When seniors need help covering the costs of nursing home care, many end up turning to the one government program that offers more long-term care assistance to the elderly than any other: Medicaid. Though most Americans think of the Medicaid program as nothing more than a way to provide health care insurance to the nation’s poorest citizens, the fact is that it is also the largest single revenue source for nursing homes across the country.
For seniors who apply for Medicaid, however, obtaining benefits is not always as easy as some might think. Due to the program’s stringent income and asset limits, some seniors can struggle to achieve eligibility, and many can face challenges they never even knew existed. To avoid complications, it’s important that you recognize the most common Indiana Medicaid dangers, and learn how to protect your interests.
How Can a Benefit Program Pose a Danger?
We should be clear right up front: the Medicaid program doesn’t represent a real danger to anyone who receives its benefits. However, the eligibility process can be fraught with peril for those who make mistakes in their efforts to qualify for those benefits. As noted, the program has some hard asset and income limits that must be met by applicants before any benefits can be obtained. For example, seniors can have no more than $2,000 in countable assets and $2,199 in monthly income. If your assets or income are even one dollar over those limits, then you cannot qualify until those amounts are reduced to meet the eligibility standards.
That’s where things can get tricky. In the past, seniors have tried a variety of different strategies to reduce their estate size or income to meet the program’s requirements. Many would give away inheritances early, or even transfer their assets to their adult children to shield their wealth from Medicaid. As you might imagine, those are the types of things that eventually attract the government’s attention – as occurred when Congress took up the issue more than a decade ago.
To prevent so-called asset-shielding, Congress passed new legislation that empowered the Medicaid program to give greater scrutiny to how Medicaid applicants disposed of their assets in the five years prior to applying for program benefits. This five-year look-back provision gives the government the power to review any transfer of assets that takes place within the five-year period immediately preceding the application. And therein lies the problem for applicants who rush to give away assets to achieve eligibility. That look-back provision can cause all manner of problems.
How the Five-Year Look-Back Provision Can Impact You
To understand how those problems can arise, it’s important to understand how the look-back power works. When you apply for Medicaid, the government will begin to examine all the asset transactions you’ve made during the previous five years. They do that to fulfill the Congressional mandate that requires them to identify potential attempts to shield assets from the program – and they’re very good at their job. If you’ve transferred assets for less than fair market value, given away wealth, or otherwise reduced the size of your estate in any way that appears to be an attempt to shield assets, they will almost certainly find out.
When those types of transactions are discovered, several things can happen – and none of them benefit you. For example, if you give a loved one $20,000 to help them cover some medical procedure, and find yourself in declining health a couple of years later, that gift could be flagged by Medicaid during their five-year review. That could trigger the imposition of a Medicaid penalty that would make you ineligible for program benefits just when you need them most. The same result could occur if you sold your home, vehicle, or other asset for such a small amount of money that the transaction appears to be an attempt to hide assets.
Now here’s the truly harmful aspect of all of this: that ineligibility period can last for many months. In Indiana, as in other states, Medicaid determines the exact penalty by dividing the value of the inappropriate gift or transfer by the average cost of nursing home care in the state. The goal is to penalize you by denying benefits for the same amount of time that your asset transfer would have paid for had you used those resources to cover nursing home costs.
As if that isn’t frightening enough, there’s one more aspect of the penalty to consider: it doesn’t begin until you start paying for your own care. That’s right; if you give away or otherwise inappropriately transfer your assets to qualify for Medicaid, you could end up facing a lengthy period of benefit ineligibility and have no assets to pay for the care you need.
Avoiding Those Dangers
The real problem here is that too many seniors try to manage their eligibility issues on their own. Gifting and spend-down strategies don’t always work out as you plan, and the consequences of making even a small mistake can be too much to bear when you need nursing home care now. The best way to avoid potential errors is to ensure that you don’t attempt to find a solution on your own. If you haven’t already developed a Medicaid planning strategy, then you need to consult with a competent Medicaid planning attorney to get the sound advice and assistance you need to avoid these risks altogether.
With an experienced attorney on your side, you can avoid any dangers associated with your Indiana Medicaid application and ensure that you get the benefits you need when you need them most. At Frank & Kraft, Attorneys at Law, our elder law specialists can work with you to identify potential pitfalls and help you craft a strategy that will secure the benefits you need. Depending upon how early you seek a solution, we may even be able to help you preserve many of your assets while still qualifying for nursing home assistance. To learn more about how Medicaid planning can help you to avoid harmful penalties, call us today at (317) 684-1100, or contact us at our website.
Paul A. Kraft, Estate Planning Attorney
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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