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Medicaid & Asset Protection Plan

The Medicaid program is the largest source of funding for long term care.  It is funded by federal, state and local governments.  The program is administered by the local government agency and the decisions of the agency are subject to review by the state and federal courts.  Qualifying for Medicaid is the cornerstone of Asset protection Planning.  It is essential to work with a qualified and experienced elder law attorney, capable of effectuating and implementing the best asset protection plan to assure the best results. Medicaid is a means tested program which was enacted for the benefit of those without resources and who had no health insurance coverage.  Today, the vast majority of the Medicaid dollars are spent toward the cost of nursing home care for middle class adults.  Since the cost of a nursing home in the metropolitan New York area can easily exceed $140,000.00 per year, the need for such medical coverage is clear.  Although Medicare does pay for some of these costs, the coverage is so minimal that most nursing home residents must resort to Medicaid. Long term care insurance is available to cover nursing home and home care costs, but most senior citizens have not purchased such insurance and often find themselves in a medical crisis and no longer insurable. As a means tested program, Medicaid has the right to evaluate an applicant’s finances, currently, as well as five years prior to the time that an application for benefits is submitted (the “look-back period”).  If an applicant is married, Medicaid may review the finances of the applicant’s spouse as well.  There are limitations to the amount of resources that both the applicant and the spouse are permitted to have, unless a resource is considered exempt or unavailable.  An applicant or spouse may own unlimited exempt or unavailable resources.  Examples of exempt resources include the primary residence, one car, personal belongings and pre-paid burial.  An example of an unavailable resource is life insurance that has no cash surrender value.  Retirement plans in “pay status” are also unavailable. New York is considered a spend-down state.  As such, the extent of income received by the applicant or his spouse each month will not affect the applicant’s eligibility for benefits.  However, the applicant must spend his income on his medical expenses each month, leaving him with  $787.00 per month for living expenses if he resides at home, or $50.00 per month if he resides in a nursing home.  The spouse may keep her own income and can often obtain some of the applicant’s as well. Clients, seeing the need, future or present, for long term care often wish to qualify themselves for the Medicaid program, knowing that they cannot afford to pay a nursing home privately for too long.  They may choose to gift their assets to family members and/or to an irrevocable Trust in order to reduce the amount of their available, non-exempt resources and to make them Medicaid eligible.  Any such gifts, made within the look-back period (five years) will render the person (and his spouse) who has made the gifts ineligible for nursing home Medicaid for a period of months (the “penalty period”).  The penalty period is mathematically calculated by dividing the amount gifted by the regional penalty rate in effect in the County in which the person applies for Medicaid.  The larger the amount gifted, the longer the penalty period. Gifts will not render the applicant ineligible for Medicaid to pay the costs of care in the home.  Community based Medicaid is not subject to the look-back period or penalty periods. Gifts to certain exempt persons will not render an applicant for nursing home Medicaid ineligible at all.  A gift of the primary residence to certain other exempt persons will also not render an applicant for nursing home Medicaid ineligible at all.  For a more complete discussion of how gifting affects eligibility for Medicaid, contact us. To receive a free copy of A Simple Guide to Understanding the Complexities of Elder Law – a helpful booklet we distribute to our clients which contains definitions and explanations of some important terms – please contact us.