Though the aging population continues to get larger, there is more need for long-term care. However, since most elderly Americans do not have long-term care insurance or have the assets to be self-insured, many people are dependent upon Medicaid, as Medicare’s coverage is much more limited when it comes to longer-term costs.
The government helps to pay for the cost of your care, but you must follow rules and guidelines to be eligible. Here are 10 common mistakes that people make when applying for Medicaid:
- Failing to plan. Life is an unknown. Though we don’t know what tomorrow may bring, pre-planning for long-term care while young and healthy can make a big difference. Long-term care insurance and pre-planning tools and annuities can help to set you up for later in life.
- Giving away your assets without consideration of impact. Gifts can have tough tax ramifications and create Medicaid ineligibility for a long period of time. Medicaid classifies gifts as uncompensated transfers. However, by planning you can make decisions to protect your eligibility.
- Ignoring exempted transfers. The good news is that not all gifts can result in ineligibility for Medicaid. Transfers to disabled children, caretaker children, certain siblings, and money in any trusts that are for anyone who is under the age of 65 and disabled are exempt by Congress.
- Thinking it’s too late to plan. While it’s best to pre-plan 5 years prior to when you believe that you will need nursing home Medicaid, it is never too late to plan. Even after going into a nursing home there are opportunities to protect life-savings and become qualified as soon as possible.
- Not utilizing spend-down rules. Some examples include pre-paid funeral plans, purchasing a new car, making repairs and upgrades to the family home and paying off debt.
- Applying too early. If you wish for your life savings to be used for long-term care then you would want to apply right away and spend down savings on nursing home costs. You would be eligible when your assets are depleted.
- Applying too late. It is also important to not wait too long to apply. If one spouse is still living at home it is important to properly plan so that that spouse can be eligible for Medicaid benefits prior to assets being depleted.
- Not understanding rules on estate recovery. Upon the death of a Medicaid recipient, there is expanded estate recovery. Essentially, any Medicaid payments that are made on behalf of a nursing home resident will become a claim.
- Failing to take advantage of protections for spouses of nursing home residents. Congress has passed specific rules for spouses of nursing home residents to ensure that they don’t become impoverished because of Medicaid asset and income restrictions.
- Failing to obtain expert help. Medicaid can be extremely confusing and since most people don’t have much experience with it, you should consult with a knowledgeable and experienced Elder Law attorney to ensure that you are doing what is in your own best interest.
Written by Kimberly Hegwood, May 29, 2019