Each month, Sean Cox has been teaming up with Crossroads Eldercare to deliver timely information to help Navigate the Senior Housing Maze. At the seminar, Sean Cox is often asked about various aspects of Medicaid eligibility. Many people wrongly assume that you cannot qualify for medicaid to pay for a nursing home if you have assets. This is not true, but there are complex regulations, including a “look back” period and restrictions against asset transfers. We thought we’d touch on eligibility criteria in this article, but for a comprehensive discussion, please join us at our next seminar August 28th, 6 p.m. or Contact our office for a free initial consultation by calling (616) 942-6404.
“Navigating the Senior Care Maze” will be held Thursday, August 28 at 6 p.m. at Sean Cox Law office (3351 Claystone SE, suite 101). Enjoy complimentary hors d’oeuvres and beverages. Please RSVP (616)485-3365.
In a recent article at ElderLawAnswers.com, Medicaid’s asset transfer rules were discussed. A person applying for Medicaid must disclose all financial transactions he or she was involved in during a set period of time — frequently called the “look-back period.” Medicaid then determines whether the applicant transferred any assets for less than fair market value during this period. In Michigan, there is a “look-back” period where Medicaid can review transfers made within the last five years. However, few people realize there are significant exceptions, whereby the transfers will NOT trigger a period of Medicaid ineligibility.
These exempt recipients include the following:
- A spouse (or a transfer to anyone else as long as it is for the spouse’s benefit)
- A blind or disabled child
- A trust for the benefit of a blind or disabled child
- A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).
In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty:
- The applicant’s spouse
- A child who is under age 21 or who is blind or disabled
- Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
- A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
- A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.
- Congress has created a very important escape hatch from the transfer penalty: the penalty will be “cured” if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned. However, some states are not permitting partial returns. Check with our office for a determination if this applies to you.
Eligibility Rules & Transfer Penalties on Non-Exempt Transfers
If you have transferred assets within the lookback period for less than market value and then move into a nursing home, you will be “penalized” via a period of Medicaid ineligibility. This is to prevent people from in essence divesting themselves of assets as soon as they know they need nursing home care. But just because there’s a penalty period does not mean the person will be ineligible for Medicaid forever. However, the changes in policy have meant that it’s best to plan well in advance for prospective scenarios in your twilight years.
The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average cost of a nursing home in Michigan.
Example: For example, if you give away property worth $100,000, you will be ineligible for benefits for 12.7 months using the Medicaid formula called the “average long-term care cost” which would be $7,867.00
($100,000 / $7867 = 12.71).
Another way to look at the above example is that for every $7,867 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.
Recent changes have also been made to when penalty period created by the transfer begins. Under the prior law, in the example described above the 12+-month penalty period created by a transfer of $100,000 would begin either on the first day of the month during which the transfer occurred, or on the first day of the following month, depending on the state. Under the new rules, the period will not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer.
In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts.