In the United States, Medicaid matters because it is the only avenue to get government support to pay for your long-term nursing home care needs. Medicare does not cover long-term nursing care. So, the options are to qualify for Medicaid, have long-term care insurance or pay for nursing home care yourself. Medicaid can serve as a lifeline for individuals in need of long-term care, particularly as the demand for nursing home services continues to rise. Approximately nine million Americans over the age of 65 will require long-term care this year alone.
Long-term nursing home care in Colorado
Moreover, the cost of long-term care can be staggering, with nursing home expenses ranging from $7,000 to $12,000 per month in Colorado. Sadly, studies show that 54% of middle-income U.S. seniors may struggle to afford yearly costs of $60,000 for assisted living, even if they dedicate all their financial resources. For many people, understanding how to use Medicaid to plan for long-term nursing care is essential, especially given the expense and eligibility criteria involved.
This is because Medicaid is only eligible to people who have low access to assets and low income. If your current situation exceeds the Medicaid limits, you will need to thoroughly plan to be able to meet them in the future.
Understanding Medicaid eligibility
Medicaid eligibility hinges on financial need, with strict asset and income requirements. For single individuals, the asset limit is set at $2,000, while married couples enjoy slightly higher thresholds of $3,000. Countable assets include investments, bank accounts, real estate, vehicles, and more. However, certain exemptions exist for community spouses, such as cash, primary residences, cars, jewelry, funeral plans, life insurance, and spousal maintenance. You can learn more about Medicaid eligibility by reading our blog, The seven most important questions about Medicaid.
However, there are strategies that you can use to bring down your usable assets in line with the Medicaid limits, while preserving them as part of your legacy.
Asset protection strategies
Planning for Medicaid involves strategic asset protection to ensure eligibility while safeguarding assets for spouses and heirs. Various strategies, including irrevocable trusts and Medicaid-compliant annuities, can be employed.
- Irrevocable trusts: In an irrevocable trust, you don’t have assets in your name or control of them; they are now owned by the irrevocable trust. This is different from a living, revocable trust where you keep control of your assets. With an irrevocable trust these assets cannot be counted by Medicaid, but equally, you do not have access to them. Real estate can be a good thing to put into an irrevocable trust. Real estate in Colorado is high-value and even with the couple and community spouse allowances, the excess in equity can be subject to a Medicaid lien eventually. Putting a house into an irrevocable trust can ward against this.
- Medicaid-compliant annuities: These are single premium annuities that convert excess funds into an income stream for you, but don’t have a cash value. They can help accelerate your Medicaid eligibility, while protecting other assets.
The five-year lookback period
If you want to go down these paths, you must do so now, in order to qualify in five years’ time. That is because there is a five-year look back period for Medicaid eligibility to make sure you haven’t made any “transfers without fair consideration.” “Transfers without fair consideration” include gifts and transfers to family members. In practice, that means that the Medicaid office will look at those transfers and divide them by the average cost of nursing home care for the county in which you live. And they will subject that applicant to a penalty for that period of months.
It’s crucial to navigate the five-year look-back period and understand potential penalties for asset transfers. You need to be very strategic in how you use trusts. Also, at the moment we are talking about a five-year look-back period but in the future, this five-year look-back may be extended to a ten-year look-back period. There is already talk of extending this period in Colorado.
Where you can go for help
We recommend consulting with the Medicaid technician in the county in which you live, an elder law attorney, or some other kind of Medicaid expert before you start transferring assets. There can be ways to do so that forecast the need for care, but don’t harm you in other ways.
When we work with clients, we want to make sure that people prepare for Medicaid in a way that is a solid spend-down plan. One of the ways of spending down is that Medicaid can cover some of your medical bills, but won’t cover medical bills before you qualify. One of the things we like to do when we’re looking at the whole picture is to make sure that part of the spend-down includes paying off medical bills.
Medicaid planning considerations
When planning for long-term care, factors such as health, family history, and anticipated care needs must be carefully considered. Your family may have a history of being physically robust, but there is also the potential for mental decline. Whether it’s skilled nursing care, including memory care, each situation needs a tailored approach.
How an elder law attorney can help
Consulting with an elder law attorney like Rocky Mountain Eldder Law can provide guidance in evaluating assets, determining eligibility, and crafting a comprehensive plan for long-term nursing home care. It is always better to have plenty of planning in place, long before it’s needed. We can offer crisis planning for Medicaid, but it’s a more expensive service.
As part of Medicaid planning, we can help you take an inventory of all your assets, how they’re titled, and really think through how you want to plan for an eventual need for long-term care. We want to make sure that you and your family can navigate the complexities of Medicaid with confidence and peace of mind.
We recently held a webinar about how to plan for long-term nursing home care using Medicaid. You can watch the recording on YouTube if you’d like to find out more.
If you would like to get in touch about your situation, please call me on (720) 457 4573 or email me at kate@rockymtnelderlaw.com.
