Five Myths About Medicaid’s Long-Term Care Coverage
Most folks are more familiar with Medicare, while Medicaid remains a mystery to most of us. Often times, we use the two words interchangeably. The fact is that Medicaid is the largest source for funding nursing home care, but there are many myths about exactly who qualifies for it and what coverage it provides. Here are five myths followed by the real story.
- Medicare will cover my nursing home expenses. Medicare’s coverage of nursing home care is quite limited. Medicare covers only up to 100 days of “skilled nursing care” per illness. To qualify, you must enter a Medicare-approved “skilled nursing facility” or nursing home within 30 days of a hospital stay that lasted at least three days. The care in the nursing home must be for the same condition as the hospital stay.
- You need to be broke to qualify for Medicaid. Medicaid helps needy individuals pay for long-term care, but you do not need to be completely destitute to qualify. While in general a Medicaid applicant can have no more than $2,000 in assets in order to qualify, this figure is higher in some states and there are many assets that don’t count toward this limit. For example, the applicant’s home will not be considered a countable asset for eligibility purposes (unless the equity exceeds $585,000 as of 1/1/19). In all states, the house may be kept with no equity limit if the Medicaid applicant’s spouse or another dependent relative lives there. In addition the spouse of a nursing home resident may keep one half of the couple’s joint assets up to $126,420 (in 2019). These numbers can and will change each year. Medicaid laws themselves are subject to change in the future as well. When doing Medicaid planning, always consult an elder law attorney.
- To qualify for Medicaid, you should transfer your money to your children. Medicaid law imposes a penalty on people who transfer assets without receiving fair value in return (i.e., a gift). This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid, and the length of the penalty period is determined, in part, by the amount of money transferred. The state will look at all transfers made within five years before the application for Medicaid. That doesn’t mean that you can’t transfer assets at all — there are exceptions (for example, applicants can transfer money to their spouses without incurring a penalty). However, before transferring any assets, you should talk to an elder law attorney!
- A prenuptial agreement will protect my assets from being counted if my spouse needs Medicaid. A prenuptial agreement only works to keep property separate in the event of death or divorce. It does not keep your property separate for purposes of Medicaid eligibility.
- I can give away up to $15,000 a year under Medicaid rules. You can give away up to $15,000 a year without incurring a gift tax. Under Medicaid law, a gift of $15,000 or any other significant amount could trigger a penalty period if it was made within the five-year look-back period. Small gifts under $500 per month (in aggregate) are OK under Medicaid laws.
Before doing nursing home planning/long-term care planning/Medicaid planning, it is crucially important to consult with your elder law attorney. Also, it is essential to have an updated and well-written Durable Power of Attorney, so that someone you trust can do Medicaid planning for you if you’re unable to do so yourself and have not done advance planning.