Proactive Medicaid planning is essential if you foresee a need for long-term care, anticipate future healthcare costs that could exceed your ability to pay for them, or have assets that could be subject to Medicaid estate recovery.
To qualify for Medicaid and protect your assets and estate, you should implement planning strategies as early as possible with help from a local elder law attorney who is familiar with program rules where you live.
Medicaid is the primary payer for long-term care—what the Centers for Medicare and Medicaid Services (CMS) calls “long-term support and services” (LTSS)—covering roughly half of all LTSS spending in the United States.
LTSS encompasses medical and personal care services associated with activities of daily living (ADL), such as eating, bathing, dressing, preparing meals, and managing medication. These services are provided to people who need them because of age, illness, or disability. They are delivered in home, community, and institutional settings (e.g., a nursing home). Most Medicaid LTSS spending is for people aged 65 years and older.
Care lasting longer than three months is considered long-term care. The average duration of long-term care is 3.2 years.[1] Annual costs range from around $60,000 for full-time homemaker services to more than $116,000 for a private nursing home room to nearly $300,000 for round-the-clock home health aide services.[2] These costs far exceed the median income of seniors. They would quickly exhaust their savings, mainly because private health insurance does not cover LTSS costs, and Medicare does not cover most LTSS expenses.
The Department of Health and Human Services estimates that the typical American turning 65 today has an almost 70 percent chance of needing long-term care in their remaining years,[3] with future LTSS costs surpassing $120,000 on average.[4]
Many different Medicaid programs have unique eligibility requirements, even within the same state. Long-term-care Medicaid is available to individuals who need higher care levels and can also meet strict financial requirements. In most states, individuals must have no more than $2,000 in assets to qualify for long-term-care Medicaid. The asset limit is higher for married couples, though the rules add another layer of complexity. States have rules about which assets are included, or “countable,” when determining Medicaid financial eligibility.
Because many seniors cannot afford long-term care costs but have assets exceeding their state’s means-testing, they undertake a Medicaid spend-down. This process can allow seniors who do not currently meet Medicaid’s financial requirements to “spend down” their excess assets until they meet their state’s Medicaid resource limits. Spend-down strategies vary from state to state and should be discussed with an experienced elder law attorney before implementation.
Prospective applicants must also be aware of the federal prohibition on gifting. Federal law prohibits a prospective Medicaid applicant from transferring or selling any asset for less than fair market value five years before applying for Medicaid. This five-year timeframe is often referred to as the “look-back period.” Any gifting in the previous five years will result in the application being denied.
Medicaid is a cost-sharing program, meaning that all long-term-care Medicaid recipients must pay nearly all their income with just a few deductions to the nursing home as part of their share of the cost. In a spousal case, the well-spouse can keep their own income. The recipient must pay their share of the cost monthly to remain eligible for Medicaid.
Even though someone might go to great lengths to spend down assets to qualify for Medicaid, under an estate recovery program, the state can still recoup benefits paid on behalf of an enrollee after their death. States must attempt to recover Medicaid costs for individuals who received long-term care after age 55. Some states also attempt recovery for other Medicaid-covered services.
Many assets a person owns could be subject to Medicaid estate recovery. This includes their home, savings or retirement account, and even assets held in some types of trusts. As with other Medicaid rules, estate recovery rules are state-specific.
With the high costs of long-term care, the stress and complexity of a Medicaid spend-down in a crisis, and the reality of estate recovery hanging over the process, proactively planning to preserve assets from the cost of long-term care is the best strategy.
Medicaid planning can be integrated into an estate plan using trusts and other strategies. The Medicaid Asset Protection Trust is one specialized trust designed to protect assets, such as the home, from long-term care costs. The look-back period means proactive Medicaid planning cannot be done on demand. The best time to plan is right now, with the understanding that after assets have been planned for and the five-year look-back period has expired, those assets are no longer subject to an initial assessment if you seek Medicaid, nor are they attachable for estate recovery purposes.
If you have potential long-term health issues or family health struggles, proactive planning could be for you. In addition, you should consider proactively planning for Medicaid if you have recently experienced a significant financial milestone or event, such as paying off your home or receiving an inheritance. If they are not protected, these assets could be used to pay for long-term care or otherwise paid to the state instead of passing to your loved ones.
Failure to plan for Medicaid could jeopardize your ability to pay for care and your home, savings, and legacy goals. Book a FREE Discovery Call to discuss proactively planning for long-term care.
[1] Claire Samuels, Long-Term Care Statistics: A Portrait of Americans in Assisted Living, Nursing Homes, and Skilled Nursing Facilities, A Place for Mom (Sept. 13, 2023), https://www.aplaceformom.com/senior-living-data/articles/long-term-care-statistics.
[2] Priya Chidambaram & Alice Burns, 10 Things About Long-Term Services and Supports (LTSS), KFF (July 8, 2024), https://www.kff.org/medicaid/issue-brief/10-things-about-long-term-services-and-supports-ltss/.
[3] How Much Care Will You Need?, LongTermCare.gov. (Feb. 18, 2020), https://acl.gov/ltc/basic-needs/how-much-care-will-you-need.
[4] HHS Office of the Assistant Secretary for Planning and Evaluation Office of Behavioral Health, Disability, and Aging Policy, ASPE Research Brief, Long-Term Services and Supports for Older Americans: Risks and Financing, 2022 (Aug. 2022), https://aspe.hhs.gov/sites/default/files/documents/08b8b7825f7bc12d2c79261fd7641c88/ltss-risks-financing-2022.pdf.
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