MEDICAID PLANNING
I am thinking about a meeting I had recently. The daughter of a client came to discuss her mother’s situation. Mother is elderly. She suffers from congestive heart failure. Recently, she was so weak that she was hospitalized for a while. Then she was transferred to a nursing home. For now, Medicare is paying for the nursing home cost. When Medicare stops paying in a few weeks, mother will have to pay the bill herself. This nursing home costs about $10,000 a month! Daughter met with a social worker to discuss finances. The social worker found out that mother has saved up quite a bit of money. Medicaid will not pay for mother’s nursing home costs until she has less than $2,000. The social worker advised the daughter that mother should “spend down” her money until she has less than $2,000. She suggested different ways that mother could spend down the money. When mother heard that she could not give money to her daughter and grandchildren, she was upset. She had worked hard and saved money. She wanted her daughter and grandchildren to have it.
Some of the advice given by the social worker was correct. Some of it was wrong. I told the daughter that it is not true that mother has to spend all of her money. Some of it can be given to the daughter and grandchildren. The social worker’s advice would have resulted in the unnecessary loss of tens of thousands of dollars. I do not blame the social worker. She was trying her best to help this family.
It is just impossible for anyone to give proper advice for Medicaid Planning unless the person is an expert in it. The Medicaid laws are very complicated. There are federal Medicaid laws and state Medicaid laws. The Hawaii Administrative Rules on Medicaid are very complicated. The Department of Human Services has internal memos and policies regarding Medicaid that are generally not shared with the public. There are interpretations of rules which I believe are in the heads of specialists at the Department of Human Services which are not written down. The only way a person can become an expert in Medicaid Planning is to spend years studying the law and actually working on Medicaid cases to see how the rules are interpreted. As I have explained some of our creative Medicaid Planning techniques to Medicaid eligibility workers, I have discovered that the vast majority of Medicaid eligibility workers who handle Medicaid applications every day are not experts in the Medicaid law. In my opinion, among the thousands of attorneys in Hawaii, less than 1% are experts in Medicaid Planning. I had a case last year in which a woman came to me after being given wrong Medicaid advice by an attorney who specializes in Estate Planning, but not Medicaid Planning.
If you have a loved one in a nursing home or about to enter a nursing home, you cannot rely on the advice of friends or relatives. You cannot rely on the advice of well meaning social workers and Medicaid workers. You cannot even rely on the advice of an attorney unless he or she is an expert in Medicaid Planning. If you find an attorney who specializes in Medicaid Planning, before you hire him, ask him how many Medicaid Planning cases he has handled. If it is less than a dozen cases, be careful. If you were having brain surgery, you would not want to be the first patient on whom the surgeon is operating.
Some people in nursing homes are paying thousands of dollars a month, waiting until they run out of money, when they can qualify for Medicaid. This is a sad and unnecessary loss of money. In most cases, some money can be saved by proper Medicaid Planning. In some cases, 100% of the money can be saved! It is true that the Medicaid laws are becoming stricter as the years go by. However, there is still room for creative Medicaid Planning.
© OKURA & ASSOCIATES, 2009
Sanford K. Okura received his Doctor of Jurisprudence Degree from Stanford University in 1976. He specializes in Estate Planning and Medicaid Planning to protect assets from nursing home costs, probate and estate taxes.
This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.
the article on special needs in the Hochi says that you can have retirement funds and still qualify for medicaid. How? do annuities count as retirement funds in this situation.
@taye – Good question. You can have considerable retirement income and still qualify for Medicaid for nursing home costs. With regular (non nursing home) Medicaid there is an income limit, but with Medicaid for nursing home costs, so long as your income is less than the nursing home costs, you can qualify for Medicaid if your assets are within the asset limits. As for the Medicaid asset limits in Hawaii, if you are married, the spouse in the nursing home can qualify for Medicaid if the combined countable assets of both spouses totals $111,560 or less. If you are single, your countable assets must be $2,000 or less. An annuity can be considered either as income or as an asset, depending on how it is structured.
thank you for your reply. if i want to qualify, is there a timing factor to consider. ie if i want to reduce my assets, must i do so a given number of years before i apply. i am not quite ready to use your services but would like to know when i should consider consulting you. do primary residence get exempted from the “assets”?
@taye – Under proposed changes to Hawaii Medicaid rules, a copy of which I will be posting on this website shortly, there will be a 5 year lookback for all transfers made on or after February 8, 2006, which is the date on which President Bush signed into law the Deficit Reduction Act. What this means is that if a person gives away assets without receiving fair market value for the assets, and then applies for Medicaid for nursing home costs within 5 years, there will be a penalty imposed. The penalty will be a length of time during which the person will not be eligible for Medicaid. The length of the penalty depends on the value of the assets transferred. Generally, if assets are given away more than 5 years before the person applies for Medicaid for nursing home costs, those assets should be safe. The primary residence poses special problems. The primary residence is considered an exempt asset for eligibility purposes, but not for recovery purposes. In other words, even though the residence currently is not counted as an asset when you apply for Medicaid, under some circumstances, the government can place a lien on the residence after you qualify for Medicaid. A lien is like a mortgage, to help the government collect out of the value of the residence amounts that are paid by Medicaid for your nursing home costs. Also, the proposed new rules, which are scheduled for public hearing on July 28, 2009, provide that a person will not be eligible for Medicaid for long-term care services if her home equity interest exceeds $750,000. There are special ways of transferring the residence so that you still have the right to live there, and yet have the residence protected from nursing home costs.
I have corticobasal ganglionic degeneration [CDBG] AND HAVE ABOUT 5 YEARS TO LIVE; widowed 1-17-13; ONLY ASSET IS cash of about $35,000. I am living in a Honolulu nursing home $4,000 a month which wants to get rid of me [I am considered suicidal] , so ability to travel is limited. I am a Kaiser patient.
HOW DO I QUALIFY FOR MEDICAID???? I saw Sanford in Hilo about 5+
years ago.
My only son recently got remarried – he was born in 1969 – he doesn’t want me
@Shirley, I’m sorry to hear about your situation. If you are under the age of 65, you could create a supplemental needs trust (sometimes called special needs trust) that would let you keep your remaining cash assets in trust for your future expenses, and still be eligible for needs-based government assistance programs such as Medicaid. However, in order to qualify for Medicaid for long-term care costs, you need to be at Intermediate Care Facility (ICF) level of care or greater. If your care level is considered less than ICF (such as assisted living), then you would not be eligible for Medicaid Nursing Home coverage until you reach that level of medical need even if your assets are brought down to $2,000 by creating a supplemental needs trust.
My grandma has about 50,000 left in cash and wants to give it equally to her 6 children. Would that disqualify her for Medicaid if she just moved into a nursing home?
Hi Craig, If your grandmother is applying for medicaid to cover her nursing home costs, Medicaid will look at all gifts she has given away in the last 5 years and assess a penalty period. Call our office if you have not applied yet, we can help.