Tuesday, July 8, 2014

How to Pay for Long-Term Care Using Medicaid

By:  Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

The latest government report on Medicaid applicants highlighted the four most common methods used to reduce countable assets to qualify for Medicaid in a nursing home. 

The Government Accountability Office issued a report on June 23, 2014, in which about 300 applications for Medicaid in three states, New York, Florida and South Carolina were reviewed. [1]  The report stated the average cost for nursing home care is $7,000 per month, or $85,000 per year.  Medicaid, a joint state and federal program, provides services to certain individuals whose assets are insufficient to meet the costs of necessary long-term medical care. One of the tests that must be met is a measurement of the assets available to a Medicaid applicant.  If the applicant has too many assets, they will not qualify for the Medicaid benefit. 

The report identified the top four methods used to reduce the assets considered to qualify for Medicaid:

  1. The countable assets were used to purchase “exempt” assets, which are assets ignored by Medicaid.One common practice was to prepay a burial.
  2. An annuity that meets the strict Medicaid rules was purchased
  3. Assets were gifted to family members.
  4. Assets were shifted to the healthy spouse, who then purchased an "exempt" annuity, meeting the Medicaid standards.
The Medicaid applicants in these three states surely needed professional help to navigate the complexities of the Medicaid rules and qualify for the benefit of having their nursing home care paid for by the government.   Gifting is a dangerous and aggressive technique.   Often a gift will disqualify an applicant from receiving benefits if the gift was made within five years of applying for Medicaid.  Using annuities to reduce assets requires that the annuity falls within the narrow limits allowed.  This is next to impossible without assistance from a knowledgeable professional.

The GAO report states the obvious:
 “Medicaid spending for nursing home care is projected to increase, placing an additional burden on already strained federal and state resources.”[2]    

What does this mean for you?  Everyone should plan for the need for long-term care and how to pay for it.


[1] “Medicaid:  Financial Characteristics of Approved Applicants and Methods Used to Reduce Assets to Qualify for Nursing Home Coverage,” Government Accountability Office, June 23, 2014.

[2]  Page 1, GAO-14-473 Medicaid Nursing Home Financial Eligiblity

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