As people get older it’s a natural desire to help their children financially, or perhaps make gifts to their grandchildren or other family members. But that generosity may later affect their eligibility for Medicaid benefits if they ever need long-term care.
WHAT IS MEDICAID?
Medicaid is a program that provides health coverage and long-term care to millions of Americans, including eligible low-income adults, children, elderly adults, and people with disabilities. Although the program is administered under federal guidelines and partially funded with federal funds, it is administered independently be each state.
MEDICAID AND LONG-TERM CARE
With the advancements in medical technology, people are living longer than ever before. As a result, it’s not unusual for them to outlive their financial resources. For those individuals who may require long-term care at some point during their lifetime, without the ability to pay for such care, Medicaid is often the program to which they turn. For those who meet the program’s strict asset and income guidelines, Medicaid can provide life-saving benefits to cover the costs of a nursing home or other long-term care. However, the program rules are extremely complex, and great care must be taken in order to comply with them. Actions that people take now could affect their eligibility for benefits in the future.
THINK TWICE BEFORE MAKING THOSE GIFTS AND DIVESTMENTS
Gifts and divestments can affect a person’s future eligibility for long-term care Medicaid. If someone applies for Medicaid benefits and it is determined that a divestment has occurred some time in the past, the applicant may be found ineligible for benefits for a period of time (the penalty period). Because Medicaid is a program designed for people with limited assets, the government imposes strict rules to help ensure someone isn’t giving their assets away simply to qualify for Medicaid benefits.
WHAT IS A DIVESTMENT?
So what is a divestment, anyway? Well, unfortunately that’s a complex topic that is too big to address in a single blog post. But generally speaking, a divestment is the transfer of income, assets, your home or other real estate, for less than fair market value. It can also be a divestment if a person takes an action to avoid receiving assets or income he or she is entitled to. Examples of this would be turning away an inheritance, waiving pension income, not accepting injury settlements, refusing to take action to enforce a court-ordered payment to which you are entitled, or refusing to claim your legal portion of a spouse’s or parent’s estate when they die.
Using assets to purchase certain annuities can be a divestment. It can also be a divestment to pay money to relatives or family members for services they provide, unless the proper written contract is in place prior to those services being provided. Another type of divestment is making an asset unavailable to you without receiving fair market value. An example of this would be using your asset as collateral for another person’s loan.
Because of the complexity of the divestment rules, and because there are certain exceptions that apply, it is advised that you consult with a qualified estate planning attorney to fully address your questions concerning this topic.
ARE DIVESTMENTS COUNTED AGAINST ME FOREVER?
No. There is a look-back period that applies to Medicaid applications. As of the date of this article, the look-back period is 60 months for all divestments. This look-back period begins when an individual is both institutionalized and has applied for Long Term Care Medicaid. The look-back period also applies to those individuals who apply for services under one of the Home and Community-Based Waiver or Managed Long Term Care programs.
WHAT IF I’VE MADE A DIVESTMENT?
If an individual is applying for Medicaid benefits and it is determined that there was a divestment during the look-back period, and none of the program’s exceptions apply, the individual will be ineligible for long-term care benefits for a period of time. This is referred to as the penalty period. During the penalty period, Medicaid will not pay for the individual’s daily nursing home care costs. The penalty period is calculated by dividing the total amount the individual divested during the look-back period (the numerator), by the “average daily nursing home private pay rate” (the denominator). The result of this equation is the number of days the individual will be ineligible for long-term care Medicaid benefits.
Once again, there are exceptions to the divestment rules, which may apply under certain circumstances. Furthermore, certain divestments can be undone or “cured” if the total sum of the divestments is returned to the applicant.
To learn more about divestments, or the Medicaid program in general, contact Attorney Stephen Kosa today.