A Guide for Elders: Planning That Protects You and Your Assets, Chapter 6 WHAT SHOULD I DO BEFORE ENTERING A NURSING HOME? How Will My Nursing Home Care Be Paid For? In Chapter 6, the different sources of payment for nursing home care are discussed — private long-term care insurance, Medicare, Medicaid, or your own income and savings. If you can predict that you will be paying privately for the care, then you will have to decide whether or not to take steps now with respect to your assets or property which would be depleted by the expenses of long-term care. If you think that you ought to be doing something, you should consult with expert counsel on what to do and how to proceed. There are risks in many of the actions you may take, and it is foolhardy to plan without expert advice. In order to determine how you might become eligible for Medicaid earlier rather than later in your nursing home stay, you have to understand the basics of the Medicaid program. It should be stressed that this chapter contains the basic rules as they now stand, but they are subject to change at any time. Do not make plans on the basis of this material, but seek competent counsel. This chapter will give you an overview of matters to discuss with your counselor. WHAT ARE THE BASIC RULES OF LONG-TERM CARE MEDICAID? In order to become eligible for long-term care Medicaid assistance, your countable assets must be worth less than $2,000. Your monthly income must be less than the amount that Medicaid would pay the nursing home monthly for your care. And, you must show that you did not transfer (give away) assets that would disqualify you from eligibility. Here are the basic rules: 1. Your home is not a countable asset. If you formally declare that you no longer consider it to be your home, you will be required to sell it. When you do, you lose Medicaid eligibility until you have spent down the proceeds from the sale.  2. Your bank accounts, Certificates of Deposit, U.S. savings bonds, shares of stock, mutual funds, and any other liquid assets are countable and may not exceed $2,000 in value. 3. If you have a spouse at home, you will not have to spend your assets down to $2,000. Instead, Medicaid will do an assessment of spousal assets. Essentially, they will determine which of the marital assets, regardless of in whose name the assets are held, are assigned to each spouse. Assets assigned to the nursing home spouse must be used for her or his nursing home costs. As of January 1998, the at-home spouse is allowed to keep the first $80,760. Any assets over that amount are assigned to the nursing home spouse. The amount assignable to the at-home spouse will change annually, based on increases in the federal poverty levels. 4. A Medicaid rule that may be of great advantage to the at-home spouse allows, under certain circumstances, the at-home spouse to keep more than the $80,760 asset allowance. As the at-home spouse, you are allowed a Minimum Monthly Maintenance Needs Allowance (MMMNA) equal to 150% of the federal poverty level for two persons. As of June 1998, that figure was $1,327. If the at-home spouse’s pension and or Social Security income adds up to less than her or his MMMNA, then the at-home spouse is able to keep additional assets to generate additional income up to the MMMNA. This rule is of great value to a nonwage-earner spouse. In order to obtain this increased spousal resource allowance, you must request an appeal hearing, since only the Medicaid hearing officers have authority to grant an at-home spouse the right to keep more than the basic asset allowance.  5. In addition, the spousal income allowance will be greater than the basic allowance of $1,327 (see 4 above) if it can be shown that the at-home spouse’s shelter costs exceed 30% of that figure. You should add up the costs of rent, or real estate taxes, homeowner’s insurance, mortgage payments, if any, and a standard utility allowance (in 1998, $330 for a person who pays for heat and utilities). If the total of those shelter costs exceeds 30% of the basic allowance of $1,327, or $398, then the excess is added on to the basic allowance. The higher the income allowance, the more assets the at-home spouse will be allowed to keep.  6. Besides disclosing your assets and income to Medicaid, you also must disclose any transfer (give away) of any property in the 36-month period prior to the date of application. If you did make such a transfer, you may be subject to a penalty consisting of a period of ineligibility for long-term care Medicaid. The period of ineligibility is determined by dividing (a) the value of what was transferred by (b) the cost of one month of private-pay nursing home care, currently (effective December, 1993) set at $4,500 by Medicaid to determine the number of months of ineligibility, starting with the month of the transfer. So, for example, if you gave away $18,000 in February 1998, you were disqualified for four months, or until June 1998. If you give away $180,000, you are disqualified for 40 months. Current regulations provide for a maximum disqualification of 30 months, but this rule is likely to change.  7. Transfer of your assets into trusts has become very complicated, and requires too much explanation to be discussed here. Be sure to get expert advice.  8. There are certain persons to whom you can transfer your home without impacting your eligibility for long-term care Medicaid assistance: your spouse; a blind, disabled, or financially dependent minor child; a brother or sister who already has an interest in the home; or a caretaker child, that is, a child who has been living in the home and taking care of you for at least two years before you enter a nursing home.  9. Medicaid may put a lien on your home, if no spouse or disabled or dependent child resides there. After your death, Medicaid will recover, from any assets in your probate estate, any contributions made for your care while you were a Medicaid-eligible person.  10. As of early 1997, federal law provides for criminal sanctions if a person transfers property and subsequently enters a nursing home and is subject by Medicaid to a period of ineligibility. Common wisdom is that the law will be repealed, but consult with an expert before making any large gifts.  11. It may also be possible to convert the nursing home spouse’s assets into “annuities,” which will create an income stream for the at-home spouse. A discussion of annuities is beyond the scope of this Guide, and requires advice from an expert regarding your specific situation.  SHOULD I MAKE PLANS ANTICIPATING NURSING HOME PLACEMENT? Everybody’s situation is different. If you believe that the time has come to make such plans, seek out a qualified expert, and discuss your individual situation first. Acting alone can have financially disastrous consequences. Get competent counsel, an attorney with expertise in long-term-care estate planning. HOW CAN I GET MORE INFORMATION?  For more information, contact the organizations at the end of Chapter 2 that give referrals.  Back to start of Chapter 6 Back to Table of Contents of A Guide for Elders On to Chapter 7