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MEDICAID FOR MILLIONAIRES
Does a millionaire need Medicaid? Does a millionaire want Medicaid? I think the answer is no, but many critics of the Medicaid system say that even millionaires can qualify for this welfare program and that changes are needed. Well, changes are coming, at both the state and federal level.
Is it true that a millionaire can qualify for Medicaid? The answer is yes, as long as it is a husband and wife. The general rule is that a husband and wife may keep one half of their assets up to $97,100 plus their home, as long as one spouse continues to reside there. The way to keep more assets is to have the healthy spouse purchase a special “Medicaid Annuity”. This converts excess assets into income of the spouse at home that is not looked at in determining the spouse’s eligibility. Here is an example.
Bob and Sue are married and own a home in Cambridge worth 2 million dollars. They also have cash and savings amounting to $2,097,100. Bob has a stroke and needs skilled nursing home care. Sue doesn’t like the thought of paying $300 per day to a nursing home and wants to know what her options are.
Option #1 – Apply for Medicaid. Because Sue lives in the home, it is a non-countable asset as long as she is living in it at the time Bob applies for Medicaid. Out of her remaining assets of $2,097,100 she may keep $97,100. This means that she is over assets by 2 million dollars. Sue will then purchase a “Medicaid Annuity” that will convert excess assets (that are bad) into income of the healthy spouse that is not looked at for determining Bob’s eligibility. That’s it, it’s done. Bob is on Medicaid. Sue didn’t have to spend a dime!
Option #2 – Staying Home. Getting care at home is paid for out of your own pocket. There are some programs that provide care at home, like visiting nurses, but the coverage is sporadic at best. For daily at home care you must private pay. Bob is fortunate. Between that large amount of cash assets, their retirement income and the equity in their home, he is going to be able to afford to pay for help at home. Nurses will come to his house and he will be sleeping in his own bed at night. Bob and Sue have so much money that even if Sue were to also get ill and require care that both of them could be cared for at home.
So, Let’s see…if I were Bob….would I want to go to a nursing home and spend my day in a wheelchair in the hallway at the nursing home or be home? Sorry kids, I’ll be spending some of your inheritance! Perhaps Bob’s illness will progress to the point that it is not possible to stay home any longer. At that point my advice would probably be to look at some of the nursing homes that do not accept Medicaid. They accept only cash paying customers.
It is widely known that Medicaid does not pay 100% of the cost of providing care to the nursing home. The shortfall is usually made up by the people who are private paying at the nursing home at a rate close to twice what Medicaid is paying for a person you might be sharing your room with. At a nursing home that only accepts private paying customers, each person pays the true cost of operating the nursing home. The differences in the facility, food and staffing can make a difference.
So, if you follow my advice and are a millionaire, it’s time to start spending some serious money on health care, you might want to look into long-term care insurance. If you are not a millionaire, you will want to keep an eye on your state and Federal legislators because changes are on the way. The Federal government is looking at Medicaid, a program set up for the poor that is now widely used by the middle class, to devise a way to start making cuts.
FEDERAL GOVERNMENT CHANGES - Medicaid is a Federal law that is applied by the states. For whatever reason, in the U.S. Congress, Medicaid is under the Federal Energy and Commerce Committee.
Last Thursday, the Federal House and Senate reached an agreement on a five year 14 Trillion budget including cuts on entitlements for the poor. This budget agreement instructs the House Energy and Commerce Committee and the Senate Finance Committee to find $10 billion in cuts over the next five years from Medicaid.
One of the changes that has been discussed is extending the look-back period from three years to five years. Currently the look-back period is three years for gifts unless a trust is used, then it is five years. This change would adversely affect families who gift away amounts between $250,040 and $423,400 and could result in a family having to private pay the nursing home for up to two additional years. An example.. Jane is a widow and is concerned about potential nursing home costs. Jane gives to Ed, her only son, $423,400 as a gift. This gift causes Jane a three-year disqualification period, the maximum period under the three-year rule. If Jane needs nursing home care in the next three years she must private pay until three years have passed since the gift was made. Under the new rule, Jane would be disqualified for five years.
The next proposed change is more difficult to understand. The new proposed rule would delay the start of the disqualification period. Instead of starting the disqualification period at the time of the gift, the disqualification period would instead start on the date you enter the nursing home or the date you have less than $2,000, whichever is later. This is a roundabout way of saying that any gifts made within five years of entering a nursing home must be returned and used to pay the nursing home. What happens if the gifted money has been spent? What if the gift was for your grandson’s college? There are a lot of unanswered questions with this proposal.
MASSACHUSETTS CHANGES – There are six bills pending in our state legislature. As of right now it would appear that only one of these have much of a chance of passing. It is the bill to restore the personal needs account of a nursing home resident.
Personal Needs Allowance Restoration - Sponsored by Representative Ann Paulson and Senator Steve Panagiotakos
$60 is a number that hasn’t changed in the last 14 years. This is the monthly amount that a person in a nursing home is allowed to keep to pay for their personal needs. The request is that it be increased to $72.80, the amount it was at about 14 years ago, with a cost of living adjustment made annually.
I have a client who is a nursing home resident. He is mentally alert but unable to move. His cable bill is $55 per month. This leaves him $5 per month. He cannot afford a telephone or even a haircut. Raising his monthly allowance to $72.80 is a start in the right direction.
I’ll be following the five other bills in the state legislature and will let you know how they progress. They have all been referred to a committee for further study.
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds a masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org