Medicaid is a welfare program for poor people who cannot afford to pay for their medical care. With the average nursing home in Ohio costing over $6000 a month, even the middleclass can become poor rather quickly if long term care is needed. There are different strategies that can be used to become qualified for Medicaid. The simplest plan is to spend down the assets until the person reaches a qualifying level.
In order to qualify for Medicaid, the state looks at a person’s medical needs, and financial ability to pay for care. If one requires more medical care than her income can cover, then Medicaid looks at her assets to see what she could sell to pay for her care.
Assets are divided into two categories, “exempt” and “countable” assets. Exempt assets are things such as a house (for the first 13 months of Nursing Home care), a prepaid funeral, gravesite, headstone, one life insurance policy worth no more than $1,500 face value, and all of the Applicant’s personal stuff. Countable Assets are everything else; bank accounts, retirement savings, stocks and bonds, other real estate, etc. In order to qualify for Medicaid, countable assets must be spent down to $1500 or less.
Excess assets can be used to purchase or improve exempt assets, or to provide services for the Medicaid applicant. The goal in a proper Medicaid spend down is to use this money in the most advantageous way possible for the applicant without interfering with her Medicaid qualification.
The first thing to do is make sure that the applicant has a prepaid funeral. Pay ahead for any funeral expenses possible, including the burial plots, headstone, the flowers, the service, and the obituary. Make sure that the funeral contract is irrevocable to comply with Medicaid requirements.
Consider using the money to pay for medical expenses that Medicaid won’t cover: motorized wheelchairs, lift chairs, special hearing aids, dentures, and glasses.
Buy any sort of personal items the Medicaid recipient may need or want either now or in the future. This money should not be used to make gifts to family or friends. It must be used for the Medicaid recipient’s benefit. There are no set rules of how much or what type of personal goods a person may buy. A good rule of thumb is the old adage, “pigs get fed and hogs get slaughtered”. Avoid expenditures that seem excessive or inappropriate. Keep all receipts.
For example, you may buy the Medicaid applicant a new tv, but do not buy one that is too big to fit in the nursing home room. One may buy a new watch, but do not buy twelve Rolexes. Avoid buying gift cards, gifts for other people, or things that the person cannot use (for example, an iPod player for a person who is completely deaf).
Use excess assets to pay off debts or invest in exempt assets. For example, if the house needs repairs, it is fine to fix it up to sell it. However, once the house sells, the proceeds will again need to be spent down.
Consider using excess funds to pay for services to make life easier. Pay for attorney fees to handle the Medicaid application, prepare powers of attorney, or a guardianship if necessary. Prepay any taxes that may be due. Prepay any contractors who may be making improvements to the house, a hair stylist, personal aide, or masseuse for personal services. Again, be careful that expenditures are not excessive.
Finally use the money to pay for the Medicaid applicant’s care. At $6,000 a month, nursing home bills can spend down this money quickly if other things are not purchased first. It is usually easier to place a person who has private pay, than to wait until she is receiving Medicaid to find a placement.
Once the Applicant is spent down to only her exempt assets and $1,500, she then should be eligible for Medicaid. After the application is made and the person is approved, she must keep her assets under this amount. Later, if she receives an inheritance or other unexpected funds, this money must be quickly spent down to $1500 again.
Once a person is on Medicaid, her income must go to pay the nursing home. The Medicaid recipient may keep a small amount of her income as a personal spending allowance. In 2014, this personal spending allowance is $45. In 2015 it is slated to rise to $50. Qualified single Veterans or their widows may be eligible for an additional $90 in personal spending allowance each month.
In addition to the personal spending allowance, a Medicaid Recipient can use her income to pay for a supplemental medical insurance policy. The rest of her monthly income is paid to the nursing home. Medicaid will then pick up the balance of the nursing home payment as well as deductibles, copays and other uninsured medical bills. If there is an increase in the amount of income a person receives, it must be reported. That raise must go to the nursing home as well.
Example: Steve is in a nursing home that costs $6,000 a month in expenses. Steve receives $1,020 from social security and $525 from a pension each month. His only other asset is a bank account with $1,450 in it. Once Steve is approved for Medicaid, he will get to keep $45 a month from his income. He has a supplemental medical insurance premium that costs $325. The rest of his income, $1,175 will go to pay the nursing home. The government will pay the nursing home the remaining balance of $4825. If Steve does not spend his monthly allowance and puts it in the bank account, he will soon be over the allowed resource amount, and he may be disqualified from Medicaid.
The simple spend down is just one of many strategies that can be used to qualify for Medicaid. There may be other better options available. If you are concerned about how you will pay for your long term care, or want to know more about a simple spend down plan and if it’s right for you, make an appointment with a knowledgeable Elder Law attorney. Please contact Williger Legal Group at (330) 686-7777 to set up an appointment.