Medicaid & Assets (long!)

pachickMarch 8, 2009


I've lurked on these boards but never posted; I am looking for information about asset management in Medicaid. I know that each state has its own regulations for Medicaid, but know that several members have helped their parents and am hoping someone can point me in the right direction on some questions.

My parents are pretty young- 64 years old, but my dad is in very poor health. My mom, thankfully, is very healthy (knock on wood.) I moved back home to help with caregiving, but currently my dad is in the nursing home for rehab. We are not sure if he is well enough to recover his strength so that he can come back home. We are hopefully, but uncertain.

My dad does not have one specific diagnosis. He has the multiple symptoms of end-stage diabetes (e.g. dialysis, heart problems, has lost one leg and has chronic wounds in the other leg). He has very good days and very bad days. However, while there is a general slow deterioration, there is no set course. He may make it back home, or he may not be able to get strong enough to be back home. He was in the nursing home in the summer, and we thought he might not be able to come home at that time; instead, he came home and did very well- way beyond our expectations- until a simple, routine surgery had a life-threatening outcome, which put him in the hospital and back in the nursing home. Maybe he can recover and do as well as he was previously? We just don't know. It is possible, though unlikely, that there is no need to even worry about the questions below- maybe he will recover and do well for the next few years? We are generally hoping for the best but planning for the worst.

I am posting this because we (my mom, me, and my younger sister, with support also from my fiance) are trying to figure out how best to handle things financially. My parents are currently OK financially. They have a paid off home and no debts. My mom continues to work. My dad was a public school teacher and has good health insurance (thank God!!!), and a pension. So far, so good.

Now, if Dad is not able to recover enough strength to come home, he will soon begin the Medicaid spend-down, where he will go through his assets until they are exhausted before Medicaid will kick in. Since a lot of his money was in his 401k, he now has considerably less to go through then he did a year ago. My understanding is that Medicaid looks back over the past 5 years to ensure that no assets were transferred in an attempt to avoid the spend-down.

Here are my questions. My parents have some $$ saved for me and my sister, namely wedding funds and college funds (I am already through college).

1. These funds are in both my parents' names, so they will need to spent-down before Medicaid kicks in, yes?

2. Are college and weddings considered "Reasonable Expenses" when Medicaid looks back over the past 5 years?

3. My sister is currently in college and I am going to be married this coming July. My parents have given my sister the money, then she pays the bills. They would like to give us the money directly so that we can decide how to spend it on the wedding (we are unbelievably fortunate!!) However, if my parents are not paying the bills directly, it may look like my parents did, indeed, transfer large sums of money, and if so, will that get them into trouble with Medicaid?

4. I have read that individuals are able to give some money each year as gifts, I think it is something like $12k/year without the recipient being taxed. Is this allowable under Medicaid as well- if these gifts are given (which would cover the wedding and college amounts), would Medicaid consider these a transfer of assets to avoid the spend-down?

Please know that we are not trying to find loop-holes or anything, we want everything to be totally above board. My mom works for a elder community and knows how important private pay is for assisted living/nursing homes- she is not looking to avoid the spend-down. She and my Dad just want to make sure that the money they saved specifically for my sister and me are used for these goals, if possible. Also, I want to add that we are all very thankful that we even have the need to ask these questions!! They are good "problems" to have, if having money to allocate if possible could even be considered a problem.

I have looked online to try to find the answers, but have not found an answer. I am not even sure who to contact to find out the answers, so any direction would be appreciated!

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The major point to keep in mind is the 5 year spend down period before getting on Medicaid. Anything less than five years will come out of your/your family's pocket before Medicaid kicks in.

Also - spending down the joint accounts for the benefit of your ailing father also helps to impoverish your young and healthy mother. Is that a goal you want to achieve?

Right now $12,000 tax free can be given by each parent to as many recipients as they wish. However, the five year spend down could come into play if the worst happens before the five years has been satisfied.

And when one is on Medicaid, the assumption is assets are exhausted/spent down so there would be no gift giving (presumably nothing left to give) once on the system. Long term care would take pensions and/or Social Security, health insurance would keep up with health issues, etc. so there would not be income to be given away - any ongoing income would supplement Medicaid or vice versa.

Perhaps, aside from your father's pension, all existing assets could be retitled to your mother only - would guess she's the primary will beneficiary anyway? If all is given over to you and your sister, you could be on the hook for an awful lot of out of pocket expenses if you don't have the luxury of the five years going forward.

Your Mother (and maybe you and your sister along with your Mother) should make an appointment with an attorney specializing in Elder Care. They're well versed in these situations and would have a variety of options for you to explore.

    Bookmark   March 8, 2009 at 2:39PM
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Hi Duluth,
Thanks so much for your post! When you say that that major point to keep in mind is the 5 year spend down period- are you saying that we need to pay out of pocket for 5 years, and then Medicaid kicks in? It was my (probably incorrect) understanding that a person needs to spend down all their assets, and only then will Medicaid start paying for nursing home care. I thought the 5-year was a "look back" period, where they review all transactions in the past 5 years to make sure that no assets were transferred to avoid the spend-down. If this is not the case, then we definitely have to more consider.
You are right: we are very worried about Mom's financial stability. Currently they are paying for Dad's expenses out of his pension/401k- however, given the market, those funds are not going to go nearly as far as we'd hoped just a year ago.
My mom did talk to someone at work- a case manager, who helps their clients pay for the nursing home/assisted living. She was able to find out that Medicaid will not touch their house as long as she is still living in it, and they can have one car, and they will not consider Mom's 401k or salary. However, it seemed that anything else which is in both their names, including all savings (which, outside of Mom's 401k, everything is in both names) is fair game.
If it is possible to re-title the assets to Mom's name only- that would be fabulous (if she agrees to it; she might not)! I thought that the 5 year period was to ensure that people didn't try to re-title or give away their $$ prior to the spend-down. My mom believes that as long as she has her job, 401K and the house, she will be OK even if they spend down all their shared assets...but that seems like a very scary proposition to me.
I am definitely worried about my mom and dad giving me money at this time. I do not want to cause problems down the line for either myself or my parents. My fiance and I did not want to take any money- we had our own plans for getting married; however, my mom and dad are extremely insistent on this- they worked their whole lives, have saved for it, etc. I think it is insane for them to be putting out cash at this time; they, on the other hand, have very definite ideas on where they want their money to go.
I guess this is where my major concerns come into play. If they give us this money now, and, say, have spent-down all their other assets in 2 years' time- will Medicaid come back and ask for the funds from my sister and I (if my parents give us the money outright), or come back and ask for additional funds from my mom and dad to make up for the money they gave us? My mom believes that college and weddings are "reasonable expenses that many parents pay" (her words), so we all should be OK. I am not sure. I would like to find out for certain.
Thanks especially for the recommendation to go talk to a lawyer. I was not sure who would be the best professional to talk with- a lawyer, an accountant, a personal financial advisor, any of whom specializes in Elder Care. I will talk to Mom about this tonight.

    Bookmark   March 8, 2009 at 5:19PM
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I'll answer this first: the five year period is the lookback period. You aren't given a five year window during which to spend it all down - your parent's assets have to be spent down a full five years in advance of receiving Medicaid. If you miscalculate and come up short of the five years, then you will have to pay to make up for the time shortage. Even simpler - if assets are spent down during 2009, it'll be sometime in the year 2014 before Medicaid lookback qualifications are met and before Medicaid will begin paying for care.

Right, the house is untouchable, as well as one car, your mother's salary, 401k, and pension. Joint assets and accounts are fair game.

Finding what is considered reasonable expenditures isn't so easy - most of the info that comes up relates to health insurance and medicaid/medicare drug programs. College expenses might be one thing, but a wedding or promised monetary gifts might be something else. I don't have an answer for reasonable expenses.

If they give us this money now, and, say, have spent-down all their other assets in 2 years' time- will Medicaid come back and ask for the funds from my sister and I (if my parents give us the money outright), or come back and ask for additional funds from my mom and dad to make up for the money they gave us?

Yes, it could and most likely would happen if they apply for Medicaid assistance after only two years into the 5 year lookback period.

In a nutshell, it all depends on when the major spend down of assets is completed leaving basic living and ordinary financial obligations met and when Medicaid is needed.

I would still suggest an attorney - many law firms have Trust, Wills, Estates & Elder Law department experts. And the only reason I suggest a lawyer right off the bat is that sometimes getting finances and change of life situations in order requires legal documents that CPA's, financial planners, accountants, etc. just don't deal with.

    Bookmark   March 8, 2009 at 6:56PM
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I have to clarify something... didn't mean to suggest a potential medicaid applicant would have to exist in abject poverty for a five year period - just that some thought and caution should go into the appropriate dispersal of assets within the guidelines Medicaid sets forth.

Searching medicaid transfer rules will give you sites with good overviews.

When an application is made for Medicaid to pay for nursing home care, government officials will review financial transactions made within 60 months from the first date that a person was institutionalized and applied for Medicaid coverage. The purpose of the look-back rule is to prevent people from making financial transfers one day, thereby impoverishing themselves, and then becomming immediately eligible for Medicaid.

Many people simply try to give their assets away to their children in an attempt to safeguard their estate. The Medicaid people have caught on to this. The look-back rule exists to prevent people from transferring assets that could and should be used to pay their long-term care expenses.

    Bookmark   March 8, 2009 at 9:09PM
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Hi Duluth,

Wow, thank you so much for this information!!

I googled PA Elder Law and found a few links. One of the pages indicated that weddings gifts to children in the 5 year look-back period may make one ineligible for Medicaid.

I cannot even begin to tell you how thankful I am to have found this out NOW, before any big expenditures have been made!!!

I sent the link to my mom, and we talked about it over dinner. We are definitely going to go talk to a lawyer about this. It's a great time to start a legal conversation about asset planning with the wedding as a part of the overall picture. We clearly need to get more information and some additional guidance on the situation.

Thanks again!!

    Bookmark   March 8, 2009 at 9:11PM
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You're welcome. You're very wise to start thinking about a plan. Life is full enough of uncertainties - finances for future care, etc. shouldn't be one of them!

    Bookmark   March 8, 2009 at 10:14PM
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pachick, I'd also suggesting consulting with an accountant on the questions you have.

My sisters and I went through a similar situation with our mom. Our dad passed away in 1989 and left an estate for mom. Thanks to multiple sclerosis, my Mom lived in a nursing home as a private pay patient for a number of years. She passed away at the end of 2006. However, about 3 years before she died, dad's money ran out. Medicaid allowed, at that time, a person to have $2000 in assets before they started paying in. We knew that the $2000 would have to cover the cost of her funeral and/or my sisters and I would contribute the balance. The transfer of asset rules are pretty strict as Medicaid asked for copies of a number of quarterly account statements before they approved any nursing home payments. Annually after it kicks in, we had to provide year end account statements to recertify eligibility. They also want to know all sources of income and ask for verification of it. My mom received a small pension of her own and that amount was applied to reduce Medicaid payments. Medicaid allowed the recipient to keep $60 per month to cover all other incidental expenses - phone, tv, clothes - whatever.

The reason I suggest talking to an accountant is so that you get correct advice re 'gift' transfers for the education and wedding costs. A lawyer may not be up to speed on accounting/gift type issues. I'd also inquire about whether or not your mom should segregate funds to cover her own living expenses as she's healthy now. How should she best protect herself for the future?

It's a tough situation for anyone to be in. The AARP website has alot of info about Medicaid - I've added the link below. Your family is very wise to do the planning now.

Here is a link that might be useful: AARP and medicaid

    Bookmark   March 9, 2009 at 5:29AM
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Thanks, Kek01! Please accept my condolences on the loss of your Mom and Dad. Thank you for sharing your thoughts and experiences, I really appreciate it. You and Duluth have been *very* helpful.

My mom and I sat down again tonight and continued our talk. She wants me to be involved in case, God forbid, anything happens to her. She really is the lynch pin holding everything together, managing everything. She wants at least one other person to know the situation.

So we are going to go together and talk to a lawyer, and afterward also probably an accountant. They do have a financial planner, but he told them that he is not very familiar with Medicare, so we will go find a specialist.

It's hard to get my mom to talk about asset protection. She works for a facility that relies on private pay, so she is loath to the extreme to do anything that might be an attempt to game the system.

That said, we did agree to go talk to a lawyer to try to find out how to protect her assets in a legal, fair manner.
She does not want to take advantage, but does want to protect herself as well. Both she and my dad have worked very hard to build up their savings and plan for their future- we do not want her to be impoverished!!

One thing is for sure- this experience has really opened my eyes to the necessity of women to have their own 401ks and savings in their own names. Even if they will spend the money with their spouse, it seems that women should have some assets in their own name. Anyone's husband could end up on Medicaid due to an accident at any time. Very scary to think what could have happened if my mom didn't have her own 401k and salary coming in. Hopefully there will be changes in health care in the near future that will help lessen the chances of bankruptcy and ruin due to medical expenses, but in the meantime, its best to be prepared!

Thanks again!

    Bookmark   March 9, 2009 at 9:31PM
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Sorry this is happening to your Mom. I am somewhat dealing with the same issues but it is my husband. We don't really have assets except for home and car and a few thousands in the bank. I am trying to find out if I put him in a nursing home if I will ever be able to sell my house and move into a smaller one. I have three kids that are growing and won't need all this space soon. My plan was to sell last year until the housing market dropped and nothing is selling but foreclosures.

I would also suggest that you speak with an attorney.

Glad you mentioned about women having a 401K and income of their own. I would also suggest that women have their own credit cards because some are only authorized users on their husbands, because you never know that tomorrow will bring.

    Bookmark   March 15, 2009 at 11:34PM
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I agree that you should speak to an attorney who specializes in elder law.

There is something called "The rule of halves" that they play around with. It involves splitting assests.

    Bookmark   March 18, 2009 at 10:49AM
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So sorry to hear about your situation. This may be a dumb comment (I am not as familiar with these public health programs as most), but is there a big difference between the medical coverage provided under Medicare vs Medicaid?

Both your parents will be eligible for Medicare when they turn 65 next year, regardless of assets and income, if you guys can hang on financially until then. Sorry if I'm missing something obvious!

    Bookmark   March 18, 2009 at 1:38PM
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is there a big difference between the medical coverage provided under Medicare vs Medicaid?

Medicare is available, at age 65, to those who paid into the Medicare system. You are eligible for premium-free Part A if you are age 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years. Some people aren't in the Medicare system and therefore aren't eligible without certain exceptions. Though it pays for medical expenses, etc., it does not pay for nursing homes.

Medicaid, basically, pays for the medical care, including medicaid accepting nursing homes or long term care facilities, for those who can't afford it.

For the purposes of this discission - and others on the same topic in the past... it often comes down to differing camps of opinions, ie. those who can pay but don't want to vs those who cannot pay.

Sometimes it's a little difficult to discuss spenddowns in anticipation of applying for Medicaid without sounding like one is making a judgment. Who in their right mind wants to work their whole life then have to spend the retirement nest egg for nursing home care instead of leaving legacies to children or leaving a spouse well provided for - but those who have assets and can pay should be "private pay" residents of nursing homes. My Father, mercifully, got his wish to die at home, but my Mother spent the last year of her life in a nursing home as a private pay resident. And why? Because she could afford it and it was the right thing to do.

Many people who have assets and could well pay for their last years in nursing homes, etc. want to protect inheritances for children - or whatever- and find ways of impoverishing themselves by giving all their assets away. Once the estate is given away, they apply for Medicaid. Medicaid is well aware of this and should some unreasonable transfers of wealth and assets occur during the established 5 year lookback period, Medicaid will be withheld or reduced until those assets are made up - and the likely source for Medicaid to recoup these assets is from the person(s) to whom they were transferred.

    Bookmark   March 18, 2009 at 3:24PM
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I am not sure what kind of spend down you are referring to. If you have already done the division of assets with the SRS and started that spend down you can not give away any assets. If you haven't done the division of assets you need to do that right away. The mother gets to keep the home, a car and the rest is divided half for the mom and half for the father. If they have more than $180,000. I am not sure she would get half the money. I think in Kansas it is capped at the spouse getting $90,000.

    Bookmark   March 18, 2009 at 4:27PM
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