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Medicaid Planning Before & After A Loved One Enters a Nursing Home

09.02.11 written by

As I grow older, I feel like I become smarter. I am not sure if that is really the case but at least thinking that makes me feel better. Experience has taught me that the unknown is usually worse than the reality. Many times this is the case when a loved one needs to enter a nursing home. Each week I receive phone calls from clients who tell me that their spouse has been diagnosed with dementia and needs to enter a nursing home, but they have heard that they will lose all of their assets. After receiving that phone call, I inform them that they will not lose all of their assets and that we need to sit down and discuss their specific situation because everyone’s facts are different. During our meeting, we discuss the Medicaid qualification rules and their planning options. We also come up with a plan which meets their goals.
The average cost for skilled nursing home care in Ohio is between $5,000 and $6000 per month depending on the care needed. Families can either privately paying for this or try to qualify for the Medicaid program. Four components must be examined and satisfied in order to qualify for Medicaid. Those components are the medical component, the income component, the resource component, and penalty period component.

In order for an individual to be eligible for Medicaid from a medical standpoint, the care must be medically necessary. Medical eligibility for nursing facility services is determined based on a comprehensive needs assessment which demonstrates that the recipient requires nursing home services. Nursing home residents are dependent on others in several activities of daily living such as walking and standing by oneself, feeding oneself, dressing oneself, bathing oneself, toileting, and continence. Each separate activity of daily living may be classified as either independent (requiring some assistance) or being totally dependent. In order to qualify under the medical portion of the Medicaid test, an individual must need hands on assistance with 2 out of 6 of the activities of daily living.

With regards to the income test, if countable monthly income is less than the monthly nursing home costs, the nursing home patient would meet the income test. 
For the asset portion of the test, as a general rule, Medicaid will not begin to pay nursing home bills until the assets of the nursing home resident are below $1,500. However, certain assets are excluded for purposes of determining Medicaid eligibility. The exempt assets for a single individual include irrevocable prepaid burial contracts, one automobile, and household and personal effects. For married individuals, these exempt assets also include an individual’s home if the nursing home resident’s spouse (“community spouse”) is residing in that home. In addition, for married individuals, a nursing home resident’s spouse may keep one-half of all non-exempt assets up to a maximum of $109,560 and a minimum of at least $21,912. This amount is determined by adding the value of all non-exempt assets on the first day one spouse is institutionalized for a period of 30 consecutive days. It does not matter which spouse owns the asset. All assets are included in this calculation. Then the sum is divided by 2 and generally speaking the community spouse can keep one-half up to $109,560. The rest must be spent down before Medicaid will pay.

In addition, there is a 60-month lookback period for all transfers. This means that on the date of application for Medicaid benefits, if there have been any transfers made to an individual(other than the community spouse) or to a trust within the previous 60 months, a penalty period will be imposed even if the applicant would otherwise qualify for Medicaid benefits. This penalty period begins when the person enters a nursing home, a Medicaid application has been filed, and the person would otherwise be eligible for Medicaid benefits. For example, if an individual had given away $60,000 of assets within the last 5 years, there would be a penalty period of 10 months from the time the individual entered the nursing home and was otherwise qualified for Medicaid benefits.

The Medicaid qualification process can be very confusing. I have seen numerous situations where married couples have liquidated all of their assets and spent their entire life savings, including the proceeds from the sale of their residence, because they were not aware that certain assets are exempt or that a community spouse can generally keep one-half of the non-exempt assets.

Contact a qualified elder law attorney to discuss your options both before this situation occurs to do some pre-planning and especially when it appears that a loved one may need to be placed into a nursing home. This individual will be able to explain the various rules and regulations regarding Medicaid qualification and develop an asset protection plan which may potentially save a significant portion of the family’s assets and still obtain Medicaid qualification for the nursing home resident.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 N. Broadway
New Philadelphia, Ohio 44663
Phone: 330-364-3472
Fax: 330-602-3187