Medicaid and Medicare are two completely different programs. Medicare is a type of health insurance provided by the federal government to retirees who receive Social Security benefits. Medicare does not cover long-term nursing care (except for a very limited time if you are hospitalized). Medicaid is a joint federal and state health care program for people who have little or no money. Medicaid pays for many health care costs, including long-term nursing care.
If you have money, you have to pay for your nursing home care. If you do not, the government pays for most of it. Most people pay for nursing home care out of their own savings until they run out of money. Only after they run out of money does Medicaid help them pay. What many people do not know is that with careful planning you can keep most of your money and property and still have the government pay for your nursing home costs.
In order to qualify for Medicaid, an unmarried person may keep only a few thousand dollars and a married couple only one-half of their assets up to certain limits. In addition to these amounts, you may keep your primary residence (subject to special rules), personal items, a
motor vehicle, a funeral contract and a small amount of life insurance. But careful planning is required to make sure you maximize the amount you are automatically entitled to keep. In particular, married couples must plan well in advance to maximize the assets they are
permitted to keep.
The government will not let you move into a nursing home one day, simply give all your money away the next (so you have less than the allowable limits), and qualify the day after. You will be denied Medicaid if you just give away your money anytime within five (5) years of the date of admission to a nursing home. But there are exceptions, and we can help you divest yourself of your assets and still qualify for Medicaid, even if you are already in a nursing home.
MEDICAID QUALIFIED ANNUITIES
One Medicaid planning strategy for unmarried people involves giving away a specific amount of money (the amount is determined by a complicated formula set by the state and federal government) to your family or whomever else you desire. Once this is done, the
remaining balance is used to purchase a “Medicaid Qualified” immediate annuity.
An immediate annuity is a contract with an insurance company in which you pay a lump-sum of money and the company gives you a monthly check for a fixed period of time. A “Medicaid Qualified” immediate annuity can be used to convert countable assets into an income stream. The government will not treat the annuity as an asset countable toward Medicaid’s asset test if the annuity complies with certain requirements.
By investing the right amount of money in a Medicaid Qualified Annuity at the right time, you may protect a significant portion of your estate for your family.
For married couples, when one spouse goes into a nursing home a Medicaid Annuity also offers an option to protect marital assets if established timely. Marital assets may be used to purchase the Annuity which must make distributions to the Community Spouse for a specific period of time (generally between from 12 and 48 months). The sources and amount of marital income will factor into the calculation of how long the Annuity must pay out, and as always there are income tax implications involved.
In addition to using a Medicaid Annuity, the Community Spouse is entitled to keep all of his or her income (including wages, Social Security and pension income). The Community Spouse may also keep a portion of the nursing home spouse’s income if they pass the income test.
A nursing home resident must pay all of his or her income to the nursing home, with a few exceptions. The resident may keep a small monthly stipend for personal needs, money to pay for uncovered medical costs, and, in the case of a married couple, an allowance for the
Community Spouse. Income may also be protected and used for a dependent child.
For married couples, the Community Spouse is given a monthly “Allowance” out of the nursing home spouse’s income. The standard Allowance may exceed $2,000 per month. But the exact figure is calculated for each Community Spouse according to a formula based on his or her housing costs. Again, the Community Spouse may keep all of his or her own earnings and other income, but the amount of his
or her income may reduce the Allowance amount.
As part of our role as your attorneys, we will help maximize the amount of income that the Community Spouse may retain.