While the importance of financially planning for retirement and old age are at the forefront of people’s minds, many are under the false impression that Medicare will serve to cover long-term care costs and therefore may not budget their money accordingly. However, in reality, Medicare does not pay for an extended nursing home or assisted living facility stay. Medicare only covers short-term stays, and if a longer stay is required the patient must pay privately… unless they are eligible for Medicaid. However, recent changes have made qualifying for Medicaid much more difficult.
To qualify for Medicaid in Indiana, an applicant cannot have assets roughly exceeding $1,500 dollars, excluding some assets such as your home, car, and some valuables. Therefore, many try to “spend down” their assets in order to qualify for Medicaid. However, under the new law there is a five year look-back period that penalizes Medicaid applicants that gave away assets within five years prior of applying for Medicaid in an effort to qualify. For example, an applicant who made gifts will be ineligible to participate in Medicaid for the number of months that the value of the gift could have paid for the nursing home care. Therefore, under the new law, all gifts made within five years must be reported to the Medicaid office before the application process begins. However, there are exceptions to these rules. The Medicaid office will ignore $1,200 worth of gifts a year as long as the gifts were made to a non-profit organization or a family member.
In addition, Medicaid applicants may also be penalized for loans made unless the loans meet very specific requirements. For example, the payback period of the loan must be shorter than the average life expectancy of the person making the loan. Also, the payments of the loan must be equal (i.e. no balloon payment allowed at the end of the loan), and the loan cannot be cancelled in the event of the lender’s death.
Furthermore, purchasing an annuity or changing an existing annuity may trigger a Medicaid transfer penalty. A transfer penalty will be triggered unless the State of Indiana is named as a first or second beneficiary.
However, a Medicaid beneficiary will not be penalized if portions of the transferred assets are returned to them.
If you are interested in finding out more about Medicaid and how it may fit into your long term care plan, or are contemplating an estate plan, an experienced attorney at Gordon A. Etzler and Associates is ready to help!
