Medicaid Planning

MEDICAID PLANNING

Medicaid Planning primarily focuses on older adults' needs related to paying for long term care. Few people have the resources to afford to pay out of pocket for long term care, when an average month's stay in a nursing home costs over $5,500. Unfortunately, many people do not plan for nursing home or assisted living care before the need is urgent.

Applying for Medicaid is a complicated and tedious process. To qualify for Medicaid, an applicant is only allowed to have a certain amount of income and to own a certain amount of qualified assets. Look-back periods and transfer penalties are employed. Not having a plan for old age, or making a mistake when planning, can be extremely costly.

What is Medicaid?

Also known as Medical Assistance and Title 19, Medicaid is a health care program for certain groups of low income people who qualify. There is no straightforward rule for qualification. You may qualify for Wisconsin Medicaid if you are age 65 or older, blind, disabled, under age 19, pregnant, or a relative caretaker of a child, if you meet financial eligibility. For help in finding out if you may qualify for Wisconsin Medicaid, visit theWisconsin ACCESS website.

Qualification

To initially qualify for Medicaid, an applicant must be either categorically or medically needy. With some exceptions, people who receive SSI make up the categorically needy group. Currently, the SSI income standard is $591.67 per month. The medically needy category consists of people whose income exceeds the SSI standard, but whose "extra" income is spent on medical expenses.

A Medicaid applicant is only allowed to retain $2,000 in liquid assets, or a total of $3,000 if both spouses are applying. There are certain assets that are exempt. Under certain conditions and depending on their value, the applicant's homestead, car, life insurance, personal property and other assets may be exempt.

Divestment

Divestment is disposing assets for less than a fair market value, such as making gifts and selling property for less than it is worth. There is a disqualification period in which an applicant will not be eligible for Medicaid if the applicant has made a prohibited divestment. The disqualification period varies depending on the size of the gift and when it was made.

After receiving an application, Medicaid officials make an inquiry into the applicant's finances for up to the last 60 months. This is called the "look back period." If a prohibited divestment is discovered, the applicant will either be ineligible for Medicaid for a certain amount of time, or will only be eligible to have a certain portion of medical expenses covered.

Most people are aware that the IRS allows a person to make gifts of $12,000 per donee per year without reporting them on a tax return. Even though a gift "doesn't count" for federal tax purposes, it will be considered a divestment under Medicaid rules.

Spousal Impoverishment

There are special rules for the situation in which one spouse is institutionalized and the other (the "community spouse") is able to live on his/her own. The community spouse may keep an income allowance called the Minimum Monthly Maintenance Needs Allowance (MMMNA). Currently, that monthly allowance is $2,200, but there are exceptions to this rule too.

Keep in mind that Medicaid rules do not sync with Wisconsin Marital Property law. For example, when determining a married person's income, Medicaid only cares about whose name is on the check, not whether or not the income is "marital" or "individual" property.

The Attorney's Role

Medicaid rules are complicated and seemingly ever-changing. There are many exceptions to each rule. It is a good idea to get the advice of an attorney well-versed in elder law if you or your loved ones are in need of Medicare benefits. Better yet, think about your long term care goals and needs long before care is required.