Qualifying for long term care under the Mass Health Medicaid program requires a certain commitment to detail, and also some understanding of pitfalls in the process. At our office, we frequently counsel clients hoping to minimize the extent to which Medicaid will reduce the family’s assets. What follows are some mistakes and myths to avoid when planning for Medicaid.
Gifting Assets without Considering Medicaid Rules
Many times, when creating an estate plan, older or elderly parents will mistakenly believe that the annual gift exclusion under IRS rules ($13,000) will not affect Medicaid liability. Nothing, however, could be further from the truth. Any gifts made in the 5 years leading up to a Medicaid application will be considered a “disqualifying transfer.” Assume, for example, that Sarah wanted to transfer a $13,000 interest in her home to her son each year. If she did this for the five years leading up to her Medicaid application, this would result in a $65,000 penalty starting from the date she was “otherwise eligible” for Medicaid. Read our article on the subject for a more thorough description of the 5 year Medicaid lookback rule.
Omitting Assets from the Medicaid Application
When an applicant omits an asset, intentionally or by accident, the result is a crime. And although prosecution is unlikely, the applicant may very well lose eligibility for Medicaid or at the very least be subject to a penalty. Naturally then, the applicant (or his family, if applying on his behalf) must not only be completely forthcoming on the application, but extra careful to account for all assets in the applicant’s name. The consequences of losing Medicaid benefits are simply too great.
Not Understanding the Differences Between Medicare, Medicaid and Health Care Insurance
Many of us are quite unfamiliar with the healthcare system, often because we really haven’t needed to use it much. But there are many important distinctions. Firstly, with respect to long term care, neither Medicare nor traditional health insurance will cover these costs. Only Medicaid or some form of long term care health insurance will achieve this purpose. Second, MassHealth doesn’t strictly cover nursing home care; there are also programs available for care at home, assisted living & skilled nursing facilities.
Believing Medicaid is Only for the Poor
While Medicaid is a welfare program (as opposed to one paid for with payroll taxes like Medicare), the program has expanded since its inception in 1965. Now, because there are no government programs to assist the dependent seniors in our generation outside of long term insurance, and long term care in Massachusetts exceeds $100,000 per year, Medicaid covers the costs for these individuals.
Waiting Too Long to Plan for Medicaid
This may seem obvious to many, but it warrants mention over and over because this is by far the most crucial mistake for those hoping to protect their assets from Medicaid. Like all aspects of financial planning, early action ensures not only that assets are protected from Medicaid, but also that the applicant has a good understanding of the application process if and when she enters a long term care facility. Years ago it was possible to transfer assets relatively free from regulation or penalty, but people who mistakenly attempt those strategies today often find themselves disqualified from benefits. Speaking with a Massachusetts Medicaid attorney having experience in Mass Health is highly recommended.
Go on to Part 2 of Tips from a Massachusetts Medicaid Attorney.
