Question: “I’ve heard many rumors about Medicaid, such as 1) You cannot make a gift and then apply for Medicaid without waiting five years; 2) To qualify for Medicaid all of a couples’ income must go to the nursing home; 3) The spouse of the elder applying for Medicaid must “Spend Down” all of his/her assets except for the couples’ home. Are these true?”
Answer: Most of these are myths. Below are some of the most common myths about Medicaid. Hope this information helps you and your family.
1. Myth: “I have to give away everything I own to get Medicaid.”
The Truth: Basically, a person is permitted to own some property, and still be eligible for Medicaid. The trick comes in knowing what is “countable” and what is “non-countable” under the Medicaid rules. For a married couple or single person this includes, for example, equity in one home up to $500,000, with certain exceptions to the equity limitation. Whether you are married or not, certain types of prepaid burial contracts are non-countable. There are many other types of “non-countable property,” such as extensive funeral and burial space planning and some types of annuities. The bottom line is, you don’t need to be completely without assets to be Medicaid eligible.
2. Myth: “I can’t give anything away and get Medicaid.”
The Truth: In some cases, the Medicaid rules provide that a person can be disqualified for giving away property. However, a lot depends on what is given away, to whom, and when. So again, it’s complicated and it changes all the time. Some asset transfers are penalized under the Medicaid rules and some are not. For instance, transfers: to a blind or disabled child, to a caretaker child, between spouses and for the sole benefit of a spouse are allowed transfers under Medicaid law.
3. Myth: “I have to wait 5 years after giving anything away, to get Medicaid.”
The Truth: The disqualification isn’t always 5 years long and sometimes there is no disqualification at all. True, there is a 5-year “lookback” for some asset transfers under the Medicaid rules. This means that the Medicaid agency will look back at all transfers of property, including sales for less than market value. However, the rules penalizing transfers do not apply to all transfers. See #2 above.
4. Myth: “I can keep all our marital property and my inherited property when my spouse gets Medicaid.”
The Truth: When a married person applies for Medicaid, assets in either or both spouse’s name are considered by the Medicaid agency. However, some assets won’t be “countable” and you may keep some as an asset allowance if your spouse enters a nursing home. In fact, there are very special techniques only available to a well community spouse that can protect all of a married couples assets, including the family cottage. See #1 above.
5. Myth: “If I put my property into my spouse’s name, I will be eligible for Medicaid.”
The Truth: Assets are counted, regardless of which spouse’s name they are in. However, the healthy spouse will be given several months to re-title assets from the name of the spouse in the nursing home, into the name of the healthy spouse. The Medicaid agency explains these rules when the nursing home spouse gets into the Medicaid program.
6. Myth: “Medicare will cover my nursing home bill.”
The Truth: Medicare only covers a small amount of the nursing home care provided in this country. Many older people are surprised to learn this. In general, there are 20 days of full coverage if you go into the nursing home after at least three days in the hospital, and are receiving skilled care (not intermediate level care). Then, if you still need skilled care, you can get up to 80 days of partial coverage from Medicare. After that, you will either pay out-of-pocket, or get Medicaid, unless you have private long-term care insurance.
7. Myth: “If I enter a nursing home as a private pay resident, I must use up my assets before I can get Medicaid.”
The Truth: You are not required to use your assets to private pay for the nursing home care. However, some nursing homes might try to make you believe that you do have to do this. They are paid less under the Medicaid program than they collect from private pay patients. Some people seek advice from an elder law attorney to find out how they can become Medicaid eligible before having spent a significant part of all of their assets on the private pay rate.
8. Myth: “I can only ‘spend-down’ my assets on medical or nursing home bills.”
The Truth: See # 7 above. Nursing homes may tell you that you have to spend your savings on the private pay rate, before applying for Medicaid, but this is not true. In fact, it’s against the law for them to tell you this!
9. Myth: “My power-of-attorney automatically has the power to take property out of my name, if I ever need Medicaid.”
The Truth: Your best tool to be able to plan for Medicaid eligibility, should you ever need it, is to sign a general, durable power of attorney that includes a “gifting” power. Your agent under the power of attorney will only be able to re-title your assets if your power of attorney contains a “power to make gifts.” Most powers of attorney don’t contain this, so you might want to ask your attorney to add it. The court procedures to transfer assets without a “gifting power” can be expensive and time-consuming, and may not allow the type of asset protection that many people would like to accomplish.
Without a “gifting power” your agent is generally limited to spending your money on your bills and selling your assets to generate cash, to pay your bills. A “gifting power” is recommended for people who want to become eligible for Medicaid and not be limited to the “non-countable” assets allowed under that program. Some powers of attorney contain this “gifting” provision, but it’s limited to $10,000 or $11,000 per year. This figure is too limited to do effective Medicaid planning, and is related to a completely different type of legal issue. (See #11 below, about the federal estate tax.)
One more word about the “gifting power.” You should require your agent under your power of attorney to consult with an attorney experienced in Medicaid law before making any asset transfers.
10. Myth: “All property transfers will cause me to be disqualified from Medicaid.”
The Truth: Not all transfers of property will cause a person to become ineligible for Medicaid. See #2.
11. Myth: “I can only give away $10,000 per year under Medicaid rules.”
The Truth: This is a rule under federal estate and gift tax law, not under Medicaid law. (Actually, the amount has changed to $12,000, for federal purposes.) In 2002, this tax law only applies to people who have over about $1 million in assets. People who would pay federal estate tax should not worry about getting Medicaid. In fact, if more millionaires paid federal estate tax, we could cover the costs of nursing home care for the rest of us! Right now, under NEW Michigan Medicaid law a person will be disqualified from getting Medicaid for one day for every approximate $200 given away, in most circumstances. The penalty period will begin on the date that an individual would otherwise have been eligible for long term care services (Medicaid as well as the Home Based Community Waiver) but for the asset transfers, rather than the date of the asset transfer itself. Simply put, Medicaid will penalize from the date of the Medicaid application instead of the date of the gift. This is a change in well settled Medicaid law and an enormous trap for the uninformed.
For example, a semi-healthy grandmother gives her granddaughter $20,000 to assist with her college education. Three years later, the grandmother has a stroke and requires nursing home care. Over the next eighteen months, she spends her life savings on her own care. Forty-eight months after the gift, the grandmother has depleted her assets and applies for Medicaid. She will be penalized for about four months before she will receive Medicaid benefits, even though she has no money remaining to pay for her care. How her care will be paid for during that four month period of ineligibility is anyone’s guess.
12. Myth: “My income may have to be used to pay my spouse’s nursing home bill.”
The Truth: This is not true in Michigan or the majority of states.
13. Myth: “All of my spouse’s income must be used to pay the bill if my spouse is on Medicaid in a nursing home.”
The Truth: The law allows you to keep a portion of your spouse’s income if your income is below certain limits. In addition to this allowance, you may be entitled to a greater allowance if the cost of maintaining your home exceeds a certain amount or if a state hearing officer or a judge orders a greater allowance.
14. Myth: “I can hide my assets and get eligible for Medicaid.”
The Truth: Intentional misrepresentation in a Medicaid application is a crime and can be costly. The IRS shares any information concerning income or assets you have with the county department of social services. You or whoever applied may have to pay Medicaid back to avoid prosecution.
15. Myth: “Medicaid rules that applied to my neighbor when he went in a nursing home will also apply to me.”
The Truth: Medicaid rules change, and change often, so don’t count on the law that applied to your neighbor still applying to you. Also, there may have been facts about your neighbor’s situation that you just don’t know. It’s best to have your situation analyzed by a competent elder law attorney.
16. Myth: “Medicaid will take my home.”
The Truth: Yes. It is true Michigan now has an Estate Recovery law but with proper planning by an expert attorney the home can still be saved. Estate Recovery means that people who receive Medicaid benefits for nursing home level care can be subject to repaying the state for the costs of their care after they die. Typically, that means a claim against the home of the Medicaid beneficiary.
The Estate Recovery law is full of traps for those that do not have the foresight to plan ahead with an experienced elder law and estate planning attorney. With proper planning you can still save your home!
Don L. Rosenberg, Attorney and Counselor
The Center for Elder Law
Member, Elder Care Matters – America’s National Directory of Elder Care / Senior Care Resources for Families