You may have made it through your entire life without giving Medicaid a second thought; however, there is a very good chance that as a senior you will find yourself turning to Medicaid for help covering the high cost of long-term care. With that in mind, it makes sense to learn more about the Medicaid program now. In fact, as the Carmel Medicaid planning attorneys at Frank & Kraft explain, what you don’t know about Medicaid could hurt you.
What Don’t You Know?
Medicaid is a healthcare program that is predominantly funded by the federal government; however, it is administered by the individual states. Consequently, you will find some differences in both eligibility requirements and benefits offered from one state to the next. If you have never before needed to qualify for Medicaid, you likely know very little about the program. That lack of knowledge could hurt you down the road. For example, did you know that:
- Medicaid may be your only hope for assistance paying for LTC. There is a strong possibility that you, or a spouse, will need long-term care (LTC) at some point during your retirement years. When you enter your retirement years, around age 65, you will already face a 50 percent chance of needing LTC before the end of your life. If you are fortunate enough to still be here at age 85, your chances of needing LTC will have increased to 75 percent. Nationwide, the average cost of a room in LTC was almost $90,000 per year in 2018. In the State of Indiana, LTC residents paid, on average, about $98,000 for that same year. Although you may come to rely on Medicare to pay for your healthcare expenses as a senior, Medicare will not cover LTC expenses nor will most private health insurance policies. For about half of all seniors currently in an LTC facility, Medicaid is the only option for help covering the cost of their LTC.
- Medicaid uses very low income and asset limits when determining eligibility. Your eligibility for Medicaid is determined, in part, by the income and asset limits imposed by the program. The income limits are tied to the Federal Poverty Level, or FPL. The FPL, in turn, changes each year and is determined by your household size and geographic area. The “countable resources” limit refers to the value of your non-exempt assets. In many states, the countable resources threshold is only $2,000 for an individual.
- If your assets exceed the limit you may be required to “spend-down” your assets. If your non-exempt assets exceed the $2,000 limit when you apply, your application will be denied. You will then have to “spend-down” your excess assets before applying again. In essence, this means you will need to use those assets to cover your LTC expenses until they are gone at which point Medicaid will start helping. Your retirement nest egg could be wiped out in a relatively short period of time.
- Assets transfers made up to five years prior to applying for Medicaid could be problematic. Medicaid uses a “look-back” period when evaluating applications. If you apply for Medicaid, your finances will be reviewed for the 60 month period prior to the date of your application. Any asset transfers completed during that time period for less than fair market value could trigger a waiting period during which time you will be responsible for paying your LTC expenses. The length of the waiting period is calculated by dividing the value of your excess assets by the average monthly cost of LTC in your area. For example, imagine that you own non-exempt assets valued at $100,000 at the time you apply for Medicaid. Since you are allowed $2,000 in “countable resources,” your assets exceed the limit by $98,000. The average monthly cost of LTC in the Indianapolis area as of 2018 is $7,800. Your waiting period is determined by dividing $98,000 by $7,800 which comes out to 12.56. After rounding up you are facing a 13 month waiting period.
The good news is that by incorporating Medicaid planning into your overall estate plan early on, you can avoid many of the negative ramifications that come with not knowing enough about Medicaid.
Contact Carmel Medicaid Planning Attorneys
For more information, please download our FREE estate planning worksheet. If you have questions or concerns about Medicaid eligibility or planning, contact the experienced Carmel Medicaid planning attorneys 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.