MEDICAID MYTHS: A Grain of Truth, but Mostly Myth
1. Myth: Only a very few, very poor people ever need Medicaid.
The Truth: The overwhelming majority of nursing home residents receive Medicaid. That's right! Over 70% of nursing home residents right now are getting Medicaid. What about the rest? They'll be on Medicaid too in 6-18 months! Think about it can we all afford $6000-$7000 per month, every month? Most folks can't and Medicaid is the solution!
2. Myth: I have to give away everything I own to get Medicaid.
The Truth: Basically, a person is permitted to own some property, and still be eligible for Medicaid. The trick comes in knowing what is "countable" and what is "non-countable" under the Medicaid rules. For example, an individual's home and automobile are exempt and not countable for Medicaid qualification purposes. In addition, certain types of prepaid burial contracts are non-countable. There are many other types of "non-countable property." The bottom line is, you don't need to be completely without assets to be Medicaid eligible.
3. Myth: I can't give anything away and get Medicaid.
The Truth: The Medicaid rules provide that a person can be disqualified for giving away property, in some cases. But, a lot depends on what is given away, to whom, and when. So, again, it's complicated. Some asset transfers are not penalized under the Medicaid rules.
4. Myth: I have to wait 5 years after giving anything away, to get Medicaid.
The Truth: The disqualification isn't always 5 years long and sometimes there is no disqualification at all. True, there is a 5-year "lookback" for some asset transfers under the Medicaid rules. This means that the Medicaid agency will look back at all transfers of property, including sales for less than market value. However, the rules penalizing transfers do not apply to all transfers. See #2 above. A change made by the Deficit Reduction Act of 2005, applies penalties going forward from the date of application when a person is otherwise eligible for benefits. This new rule requires professional assistance.
5. Myth: I can keep all my inherited property when my spouse gets Medicaid.
The Truth: When a married person applies for Medicaid, assets in either or both spouse's name are considered by the Medicaid agency, even if a pre or post-nuptial agreement is in place. However, some assets won't be "countable" and you may keep some as an asset allowance if your spouse enters a nursing home. See #1 above.
6. Myth: If I put my property into my spouse's name, I will be eligible for Medicaid.
The Truth: Assets are counted, regardless of which spouse's name they are in. However, the healthy spouse will be given several months to re-title assets from the name of the spouse in the nursing home, into the name of the healthy spouse.
7. Myth: Medicare will cover my nursing home bill.
The Truth: Medicare only covers a small amount of the nursing home care provided in this country. Many older people are surprised to learn this. In general, there are 20 days of full coverage if you go into the nursing home after at least three days in the hospital, and are getting skilled care (not intermediate level care). Then, if you still need skilled care, you can get up to 80 days of partial coverage from Medicare after you pay a daily co-pay amount. After that, you will either pay out-of-pocket, or get Medicaid, unless you have private long-term care insurance.
8. Myth: If I enter a nursing home as a private pay resident, I must use up my assets before I can get Medicaid.
The Truth: You are not required to use your assets to private pay for the nursing home care. However, some nursing homes might try to make you believe that you do have to do this. They are paid less under the Medicaid program than they collect from private pay patients. Some people seek advice from an elder law attorney to find out how they can become Medicaid eligible before having spent a significant part of their assets on the private pay rate.
9. Myth: I can only 'spend-down' my assets on medical or nursing home bills.
The Truth: See # 7 above. Nursing homes may tell you that you have to spend your savings on the private pay rate, before applying for Medicaid, but this is not true. In fact, it's against the law for them to tell you this!
10. Myth: My power-of-attorney automatically has the power to take property out of my name, if I ever need Medicaid.
The Truth: Your best tool to be able to plan for Medicaid eligibility, should you ever need it, is to sign a general, durable power of attorney that includes a "gifting" power. Your agent under the power of attorney will only be able to re-title your assets if your power of attorney contains a "power to make gifts." Most powers of attorney do not contain gifting and/or self-dealing powers. The court procedures to transfer assets without a "gifting power" can be expensive and time-consuming, and may not allow the type of asset protection that many people would like to accomplish. Without a "gifting power" your agent is generally limited to spending your money on your bills and selling your assets to generate cash, to pay your bills. A "gifting power" is recommended for people who want to become eligible for Medicaid and should not be limited to the "non-countable" assets allowed under that program.
Some powers of attorney may contain "gifting" provisions, but limit such gifting to $10,000 to $12,000 per year. This figure is too limited to do effective Medicaid planning, and is related to a completely different type of legal issue. (See #12 below, about the federal gift and estate tax.) One more word about the "gifting power." You should require your agent under your power of attorney to consult with an attorney experienced in Medicaid law before making any asset transfers.
11. Myth: All property transfers will cause me to be disqualified from Medicaid.
The Truth: Not all transfers of property will cause a person to become ineligible for Medicaid. See #2.
12. Myth: "I can give away $13,000 per year under Medicaid rules without penalty.
The Truth: This is a rule under federal gift tax law, not under Medicaid law. Right now, Utah Medicaid law disqualifies a person from getting Medicaid for one month for every $4,526 given away, in most circumstances. This disqualification starts when a person otherwise eligible for Medicaid makes application and is applied on a forward basis for all divestments in the five years prior to the date of application. So, if my grandmother gives me $15,000 in May, she will be ineligible for approximately three and one half months beginning with the date of her application if she is otherwise eligible. These matters can be worked on, but they are not as simple as they once were.
13. Myth: If my income exceeds a certain amount, I will not be eligible for Medicaid.
The Truth: A couple's total income is divided into his and hers by the "name on the check." This includes pension benefits, IRA payouts, or other income paid only to the account holder, and accessible by the spouse only if deposited in a joint account. Income the couple receives jointly is divided in half. The community spouse keeps all of his or her own income plus half of any shared income. If this total is less than the Monthly Minimum Needs Allowance ("MMNA"), then the institutionalized spouse must be allowed to supplement the community spouse's income in an amount that increases the community spouse's total income up to the applicable MMNA. If the income level of the community spouse is very low, he or she may receive all of the combined marital income. Conversely, a community spouse with a high total income may receive little or no supplementary income from the institutionalized spouse. In such a case, even if the income of the community spouse is considerable, the Medicaid program cannot require that any of it be applied toward the cost of the institutional spouse's care. Income remaining to the institutionalized spouse after he transfers the allowed amount to the community spouse is subject to the usual Medicaid post-eligibility share-of-cost requirements.
14. Myth: My income may have to be used to pay my spouse's nursing home bill.
The Truth: This is not true in Utah or the majority of states.
15. Myth: All of my spouse's income must be used to pay the bill if my spouse is on Medicaid in a nursing home.
The Truth: The law allows you to keep a portion of your spouse's income if your income is below certain limits ($1839 in 2014). In addition to this allowance, you may be entitled to a greater allowance (up to $2,676 in 2014) if the cost of maintaining your home exceeds a certain amount or if a state hearing officer or a judge orders a greater allowance.
16. Myth: I can hide my assets and get eligible for Medicaid.
The Truth: Intentional misrepresentation in a Medicaid application is a crime and can be costly. The IRS shares any information concerning income or assets you have with the state agency that administers the Medicaid Program. You or whoever applied may have to pay Medicaid back to avoid prosecution.
17. Myth: Medicaid rules that applied to my neighbor when he went in a nursing home will also apply to me.
The Truth: Medicaid rules change, so don't count on the law that applied to your neighbor still applying to you. The Deficit Reduction Act of 2005 which went into effect February 8, 2006 made significant Changes. Administrative ruler making is still catching up. Also, there may have been facts about your neighbor's situation that you just don't know. It's best to have your situation analyzed by a competent elder law attorney.
18. Myth: If my spouse is in a nursing home or may need long-term care assistance, I should leave all my money to my kids so she isn't disqualified for benefits if I should die first.
The Truth: While many individuals and attorneys have used this method of planning, due to a change in the law that went into effect October 1, 2001 and February 8, 2006, special planning is now required when your spouse receives or may require long-term care benefits after your death. This is a very complicated and emerging area of the law, so it is very important to consult with a qualified elder law attorney as soon as possible if this issue applies to you.
