Although you may not want to dwell on the possibility, the reality is that we all stand a good chance of needing long-term care at some point in our lives. If you fail to consider the possibility, you could face significant financial hurdles should you end up in long-term care (LTC). Like many seniors, you may end up turning to Medicaid to help cover the high cost of LTC; however, qualifying for Medicaid might lead to Medicaid’s “spend-down” requirement if you failed to plan ahead. The Harrison Medicaid attorneys at the Law Offices of Kobrick & Moccia explain how planning ahead can protect your assets from Medicaid spend-down.
Will You Need Long-Term Care?
Experts tell us that if you are close to retirement age right now (age 65), you stand close to a 70 percent chance of needing some type of long-term care (LTC) services before the end of your lifetime. If either of you does need LTC, you will quickly realize that the expenses associated with LTC are high. Nationwide, residents paid, on average, over $8,000 per month for LTC in 2018. As you might imagine, the cost of LTC in New York is considerably higher than the national average with a month of LTC averaging close to $12,000 in New York. Taking into consideration the average length of stay is three years, it becomes easy to see how LTC costs could become problematic if you are forced to pay out of pocket. That is precisely what could happen though because neither Medicare nor most health insurance policies will cover LTC expenses. Because Medicaid does cover LTC expenses, you may find yourself turning to Medicaid if you wind up needing LTC as a senior.
Medicaid Eligibility and the “Spend-Down” Requirement
If you have never before relied on Medicaid you probably know very little about the eligibility guidelines for the program. To qualify for Medicaid benefits, you will need to meet Medicaid’s eligibility requirements for seniors, meaning you must meet the income and asset tests. The income limit is tied to the Federal Poverty Level and will change depending on which Medicaid category you apply under, your geographic location, and household size. The income limit is not where most seniors encounter a problem though. It is the extremely low asset limit that typically poses a problem for seniors who did not plan ahead. In most states, an individual applicant cannot own “countable resources” valued at over $2,000. A married couple faces an asset limit of just $3,000. Medicaid does exempt certain assets, however, many seniors have accumulated a retirement nest egg full of non-exempt assets that easily exceed the countable resources limit. If your assets exceed the limit, your application will be denied and you will have to “spend-down” your assets before applying again, meaning you will be expected to use those assets to cover your LTC expenses until the assets are gone. Only then will Medicaid approve you for benefits and start pitching in toward your LTC expenses. By then, however, your retirement nest egg may be gone or dramatically diminished.
Protecting Assets from Spend-Down
Transferring assets to avoid the spend-down requirement is not an option because Medicaid also uses a five-year “look-back” rule that prevents such asset transfers. The rule allows Medicaid to review your finances for the 60 month period prior to applying. Any assets transfers made for less than fair market value could result in the imposition of a waiting period before Medicaid will kick in. The good news is that by incorporating Medicaid planning into your overall estate plan early on you can protect your assets from the spend-down requirement. One common Medicaid planning tool that can help protect your assets is an irrevocable Medicaid trust. Assets transferred into such a trust remain out of the reach of the Medicaid “countable resources” eligibility requirements. Consult with an experienced Medicaid planning attorney to find out how you can use Medicaid planning tools and strategies to protect your assets.
Contact Harrison Medicaid Attorneys
Please feel free to download our FREE estate planning worksheet. If you have additional questions or concerns regarding the Medicaid spend-down requirement, contact the Harrison Medicaid attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.