By Ryan McNeill, Attorney at Law
Will you outlive your retirement savings? This is a question most of us worry about when we reach mid-life. Even individuals who carefully save and plan for retirement cannot predict what the future holds. An accident, health crisis, or other emergency may result in those savings quickly disappearing. Your best bet is to assume that someday in the future you may need Medicaid assistance.
What is Medicaid?
Medicaid is a jointly funded federal and state program that provides healthcare coverage for low-income elderly adults, children, pregnant women; people with disabilities; and other eligible low-income individuals. Medicaid is a healthcare assistance program, not an insurance program. It is commonly confused with Medicare, which is a federal health insurance program that covers everyone 65+, as long as they or a spouse has paid into the program for a minimum of 10 years or has a qualifying condition. One of the most important parts of Medicaid is the assistance it provides for individuals who need nursing home care long-term, since Medicare will only pay for rehabilitative services in a nursing home for up to 100 days in a benefit period.
Who is Eligible for Assistance?
Although Modified Adjusted Gross Income (MAGI) is used as a financial measure of eligibility for most children, adults, and pregnant women, it is not generally a criteria for individuals needing assistance with the cost of skilled nursing care assistance. Medicaid does have a resource limit of $2,000 for individuals, however this resource limit does not count your home, a vehicle, personal property in your home, and other assets.
In addition, each state must provide Medicaid coverage based on mandatory eligibility groups; these include low-income families, those receiving Supplemental Security Income (SSI), eligible pregnant women, and others. Outside of these mandatory groups, states may have different rules. North Carolina is one of a handful of states that has not chosen to expand Medicaid under the rules of the Affordable Care Act, leaving between 400,000 – 626,000 individuals in a coverage gap, according to the North Carolina Community Health Center Association.
Why Do I Need to Plan for Medicaid?
The future is uncertain and planning for Medicaid can ensure you address possible financial challenges. Here are some examples:
- A healthy couple in their 50’s wants to ensure they leave assets for their children. By planning ahead, they can take advantage of techniques to preserve assets for their heirs within the law.
- An individual age 45 becomes incapacitated in a car crash and is unable to work again. They received a settlement from the accident but worry the funds will run out, leaving them unable to pay for health insurance and other expenses.
- One spouse in a married couple over age 65 becomes ill and requires long-term nursing care. The expenses add up quickly, putting the healthy spouse at financial risk.
- What if both elderly spouses require long-term care? Even if the individuals have long-term care insurance, it does not cover 100% of the costs.
How Do I Plan for Medicaid?
If you have assets or income, it is worth speaking with an estate planning attorney with experience in Medicaid planning. Timing matters, and starting the planning process while you are relatively young and healthy can be helpful. Applications for Medicaid involving long-term care assistance may be reviewed under what is called the five-year “lookback period.” This means if you have given sums of monies or property away within five years of your Medicaid application, your eligibility may be delayed based on the amount of money you transferred.
Generally speaking, individuals who have depleted their assets (have no more than $2,000 in assets countable under Medicaid) will qualify for Medicaid. If you are single and have no assets, this is a simple calculation. However, even then there are methods to convert otherwise countable assets into something that is not considered counted toward Medicaid.
A more complicated situation is when only one spouse in the marriage requires long-term care assistance. In that situation there are rules in place to protect some of the marital assets for the spouse remaining in the home, but there are very important considerations and planning opportunities to protect much more than the legal minimum.
Each situation is different, and the rules can be complex. Speak with a Medicaid planning attorney about your situation.