By: Aaron Paker
Welcome to the first installment of Crisis Corner. Since this is the first article in this series, I should introduce what Crisis Corner is. This is a monthly article to help aging Americans understand the options that they have when things go wrong. I specialize in helping folks who are dealing with a sudden illness or diagnosis that turns their world upside down and they have not made all of the arrangements necessary to flow with the change. This month, I will take on the five most common myths that prevent people from seeking Medicaid help.
The Big 5.
I often get calls from adult children seeking help for their parents. The children want the parents to get Medicaid to help pay for increasing care costs, but the parents will not listen to them. I sit down with one or both parents to talk and I almost always hear between 1 and 5 of these myths:
1) I make too much money
2) I have to be broke
3) I have to spend the money on care first
4) I’ll lose my house when my spouse dies
5) I’ll have to move to a nursing home
This is the absolute, no contest, most common objection I hear. In over 5 years and hundreds of Medicaid plans, I have run into three (3) people whose income was too high for Medicaid to approve them, though there have been a handful of single applicants whose income was high enough that remaining on benefits, once approved, would be impractical at best. Generally speaking, the “ill spouse” can have an income of $7-10,000 per month and still be approved for Medicaid benefits and the “well spouse” can have unlimited income. A high income for the ill spouse just means that they will pay for more of their care before Medicaid kicks in to pay the rest. Sometimes this even means that they pay everything and Medicaid pays nothing, but they pay the Medicaid rate and not the private rate, which could be a savings of $2-3,000 per month or more.
Where this really becomes an issue is when a single person has a high income. One situation that I have seen a few times involves a single person with an income of about $5,000 per month. They are living in a care facility that charges $7-9,000 per month and so they are losing $24-48,000 per year from savings that may not have been very robust to begin with. They use various methods to bring their savings to less than $2,000 so that they can apply for benefits and they are approved. So far, so good. Then the Medicaid rate for their care is set at $4,000 per month. They pay the care providers $4,000 and add $1,000 to their savings, putting them over $2,000 and costing them their benefits. This means that they have to find other things to spend $1,000 per month on, without gifting. This can be done with companion services, messages, field trips, etc. but it is very difficult to continuously find appropriate expenses every month.
This one takes less words to explain away. A single applicant can have one house with up to $595,000 in equity, a car of any value, and $2,000 in other resources. If they want to protect the house from being liened, then they are essentially limited to a car and $2,000. A married couple can have a house of any value, a car of any value, either $60,075 or up to $130,640 (in a nursing home scenario) in other countable resources, AND the well spouse can have unlimited income. This means that, in most situations, a couple with one ill spouse and one healthy spouse can come to me with a great house, a nice car, and $1,000,000 or more and I can protect most or all of those resources and get them help. There are times that it makes more sense to avoid Medicaid when you have that many resources, but that comes down to a case-by-case analysis of the situation. I will clarify, because I am often asked “why would someone with that much need Medicaid?” Here is a brief scenario where it might make sense: Couple has been very frugal with relatively large incomes while younger and made strong investments; retirement income is a combined $4,000 per month plus any interest being made from the investments; husband becomes very ill and has to move to a nursing home or have 24 hour care at home that is costing $12,000 per month. This means that the $1M in savings is dropping by more than $96,000 per year ($96,000 is just his care costs and ignores all of her expenses), and they will be out of money in less than 10 years if he lives that long.
Here is my shortest answer of the day. NO! There are many ways to protect resources for a married couple and a few for single people. Talk to an expert and we can help.
It is true that, if your spouse is on Medicaid AND their name is on the Title of your house WHEN THEY DIE, then the State will place a lien on the house for the amount paid in benefits. There are a few important things to note here; in most cases we can take the ill spouse off of the Title before the application or before they die. In rare cases, usually where there is not a valid Power of Attorney and a Guardianship would be too costly or time consuming, we cannot get the ill spouse off of the Title. In those cases the lien is placed. The lien cannot be enforced during the surviving spouse’s life time, so they never have to pay the lien. Oddly enough, if the surviving spouse sells or give away the property before their death, the State’s lien just goes away and is not paid by anyone. The only time the lien can be enforced is if it was a single person who died with their name on the Title or a situation where the ill spouse was on the Title at his/her death and the surviving spouse never took steps to cancel the lien before passing. This can be as simple as giving the house to a child or selling it to move to a smaller house.
Medicaid benefits are available in most nursing homes, many adult family homes or assisted living facilities, and in your own home. There are times that one setting or another makes the planning easier, or provides more appropriate care, but there is no truth to the myth that Medicaid will only pay for a nursing home.
Take Away. There are many myths floating around that make Medicaid planning seem like a pipe dream. If you or a loved one is facing current or expected costs of care that threatens to destroy a lifetime of savings, call and talk to an expert. You may just learn that you have a relatively easy road to travel and a willing guide to make it even easier.