Are you wondering how Medicaid works? Is there a right way to plan for Medicaid, even if you don’t qualify today?
The answer is yes.
You can “spend down”
If you’re not eligible for Medicaid because your assets are too high, there are acceptable ways to ‘spend down’ so you can qualify. Asset transfers are NOT the right way to qualify for Medicaid and can trigger a penalty unless they occurred more than five years before you apply.
What Medicaid wants to know
When Medicaid is determining the value of your assets, they do not include your home and car. Only your financial assets are counted – things like CDs, bank accounts, 401Ks IRAs, life insurance with cash value and annuities.
Here’s an example
Let’s say you’re a widow with these assets:
- A home you own worth $200,000 that is paid off.
- A 12-year-old car worth $5,000.
- A life insurance policy with a cash value of $20,000; you borrowed $15,000 against it and haven’t paid it back yet.
- Two $10,000 CDs for a total of $20,000
- A money market account with a current balance of $12,000.
- Two IRAs with a total balance of $30,000.
Based on this, your total countable assets from Medicaid’s perspective are:
– Life insurance – $5,000 ($20,000 minus $15,000 loan)
– CDs – $20,000
– Money market account – $12,000
– IRAs – $30,000
To be eligible for Medicaid, your assets, not including your home or car, have to be $1,600 or less.
The good news is you can get help before you get down that far through the Connecticut Home Care Program for Elders. If you’re at least 65 years old, single, have assets up to $38,592 (a married couple can have up to $51,456) and you need help with one or more activities of daily living, you may be eligible to receive home care services paid for by the state.
But right now, with $67,000 in assets, you still have too much money. Here are some examples of acceptable ways to spend down the $31,828 difference:
- Trade in your old gas-guzzler for a new fuel-efficient car. With the trade-in, you pay $20,000
- Purchase a Medicaid-compliant funeral contract; Medicaid allows you to prepay up to $10,000.
- With the remaining money, make your downstairs lavatory into a full accessible bathroom.
There are many acceptable ways to spend down, depending on your situation. While you’re on the Connecticut Home Care Program before Medicaid, you will be contributing 7% toward your care plan, or possibly more depending on your income. You may choose to supplement your care plan with services you pay for privately. Any out-of-pocket expenses for your care count toward your asset spend down.
Once you reach the Medicaid asset limit of $1600, you may be entitled to significantly more services if an assessment by a geriatric care manager determines that you need them.
Medicaid requirements can be complex
What if your income is higher than the $2,349/month Medicaid allows? What happens to your house when you die? Will your heirs inherit it? If you haven’t made provisions beforehand, the state is first in line to recover the cost of your care while you were on the Connecticut Home Care Program from your estate, which includes your house.
There are good solutions to all of these issues if you think ahead. To avoid jeopardizing your Medicaid eligibility, start planning for your long-term care needs early, and get expert help from an elder law attorney.
Medicaid Planning: 10 Questions You Should Ask Your Elder Law Attorney