Just because you have never before needed to qualify for Medicaid does not mean you won’t need to in the future. In fact, there is an exceptionally good chance you will need to rely on Medicaid at some point. If you do find yourself applying for Medicaid without having prepared in advance, your assets could be at risk. To prevent that from happening, the Indianapolis Medicaid planning lawyers at Frank & Kraft explain five things you need to know before applying for Medicaid.
Why Would I Need to Qualify for Medicaid?
Experts tell us that if you are close to retirement age right now (age 65), you stand close to a 70 percent chance of needing some type of long-term care (LTC) services before the end of your lifetime. If either of you do need LTC, you will quickly realize that the expenses associated with LTC are high. Nationwide, residents paid, on average, over $100,000 for a year of LTC in 2019. Taking into consideration the average length of stay is three years, it becomes easy to see how LTC costs could become problematic if you are forced to pay them out of pocket. That is precisely what could happen given that neither Medicare nor most health insurance policies will cover LTC expenses. The good news is that Medicaid does cover LTC expenses for those who qualify.
Qualifying for Medicaid
Medicaid is a healthcare program that is primarily funded by the federal government; however, the individual states have the option to supplement funding for Medicaid if they choose to do so. Although the federal government provides oversight for Medicaid, it is administered by the individual states which explains why you will notice differences in the eligibility criteria and benefits offered from state to state. In general, however, the following information reflects five things you will likely need to consider before applying for Medicaid:
- Income and asset limits apply. Because Medicaid is a “needs-based” program that is intended to help low-income individuals and families with healthcare expenses, the program uses both income and assets limits when determining eligibility. An applicant cannot own “countable resources” (assets) valued at more than the limit or the application will be turned down. Depending on which Medicaid program you are applying for, the asset limit could be as low as $2,000 for an individual applicant. If the value of your countable resources exceeds the program limit, your application will be denied, and you will be forced to “spend down” those assets.
- Some assets are excluded from your “countable resources.” Although Medicaid does employ an asset limit, not all assets are considered countable resources. Some assets are exempt from consideration. Common exempt assets include a primary residence, a vehicle, and an irrevocable burial trust. For 2020, there is an equity limit of $595,000 for your home in Indiana.
- The five-year “look-back” period prevents last minute asset transfers. Medicaid employs a five-year “look-back” rule that prevents such assets transfers. The rule allows Medicaid to review your finances for the 60-month period prior to applying. Any assets transfers made for less than fair market value could result in the imposition of a waiting period before Medicaid will kick-in.
- Your spouse will not be left destitute. The Spousal Impoverishment rules ensure that your “community” spouse will not be left destitute should you need to qualify for Medicaid to cover LTC expenses. The current Medicaid rules call for a “division of assets.” The spousal share is protected from the Medicaid spend-down requirements, ensuring that those assets remain available for the community spouse to use.
- Medicaid could still come after your assets after your death. The Medicaid Estate Recovery Program (MERP) allows states to pursue claims against your estate after your death if the state paid for your LTC through Medicaid while you were alive. Each state has its own set of MERP rules. In addition, some states are more aggressive with their MERP program than others; however, you should be aware of the ability to file a claim against your estate.
Contact Indianapolis Medicaid Planning Lawyers
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about Medicaid planning, contact the experienced Indianapolis Medicaid planning lawyers at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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