MAJOR MEDICAID MISTAKES
As our aging population continues to grow, more and more families will face the need for long-term care for their loved ones. If that care is received in a nursing home, these families will face costs of $10,000 – $15,000 per month (and that number increases each year). Since Medicare does not cover the cost of skilled nursing home care (except for limited rehab stays), most residents must pay the full cost of skilled nursing home care. At $10,000 – $15,000 per month, the average family will exhaust their life savings within the first year of nursing home care. Most nursing home residents will eventually end up needing Medicaid to pay for the nursing home care. The thought of paying for nursing home care and even eventually needing Medicaid terrifies most families. The rules are complex and ever-changing, and there is a ton of misinformation in the community about how Medicaid works. Here are the most common Medicaid mistakes made by families facing this stressful situation that we have noticed over the years:
HAVING NO PLAN AND TAKING NO ACTION:
So often families are simply overwhelmed by the health and care needs of the nursing home resident. They are aware that the nursing home costs are extraordinary, but they are like a deer caught in the headlights, frozen and unable to act. Every year hundreds of millions of dollars are lost simply because families stood back and did nothing. Frequently it is wrongly assumed that once a person is in the nursing home, nothing can be done to save their assets. In most cases the assets could have been saved, but action must be taken before the money is gone.
ASSUMING INELIGIBILITY FOR MEDICAID:
Many people cannot afford to pay $10,000 – $15,000 per month for the cost of a nursing home. For this reason, Medicaid has become the long-term care insurance of the middle class. Many of those middle class families, however, have a hard time believing that they could be eligible for Medicaid. Medicaid is seen as the health insurance for only the most destitute. This mistake has cost many families thousands of dollars.
GIVING AWAY ASSETS WITHOUT A PLAN:
One of the most common “do-it-yourself” ideas is to just give assets away. You cannot simply give assets away to meet the asset limits for Medicaid eligibility. If you have given assets away for less than fair market value within five years of a Medicaid application date, you must disclose the transfers of these assets on the application. A penalty period will be assessed based on the value of the assets given away. Making gifts can be an important part of an effective Medicaid asset protection plan, but doing so without a plan, or, worse yet, without fully understanding the consequences can be financially devastating.
THINKING A REVOCABLE TRUST WILL PROVIDE PROTECTION:
Revocable trusts can offer a number of financial benefits but protection from Medicaid is not one of them. Assets in a revocable trust are still considered as part of the nursing home resident’s assets and considered to be available to pay for care costs. Additionally, assets owned jointly with another person are all included in the calculation of assets.
HANDLING THE APPLICATION ON YOUR OWN (OR LETTING THE NURSING HOME DO IT):
Yes, there are people who apply for Medicaid and are approved without complication. The problem is that it is difficult to identify when a complication or serious mistake is looming in the application. If a Medicaid application is made and the resident is denied because of real estate or forgotten stocks, she will not learn about the denial until months of eligibility have been lost and debt of tens of thousands of dollars to the nursing home have accrued. An easy fix for this is a consultation with an Elder Law Attorney who can review the situation and advise whether the person, nursing home, or an attorney should handle the application. Nursing home social workers and business office managers are a great resource to help people file a basic Medicaid application, but their job is to provide care, not protect your assets. If eligibility is questionable, it is best to seek help from an Elder Law Attorney. Medicaid has truly become the long-term care insurance of the middle class. As we live longer and as care costs continue to rise, more families will look to Medicaid to pay the cost of Nursing Home care.
David Wingate is an elder law attorney at the Elder Law Office of David Wingate, LLC. The elder law office services clients with powers of attorneys, living wills, Wills, Trusts, Medicaid and asset protection. The Elder Law office has locations in Frederick and Montgomery Counties, Maryland.