In order to qualify for Medicaid Home Care or Assisted Livings Services, known as “Community Based Services”, a person cannot have non-exempt assets (or “resources”) greater than a specific dollar amount. In New York, for 2021 the resource limit is $15,900.
Until the Community Medicaid lookback is implemented (expected to be April 2022 or even later), a person can still transfer most of their assets out of their name to qualify for a home health aide or assisted living care without penalty.
In fact, often this is exactly what people do. A person in need of a home health aide (or assisted living facility) will simply transfer their non-exempt assets out of their name, whether to their children or to a trust, and then apply for Medicaid and get approved for community based long term care services.
A grave mistake that is made though, is spending the money too soon after it is transferred. If a nursing home is needed by either the Medicaid recipient or his or her spouse within five years after the transfer is made, the nursing home patient could find themselves in a really bad situation.
While there is currently no lookback implemented yet for home care or assisted living services, that is not the case for a Medicaid nursing home applicant. There is currently a five-year lookback when applying for Medicaid nursing home care. To qualify for Medicaid services to pay for nursing home care, not only will the applicant’s current resources be reviewed to confirm that the applicant’s non-exempt resources are under $15,900, but the applicant’s financial history will be fully reviewed for the past five years. Medicaid is looking for any uncompensated transfers, or “gifts”, that the applicant may have made in order to reduce their assets to qualify for Medicaid. If a transfer is found for less than fair market value (i.e. a transfer to a trust or to a child), Medicaid can assess a penalty equal to the amount of that transfer.
The penalty is calculated by dividing the value of the transfer by the regional rate of the cost of nursing home care to determine a period of time within which the applicant would have to pay privately. For example, if the applicant made an uncompensated transfer in the amount of $150,000 and the nursing home Medicaid regional rate in his area was $12,000, then the applicant would have a penalty period of 12.5 months ($150,000/$12,000) during which time the applicant would have to privately pay the nursing home bill. This is known as a “penalty period.” Medicaid will only begin to pick up the tab of the nursing home costs at the end of the penalty period.
If someone transfers his assets to get Medicaid home care or assisted living care, but then the situation changes, and that same person, or his spouse, needs nursing home care within five years, Medicaid will assess a penalty for the prior transfers that were made to become eligible for Medicaid community care.
The issue is, if such a penalty is assessed, how will the nursing home resident pay privately during the penalty period if he no longer has that money and the transferred money is already spent?
If the money has already been spent, there is a big problem. EVEN IF the money was spent on the Medicaid applicant’s needs, that will not help the situation. Medicaid will review the transfer and assess a penalty.
On the other hand, if the money was not yet spent then even if a penalty is assessed, at least there will be money available to pay for the nursing home resident’s care during the penalty period.
But even better, if the money has not yet been spent, there are crisis time strategies that can be implemented to preserve some of that money, and sometimes even all of the money, even when nursing home care is already needed.
Here is an example:
Bob had $165,000 collectively in all of his bank accounts. He has no retirement accounts. He transferred $150,000 to his two children and when he only had $15,000 left in his checking account, he applies for Medicaid Community Care to pay for the cost of a home health aide.
Bob’s Medicaid application is approved and he has a home health aide for six hours a day, seven days a week. His low income is insufficient to cover his living expenses, so Bob’s children use the money that was transferred to them to pay for Bob’s expenses such as his rent, utilities, groceries. Bob wanted to help pay for his grandchildren’s college education, so some further money was used for college tuition. After about two years, Bob suffers a stroke and is admitted to a hospital and then discharged to rehab. Unfortunately, he does not improve and can no longer safely return home. It is determined that he will need long term institutional care. The Medicaid nursing home application review process will uncover the $150,000 transfer of his assets to his children and a penalty will be assessed. During the penalty period Bob will be responsible to pay for the cost of his nursing home care during which time he must come up with $150,000 to pay for his own care. But where will he get this money from if it was already spent?
It is a huge problem that the children already spent Bob’s money, even if a good portion was spent on Bob’s own expenses. Bob’s children do not have another $150,000 of their own to pay for Bob’s nursing home care during the penalty. Bob cannot afford to stay in the nursing home.
Often, an applicant for Medicaid home care or assisted living facility may be short sighted and only think of the approval process for community care services while not thinking about the possibility, however remote, of requiring nursing home services.
In determining the strategy to obtain Medicaid home care or assisted living facility care, it is crucial to look ahead and make sure you have thought about the possibility, however remote, of the need for nursing home care within five years after transfers are made.
If Bob would have needed a nursing home 6 years after the transfer of his $150,000 was made, that wouldn’t have been a problem because the transfer would have been beyond the five year look back period and a penalty wouldn’t be assessed. The first five years after a transfer are pivotal. It is strongly recommended that money transferred is not used for at least five years in case it is needed in a crisis situation like Bob’s.
It is important to keep this in mind for both the Medicaid applicant and his or her spouse.
Because there is no lookback implemented currently for New York Community Care, it is not hard to get approval for Medicaid community care, but beware of making an irreversible error if the full long term care future picture is not properly assessed and addressed for both the Medicaid applicant and his or her spouse.
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