Caring for an elderly loved one is one of the hardest jobs in the world. Beyond the physical care that must be performed, you also have to practically become an expert in medical care and equipment, pharmaceuticals, and the like. How to pay for medical care is also an issue that should be on your radar. The purpose of this Medicaid Planning Guide is to provide you with an easy to understand guide to Medicaid and how it relates to you the Caregiver and the person you are caring for, who I refer to as the Caregivee.
What is Medicaid?
Medicaid is a health insurance program funded with state and federal money, administered by the Ohio Department of Job and Family Services. For those who qualify, Medicaid covers the cost of long-term care.
Why is Medicaid so Important?
Long-term care is very expensive. According to the 2010 Market Survey of Long-Term Care Costs conducted by Metlife, the annual cost of a semi-private room in a Cleveland area nursing home was $75,190 and a private room was $87,600.
Moreover, counter to popular belief, Medicare will not cover prolonged nursing home care. Medicare Part A provides limited coverage for skilled nursing care if certain requirements are met. However, even if your level of care meets Medicare’s eligibility requirements, Medicare Part A only covers the cost of a skilled nursing facility for up to 20 days, with the possibility of an additional 80 days on a co-payment basis.
Again, according to Metlife, which based their statistics on the Centers for Disease Control and Prevention, the average nursing home stay is 2.4 years. Moreover, most nursing home stays are not covered by Medicare at all, as most nursing home residents do not require skilled nursing care, which is a prerequisite to Medicare Part A coverage.
Since Medicare will not cover the costs of long-term care, and 70% of people over 65 will need long term care during their lifetimes, that begs the question, how will the average person pay for long-term care costs? The answer is Medicaid.
So I Understand that Medicaid Pays for Long-Term Care Costs, But How Do You Qualify?
There are a number of eligibility requirements for Medicaid.
- You must be age 65 or older, blind or disabled.
- You must have a nursing home level of care.
- You must meet the income and countable resource limits.
The biggest eligibility issue for most people is number three, income and countable resource limits.
What are the Income and Countable Resource Limits?
Generally speaking, if your monthly income is below the private pay rate, currently set at $6,023, you will meet the income qualifications for nursing home Medicaid.
Countable resources must currently be below $1,500.
What are Countable Resources?
Countable resources are anything of value that can be converted to cash and used for support like cash, bank accounts, stocks, bonds, retirement accounts, etc. However, there are certain resources that are exempt. For example, the home a person lives in is exempt as are household goods and personal effects, an automobile, life insurance if its face value is below $1,500, a burial space for yourself, a spouse or immediate family member, and an irrevocable pre-need burial contract.
So How Can You Qualify for Medicaid If Your Countable Resources are Above the Limit?
Well, for starters, you cannot simply give the assets away. When you apply for Medicaid, the Department of Job and Family Services will ask you whether you made any gifts within the last 5 years. A gift is anything given away for less than fair market value. (Keep in mind that lying on a Medicaid application is fraud and a misdemeanor of the first degree and a felony if you receive services as a result.) If you have made any gifts for the purpose of Medicaid eligibility you will be penalized. For example, if you gave away $100,000 in assets, Medicaid would not pay for your care after you are in a nursing home and otherwise financially eligible for 16.6 months. This penalty period is determined by dividing the amount of the gift by the current private pay rate of $6,023.
In Medicaid Planning, the first question that must be asked is what are your goals. Is it to preserve assets for your children, a loyal caregiver or other loved one? Medicaid planning is not just about ensuring your financial legacy, it is also about your quality of life goals. Do you want to make sure you have spending money each month? If you deplete your assets on care without planning, you will only have $40 a month to spend on additional personal needs like hair cuts, entertainment, etc. Do you want to stay in your home as long as possible? Do you want a single room in a care facility? These are also goals that must be properly planned for.
Once you have set your goals, the next question is where you are on timing. When it comes to planning, timing is everything. As stated, Medicaid has a 5 year look back period. Do you anticipate needing long-term care within the next 5 years? Remember, when it comes to Medicaid planning, one size does not fit all. Whereas a trust might be the way to go for one person, a gifting plan maybe better for others and whereas one strategy may greatly help one person, the same strategy can hurt another. A plan must be constructed that is tailored to your particular situation.
What are Some Medicaid Planning Strategies that are Unique to Caregivees?
Personal Care Agreement:
A compact between caregiver and caregivee that says that the caregiver agrees to provide certain care to the caregivee in exchange for specified compensation. The agreement would set forth the specific responsibilities of the caregiver, including anticipated days and hours of service and the compensation to be paid for that care.
Advantages of a Formal Agreement:
Provide compensation to a trusted loved one who may have had to quit a job, forgo job opportunities, or otherwise spent considerable energy and time providing care. Minimize problems among relatives as to who bears what responsibilities in regard to the relative and how such care is to be compensated. Ensure Medicaid eligibility should a nursing home or other at home caregiver become necessary. I.e. Spend down now by compensating the caregiver rather than later by paying the nursing home or other at-home caregiver. Unless there is a proper agreement in place, the State of Ohio will assume that the money paid is a gift or an improper transfer of assets and will impose penalties resulting in ineligibility for Medicaid benefits.
Why Plan for Medicaid if I’m Providing care?
If there comes a time when you are unable to provide care or nursing home placement is necessary, all of the assets of the caregivee will be considered available. Moreover, as discussed, the caregivee will not be eligible for Medicaid until all assets are depleted. Certainly the care you have been and will be providing is just as valuable and worthy of payment as care provided by a future home caretaker or nursing home. With a personal care agreement in place, the caregivee can pay you now with the assets he or she has and have Medicaid pay for future care.
Are There Any Other Medicaid Planning Strategies that Are Unique to Caregivers?
Yes, if a caregivee goes on Medicaid and a child caregiver resided in the caregivee’s home for at least 2 years immediately before the date the caregivee enters a long-term care facility and the caregiver provided care which permitted the caregivee to reside at home rather than in a long-term care facility, the home may be transferred to that child without penalty. However, form JFS 03697 “Level of Care Assessment” must be completed and approval obtained before making the transfer.
Will the Caregivee be able to Engage in Medicaid Planning Should He Become Incapacitated?
ONLY if he has the proper Durable Power of Attorney in place!In order to ensure that he will be able to engage in Medicaid planning, it is essential that he execute a Durable Power of Attorney with provisions specifically giving his attorney-in-fact Medicaid planning powers. An elder law attorney who is familiar with Medicaid planning strategies is the best person to ensure that the necessary provisions are included. If he does not have the proper Power of Attorney in place and he becomes incompetent, there is little hope that the assets in his name can be saved from long-term care costs.
What is the Medicaid Application Process?
You must file an application with the Department of Job and Family Services in the county where you reside, or if you are in a nursing home, the county where your nursing home is located.
A great deal of documentation will be needed. It is a good idea to start collecting the necessary documentation as soon as you are even thinking about applying, as a failure to provide it to the agency in a timely manner could result in your application being delayed or denied.
The following list is a good place to start:
- Social Security Card
- Proof of Identity (ie. driver’s license, state identification card, etc.)
- Proof of Age (i.e. driver’s license, birth certificate, marriage certificate, etc.)
- Proof of Residence (ie. deed, rent receipt, etc.)
- Last receipts for utilities, home insurance and property taxes (gas, electric, etc.)
- Proof of Citizenship (not required if you are receiving SSI or Medicare)
- Proof of Income (social security benefit letter, pension statements, etc.)
- Proof of Assets (bank statements, copies of stock certificates and bonds, etc.)
- Information on any Insurance Policies
- Medicare Card
- Medicare Supplement Card
- Trust Agreements
- Tax Returns (ideally from the last five years)