid to the nursing home as a contribution to the cost of care,” says Wolf. “In some cases, a non-applicant spouse will qualify for an income allowance from the applicant spouse’s income.”
An elder law attorney can assess your entire financial picture, figure out what you or a loved one can keep and then determine how to best utilize funds over the countable asset limit, possibly saving you money that you might otherwise spend on a nursing home later.
“The earlier people come to us, the more planning options we have available to use,” says Wolf.
“It’s important that people realize how costly long-term care can be and the sooner we can qualify them for Medicaid, the more money we can protect.”
Not true. Your friend in another state is subject to state-specific Medicaid rules that may be different from those in your own state. Even your neighbor usually has a different situation than you or a spouse.
“People will come and sit with me and tell me, ‘I don’t want Medicaid because my neighbor told me that my father or husband won’t qualify,’” says Asher. “The uninformed neighbor is the Medicaid applicant’s worst enemy.”
A person’s ability to qualify for Medicaid benefits may depend on their age, their income, the level of care needed, what assets they own, where they live and whether they are married, says Asher. “All of these things are factors in the planning process that differ from person to person and family to family.”
Not necessarily. In most states, you’re not allowed more than $2,000 in countable assets to receive Medicaid, but everything you own isn’t counted towards eligibility.
“Many people think they have to spend all of their assets to qualify for Medicaid,” says Wolf. “They don’t realize that Medicaid has exemptions for certain assets that they can keep and still qualify.”
With Medicaid, asset exemptions vary by state. For example, in most states, the house is exempt if the spouse still lives in it. Other exempt resources could include assets that can’t be converted to cash, burial spaces, business property, household furnishings, personal property, pre-paid funerals and one vehicle. Additionally, the non-applicant spouse is permitted to keep a portion of the couple’s countable assets. This is called the “Community Spouse Resource Allowance.”
Even if you or a loved one has entered a skilled nursing facility, it’s often not too late to hire an elder law attorney for Medicaid planning.
Even if money has already been spent on the nursing facility, it may be possible to save the remaining funds, especially for a married couple, says Wolf.
What other Medicaid myths have you come across? We’d like to hear them in the comments below.