How will we pay the nursing home? This is one of the most common questions family members of a loved one in the nursing home asks. The options are to private pay, use long-term care insurance or apply for Medicaid, if you are eligible. The current private pay cost in Upstate New York averages $10,000 – $11,000/month. Long term care insurance policies are often costly and should be reviewed to see how much coverage is provided per month; it is often far less than you think. Thus, as nursing home costs continue to grow, Medicaid becomes a more pertinent and viable option for many people. The Medicaid eligibility rules can be difficult to understand and there is a great deal of misinformation out in the public.
The basic rules for Medicaid are as follows: Generally, a married couple is allowed to have $74,820 in assets for the spouse at home, $15,750 for the spouse in the nursing home, one primary residence, one vehicle and pre-paid funerals. As for income (usually pension and social security amounts), the spouse at home is generally entitled to keep a maximum of $3,100/month of joint income but the remainder must go to the nursing home. The person in the nursing home can only keep up to $50/month in income.
A single person is much more vulnerable to a substantial loss of assets as he/she is generally only entitled to keep $15,750 in assets and $50/month in income. The assets above these thresholds are considered “excess resources” which must be used to pay a nursing home. There are exceptions and fluctuations of these numbers depending on many variables, but these are the general parameters to work with when evaluating Medicaid eligibility.
You may have also heard of the “5-year look back period”. In short, if an applicant has made a transfer of an asset (especially real property and any other assets over $1,000) within 5 years of applying for Medicaid, the Department of Social Services (“DSS”) can apply a penalty for each transfer, no matter how well intentioned the gift/transfer was at the time. This includes cash withdrawals of $1,000 and checks to a child, or to pay for something for a child, of $1,000 or more. DSS will generally calculate the penalty based on the amount of the transfer divided by what is called the regional rate, currently $10,451.00 for the Central New York area (which includes Oneida County) effective January 1, 2017.
For example, if someone transfers a home for a nominal sum or as a gift to their children worth $200,000, DSS takes that amount and divides it by $10,451.00, to come to a penalty period of approximately 20 months. That 20 month period is the amount of time Medicaid will not pay for the nursing home. The applicant must then privately pay for the 20 month penalty period, even if they do not have the money that they gave to their children. After the penalty period expires, Medicaid will begin paying the calculated balance. Once a penalty is imposed it is difficult to remedy. The best practice is to address any potential penalty before making a formal Medicaid application.
Having the foresight to set up an Irrevocable Medicaid Trust where assets, including but not limited to, your home, life insurance, a percentage of savings, brokerage accounts, CDs, stocks, etc., can be placed, usually pays for itself many times over due to the asset protection it provides. An Irrevocable Medicaid Trust protects these assets 100% from nursing home costs after 5 years, so long as there is no nursing home event in that time.
One should also be cautious to not apply for Medicaid until eligibility exists. Medicaid applications are often offered and/or handled by the nursing home at no charge. However, if there is an issue regarding eligibility, if substantial asset transfers have been made in the past 5 years, if there are a lot of properties and assets at stake, or if you are simply unsure of what you should do, then you should contact an Elder Law attorney.
The application process is quite involved and entails gathering a wealth of documents pertaining to the nursing home resident, as well as 5 years of asset records and transactions. The key is not just understanding the general rules but, as important, that there are many exceptions to these rules, all depending on the individual circumstances and type of assets, and prior asset transfers, which exist. You should get help dealing with the complex Medicaid rules.
While there may be a concern with the cost of hiring an attorney, a professional consultation could save months of Medicaid ineligibility, keeping in mind each month may cost up to $10,000-$11,000 until all so-called “excess resources” (as outlined above) are drained. One mistake could result in tens of thousands of dollars in costs which might otherwise be avoided by taking proper and timely measures. As important, a good plan can even save assets if a loved one is already in a nursing home.
Contact a professional and request a free consultation to thoroughly review your situation if and when you or your loved ones should face these concerns. If you favor a more proactive approach, use the consultation to get information on crafting an Irrevocable Medicaid Trust to best suit your needs and to insulate your home and other valuable assets from this stressful situation.