Most people assume that they will age in place at home and never need long-term care, but statistics show that that is not the case. Medicare may be available to pay for a limited period of care under limited circumstances, but if an individual does not have long-term care insurance, nursing home care can cost more than $12,000 per month in New Jersey. And that is only the average monthly cost of care; many facilities charge a higher rate. That translates to at least $144,000, which is an awful lot of money to pay out-of-pocket. That is why many seniors who can no longer remain at home turn to Medicaid, which is a joint federal and state public benefits program, to help fund their care in a nursing home or an assisted living facility.
As part of the process of transitioning from hospital care to long-term care, you will probably be asked whether you have filed a Medicaid application. This is a routine part of the long-term care admissions process. It is very important to avoid filing for Medicaid before it is needed, for at least two reasons.
You cannot give away your assets and go directly on Medicaid. Generally, any gifts made during the lookback period and not fully repaid, will be penalized. while there are a few exceptions, most uncompensated gifts made during the five year Medicaid lookback period will likely result in a Medicaid penalty period, which is the denial of payment through Medicaid for care in a nursing home or an assisted living facility for a period of time corresponding to the total of all the gifts made during the five year Medicaid lookback period. However, Medicaid generally cannot take into account gifts made before the lookback period began. So if there is going to be gifting in large amounts, it is best for the gifts to be made before the beginning of the Medicaid lookback period.
How do you know when the five year Medicaid lookback period is? Actually, the term “five year” Medicaid lookback can be misleading. Filing the first Medicaid application triggers the Medicaid lookback, which is a period of time running retroactively from the date of filing of the first Medicaid application. For example, if Eric Early files a Medicaid application on June 1, 2021, and this is his first Medicaid application, then the lookback period will be from June 1, 2016 to June 1, 2021 (five years) and potentially continuing into the future.
However, there are circumstances when the Medicaid lookback period can extend beyond five years. In Eric’s case, if he withdraws his first Medicaid application and does not file another Medicaid application until January 1, 2022, the lookback period for his second Medicaid application will still run from June 1, 2016 through to June 1, 2021, but will continue thereafter until the date of filing of the second Medicaid application on January 1, 2022. So if Eric (or his wife, if he is married) made large gifts in 2016, those gifts will be considered on his 2022 Medicaid application and will probably result in a gifting penalty which Eric could have avoided had he simply waited to file the Medicaid application.
If Eric is married, the first Medicaid application sets the “snapshot.” Medicaid looks at the assets of the husband, the wife and the assets in their joint names, totals the assets and that total is the snapshot. The amount of the snapshot limits the amount the healthy spouse can keep. You only get one Medicaid snapshot, so it is very important to get the highest snapshot possible. Here is an example showing what can happen if you don’t do proper planning before filing a Medicaid application.
For instance, if Jim was hospitalized in 2017, and the hospital social worker filed a Medicaid application for Jim thinking Jim might have to go into a nursing home, but it turns out that Jim was actually able to return to the home after all. Jim’s Medicaid snapshot is permanently set in 2017. His snapshot is set in stone and it is never going to change. Suppose in 2017, Jim and his wife own a home and a joint checking account with $100,000 in 2017, the home is exempt, but the checking account is not. Jim’s snapshot is $100,000 based on the checking account balance. Jim can keep no more than $2,000 and his wife can keep $50,000 without additional planning or legal advocacy and representation.
Suppose Jim never completed his Medicaid application in 2017 and his wife cares for him at home for another year and in 2018, re-files for Medicaid for Jim. In 2018, she also sells the house which was jointly owned with Jim, for the sum of $150,000. If the deed to the house was left in Jim’s name, in 2018, Jim will be disqualified for Medicaid due to being over the $2,000 Medicaid resource limit, because he is entitled to half the house sale proceeds. Now Jim has to spend down an additional $75,000 that could have been saved, had the 2017 Medicaid application not been filed and had Jim and his wife consulted with an elder care attorney. If you have questions about a Medicaid application, please feel free to contact me to discuss your unique situation.
Questions? Let Jane know.