The Mysteries of Medicaid: One Myth Exposed

   If you have older family members or are a member of the aging population yourself, you are probably aware of a very poorly kept secret: people in America are living longer than ever before.  This is creating new areas of concern for the aging and the people who love them.  Accordingly, estate planning and elder law attorneys have changed our practices to accommodate the new reality that many people are now living through medical events, such as heart attacks, that several decades ago would almost certainly result in a death.  In times past, we used to get phone calls from Mrs. Smith letting us know that her husband had passed away from a stroke. In 2012, however, it is much more common for Mrs. Smith to call us in a panic because Mr. Smith has survived a stroke, and the hospital has informed her that Mr. Smith will be discharged in a few days but that he cannot return home and will now need skilled nursing care.

   The above scenario leads people to contemplate what is, to many, a very scary concept that seems shrouded in mystery: Medicaid.  This program, due to misunderstanding, conjures fear and negative reactions in many people.  Contrary to common belief, qualifying for Medicaid does not mean you or your loved one will receive substandard care or have a lesser quality of life.  In the context of the aging population, Medicaid is a program that, in general terms, can provide funds to pay the costs associated with a stay in a skilled nursing care facility for people aged 65 and older who meet certain requirements.  Because the population is aging quickly and many more people are finding themselves or their loved ones in need of skilled nursing care, myths and misunderstandings about applying for and receiving Medicaid are running rampant through our society.  Fueling these myths is the fear of needing government assistance and not being able to get it.  As elder law attorneys, it is our duty to clear up those myths, dispel our clients’ fears, and assist them in achieving Medicaid eligibility and peace of mind. 

   One “Medicaid Myth” that is frequently encountered among the aging population is that one must give away all of one’s assets in case one needs to qualify for Medicaid in the future.  Due to this myth, many people give their assets to a family member, which is outright “gifting” and is not the best policy.  In fact, trying to “spend down” assets by giving large gifts to your family members can not only result in a delay in receiving Medicaid, it can also trigger complicated tax issues for the recipients.  While it is true that Medicaid restricts how many and what type of assets a nursing home resident or spouse may retain in her or his own name in order to qualify for coverage, there are many planning options to help people protect and keep assets while still qualifying for Medicaid.  Thus, there are important facts to know before making large gifts in anticipation of needing government assistance.

   First, while it is true that Medicaid coverage is only approved once an individual or married couple meet certain asset requirements, there are many exemptions that allow a person or her spouse (often referred to as the “community spouse”) to keep certain things.  In particular, a community spouse is allowed to keep the family home (although make sure to speak with your elder law attorney about the estate recovery law that took effect in Michigan last year).  Other exemptions include a vehicle, a pre-paid funeral policy, and sufficient income for the community spouse to live on.  Your attorney can help you figure out if other exemptions apply to your situation as well.

   Second, and even more important, your experienced elder law attorney has many tools available at her or his disposal to help you reposition your assets for Medicaid purposes, while still preserving an estate for your heirs to inherit.  Among these tools are a variety of trust options that allow you, while you and your spouse are still in good health, to dictate how your money is owned and who may access it.

   Among elder law attorneys, there is often a distinction made between “crisis planning” and “pre-crisis planning.”  Crisis planning is exactly what it sounds like.  Mrs. Smith knows that she will require help paying for Mr. Smith’s care, as soon as possible and urgently.  We can help Mrs. Smith, but she will have fewer and more limited planning options than those who pre-planned.  Most people aren’t aware that it is possible, and advisable, to meet with your elder law attorney before you ever encounter a potential crisis, to make sure that your assets are protected regardless of what the future brings.  This can be done as part of an existing estate plan or as part of a new estate plan.  A pre-crisis planning visit to an experienced Medicaid and elder law attorney can provide you with the peace of mind you need to enjoy your golden years knowing that you will be cared for if and when you need help.

   If you wish to discuss your family's long term care planning needs, contact us at www.elderlawannarbor.com.