Elder Law Myths about Medicaid
Medicaid is the largest source of government funding for nursing home care. More recently, Medicaid programs such as Family Care provide coverage for long term care in the home. Despite what many people think, the government health care program for the elderly, Medicare, covers very few nursing home or long term care costs.
But "Medicaid planning," or getting help paying your family member’s nursing home costs or home-based long term care costs through the Medicaid program, is not a do-it-yourself project. Unfortunately, people are often steered in the wrong direction by friends, family members, social workers, medical personnel, or case workers. Here are some of the more common "Medicaid myths" that make the process so baffling.
MYTH: I have to use up everything I own to get Medicaid. In fact, you don’t have to be completely destitute to get Medicaid. For example, in most cases, you don’t have to sell the home. You can also keep some funds, personal items, a car, funds for burial, business assets, and some life insurance. In cases involving a married couple where only one spouse needs care, the assets that can be kept are even more generous. It is also sometimes a myth when nursing homes tell a married couple that you must spend down to $50,000.
MYTH: I have to sell my home to qualify for Medicaid, or, the State will take my home if I apply for Medicaid. As explained above, you do not have to sell your home to get Medicaid. In most cases, the home is not counted as an asset as long as you live in it, or if you intend to return home (even if this intent is not reasonable from a practical standpoint). And, it is not true that the state will “swoop in” and take your home away from you once you are on Medicaid. The state does not take your home while you are alive, even if you no longer live there.
MYTH: If I give away assets to family or friends, I won’t ever qualify for Medicaid. It is true that some transfers of assets disqualify you from getting Medicaid for a period of time, and this area is something to be extremely careful about. The value of the assets and the timing of the gifts determines how long you will be disqualified. However, certain transfers will not disqualify you. Sometimes it depends on who receives the assets; other times, it depends on the type of property you are transferring. For instance, you typically will not be penalized for transferring property to your spouse. If you are single, you can even transfer your house to your child if that child has cared for you and lived with you in that home for two years or more. The point is, not all transfers cause problems with getting Medicaid — ask an experienced Elder Law attorney what rules apply.
MYTH: I have to wait five years after giving anything away in order to be eligible to get Medicaid. Medicaid rules do penalize some transfers of property, and the Medicaid agency will ask if asset transfers were made within the past five years. The government does not want people "planning to be poor." But the length of time you have to wait to be eligible isn’t always five years. It depends on four things:
- Was this the kind of transfer that’s penalized? (See above).
- When did the transfer occur?
- What was the value of the asset(s) that were transferred?
- What is the formula for calculating the penalty period? Wisconsin figures out how much it costs, on average, to pay for a day of nursing home care. They then divide that figure into the value of the asset that was given away. As of February, 2019, that figure is $286.15 per day. A $10,000 divestment would cause 34 days of ineligibility.
That being said, it is important to remember that under current laws, this penalty will not start until you are in a nursing home and otherwise eligible for Medicaid, and apply. Similar rules apply for Family Care benefits. This means that if you do receive a divestment penalty, it will be imposed at the time where you are already ill, and probably unable to financially afford your care during the penalty period. And this could mean that you are actually going longer than five years before you are eligible for Medicaid. So under the current law, in many cases you might want to wait five years after making gifts, before you apply. It is particularly important to talk with someone who knows the ins and outs of this law before you take any action regarding gifts.
MYTH: I can keep all our marital property and my inherited property when my spouse gets Medicaid. Medicaid rules generally consider all the assets in either spouse’s name when one spouse enters a nursing home. However, there are certain property protections for the at-home spouse. Those protections are based on a percentage of the couple’s "countable assets," which generally consist of savings and investments, real estate and things like excess life insurance. In Wisconsin the range for 2018 is between $50,000 and $126,420. (Also, the spouse in the nursing home gets to keep $2,000.) It is important to remember that with careful planning, the amount an at-home spouse can keep can be maximized.
MYTH: If I put my property in my spouse’s name, I will be eligible for Medicaid. No. See above.
MYTH: I can “protect assets” by giving them to my kids who will pay for my care if I need it. This is, in my opinion, the biggest myth of all. Unfortunately, many lawyers who do Medicaid planning, even good lawyers, also promote this myth. The hard truth is that giving assets away does not “protect” them. It gives them away. They are no longer yours. No matter how trustworthy your kids may be, when the assets are in their hands, those assets are subject to any misfortune that may befall your children such as divorce, accident, or their own unexpected disability. While there is some asset transfer planning that may be appropriate based on your wealth, life priorities, preferences, and risk tolerance; and while that planning could involve making gifts to your children if you choose to do so after weighing all the options and consequences, you must always understand that a gift is a gift.
MYTH: Medicaid rules that applied to my neighbor when he went into a nursing home will also apply to me. This area of the law changes quite a bit, so don’t assume the rules that applied to your neighbor are still in effect. For example, under federal Medicaid law, there used to be a three-year look back period for transfers of assets. Currently, it is five years. This is why it is important to get good advice from a WI-NAELA attorney so that you understand the rules that will apply to you.
MYTH: If I enter a nursing home as a private pay resident, in order to use up my assets before I can get Medicaid, I can only "spend down" my assets on medical or nursing home bills. This is wrong for several reasons. First, you are allowed to keep certain limited property, as we discussed earlier. Second, you may be able to protect some of your assets — by buying certain non-countable assets or by making certain transfers to family members, for example. Federal law prohibits nursing homes from telling you this myth if the facility is Medicaid certified. Unfortunately, some nursing homes try to force people to stay as private pay, since the rate is usually higher than Medicaid reimbursement rates. A nursing home CANNOT prevent you from applying for Medicaid if you are financially eligible.
MYTH: My power-of-attorney agent automatically has the power to take property out of my name, if I ever need Medicaid. Wisconsin requires that you explicitly include a "gifting power" for your agent in your financial power of attorney document, in order for your agent to be able to retitle your property. If you want your agent to be able to transfer assets to provide more for your spouse and/or children, in particular, you should say so in your power of attorney.
MYTH: I can only give away $15,000 per year under Medicaid rules. This is a double myth! This refers to a federal gift tax rule that has nothing to do with Medicaid law. We’re talking apples and oranges here! A gift of $15,000 per year will probably trigger a Medicaid penalty, unless an exception applies.