A Grain Of Truth, But Mostly Myth: This is a simple explanation of the law. It is not a substitute for legal advice regarding your own questions.
Many people want to know when Medicaid will cover nursing home costs, which run $70,000 a year or more. Not many people can pay those costs out of their regular income. So it wouldn't take long to lose all one's savings. Long-term care insurance is too expensive for many older people. If the person is already sick, he or she may be uninsurable.
So folks will ask friends and neighbors how to get Medicaid to pay the cost of nursing home care. Few lawyers know this area of the law. Nancy C. Nawrocki has been training in this area of Medicaid law for 20 years. Contact the Nawrocki Center for Elder Law, Special Needs & Disability Planning, PLLC, in Brighton, Michigan, for experienced counsel.
This is a complicated area and should be handled only by an attorney who knows Medicaid law. Your best bet is to consult an attorney who has expertise in this field and who is a member of the National Academy of Elder Law Attorneys (NAELA). How many people has he or she advised in the field of Medicaid law? The National Academy of Elder Law Attorneys, www.naela.org, can help consumers locate elder law attorneys.
Knowing The Truth Can Make A Difference For Your Future
There are some common myths that can get you in trouble. This article won't go into great detail; consult an attorney about your own situation.
1. Myth: "I have to give away everything I own to get Medicaid."
The truth: Basically, a person is permitted to own some property and still be eligible for Medicaid. The trick comes in knowing what is "countable" and "noncountable" under the Medicaid rules. For example, for a married couple this includes the marital home occupied by the healthy spouse. Certain types of prepaid burial contracts and many other types of property are noncountable. The bottom line is that you don't need to be completely without assets to be Medicaid-eligible.
2. Myth: "I can't give anything away and get Medicaid."
The truth: Medicaid rules provide that a person can be disqualified for giving away property, in some cases. But a lot depends on what is given away, to whom and when. So, again, it's complicated. Some asset transfers are not penalized under Medicaid rules. Consult with a lawyer who knows the law.
3. Myth: "I have to wait five years after giving anything away to get Medicaid."
The truth: The disqualification period isn't always five years and sometimes there is no disqualification at all. True, there is a five-year "look-back" for some asset transfers under Medicaid rules. This means that the Medicaid agency will look back at all transfers of property, including sales for less than market value. However, the rules penalizing transfers do not apply to all transfers. See No. 2 above.
4. Myth: "I can't keep all our marital property and my inherited property when my spouse gets Medicaid."
The truth: When a married person applies for Medicaid, assets in either or both spouses' names are considered by the Medicaid agency. However, some assets won't be "countable" and you may keep some as an asset allowance if your spouse enters a nursing home. See No. 1 above.
5. Myth: "If I put my property into my spouse's name, I will be eligible for Medicaid."
The truth: Assets are counted, regardless of which spouse's name they are in.
6. Myth: "Medicare will cover my nursing home bill."
The truth: Medicare covers only a small portion of the nursing home care provided in this country. Many older people are surprised to learn this. In general, there are 20 days of full coverage if you go into a nursing home after at least three days in the hospital and are getting skilled care (not intermediate level care). Then, if you still need skilled care, you can get up to 80 days of partial coverage from Medicare. After that, you will either pay out of pocket or get Medicaid, unless you have private long-term insurance.
7. Myth: "If I enter a nursing home as a private pay resident, I must use up my assets before I can get Medicaid."
The truth: You are not required to use your assets to pay privately for nursing home care. Some nursing homes might try to make you believe this, however, because they are paid less under the Medicaid program than they collect from private pay patients. Some people seek advice from an elder law attorney to find out how they can become Medicaid-eligible before having spent a significant part of their assets on the private pay rate.
8. Myth: "I can only 'spend down' my assets on medical or nursing home bills."
The truth: See No. 7 above. Nursing homes may tell you that you have to spend your savings on the private pay rate before applying for Medicaid, but this is not true. In fact, it's against the law for them to tell you this.
9. Myth: "My power of attorney automatically has the power to take property out of my name, if I ever need Medicaid."
The truth: Your best tool to be able to plan for Medicaid eligibility, should you ever need it, is to sign a general, durable power of attorney that includes a "gifting" power. Your agent under the power of attorney will be able to retitle your assets only if your power of attorney contains a "power to make gifts." Most powers of attorney don't contain this, so you might want to ask your attorney to add it.
The court procedure to transfer assets without a gifting power can be expensive and time-consuming and may not allow the type of asset protection that many people would like to accomplish.
Without a gifting power, your agent is generally limited to spending money on your bills and selling your assets to generate cash to pay bills. A gifting power is recommended for people who want to become eligible for Medicaid and not be limited to the noncountable assets allowed under that program.
Some powers of attorney contain this gifting provision, but it's limited to a specific amount per year. This figure is too limited to do effective Medicaid planning and is related to a completely different type of legal issue. (See No. 11 below, about the federal estate tax.)
One more word about the gifting power. You should require your agent under your power of attorney to consult with an attorney experienced in Medicaid law before making any asset transfers.
10. Myth: "All property transfers will cause me to be disqualified from Medicaid."
The truth: Not all transfers of property will cause a person to become ineligible for Medicaid. See No. 2.
11. Myth: "I can only give away $13,000 per year under Medicaid rules."
The truth: This is a rule under federal estate and gift tax law, not under Medicaid law. In 2010, this gift tax law limited noncountable gifting for tax purposes to $13,000 per person annually.
Right now, Michigan Medicaid law disqualifies a person from getting Medicaid for one month for every $6,362 given away, in most circumstances. This disqualification starts the month of the transfer going forward.
So, if my grandmother gives me $12,000 in May, she will be ineligible for two months — for May and June. On July 1, the "penalty" or "disqualification period" is over.
12. Myth: "My income may have to be used to pay my spouse's nursing home bill."
The truth: This is not true in Michigan or most states.
13. Myth: "All of my spouse's income must be used to pay the bill if my spouse is on Medicaid in a nursing home."
The truth: The law allows you to keep a portion of your spouse's income if your income is below certain limits. In addition to this allowance, you may be entitled to a greater allowance if the cost of maintaining your home exceeds a certain amount or if a state hearing officer or a judge orders a greater allowance.
14. Myth: "I can hide my assets and be eligible for Medicaid."
The truth: Intentional misrepresentation in a Medicaid application is a crime and can be costly. The IRS shares any information concerning income or assets you have with the county department of social services. You or whoever applied may have to pay Medicaid back to avoid prosecution.
15. Myth: "Medicaid rules that applied to my neighbor when he went into a nursing home apply to me."
The truth: Medicaid rules change, so don't count on the law that applied to your neighbor still applying to you. Also, there may have been facts about your neighbor's situation that you don't know. It's best to have your situation analyzed by a competent elder law attorney.