As I say often, there is very little that is “basic” about Medicaid.
When faced with the life altering event of entering a nursing home, it is important to consult a professional to review your family’s assets and income and apply the various Medicaid formulas set by the government.
Everyone’s asset situation is different and there are exceptions and legal nuances to the figures below that may apply to your situation, so one should not rely on the numbers provided as legal advice.
However, they are a good starting point to understanding the complexities involved and the need to consult with a professional.
In brief, when a loved one needs to be placed in a nursing home, the payment options are: private pay, long-term care insurance or Medicaid, if you are eligible. The current average private pay cost in central and upstate New York averages $10,000 to $12,000 per month and approximately $13,000 per month in the New York City and Long Island area. Long term care insurance can be cost prohibitive and should be scrutinized to see how much coverage per month is allowed and if such amount increases over time with inflation. Thus, as nursing home costs grow, Medicaid becomes a more relevant and viable option for many people. The Medicaid eligibility rules can be difficult to understand and there is much disinformation out in the public.
The general parameters for Medicaid eligibility in New York State, which have changed for 2019, are as follows: for a married couple, the spouse at home is allowed to keep a range of marital assets between $74,820 to $126,420, one primary residence (with home equity value up to $878,000), one vehicle and pre-paid funerals.
The spouse in the nursing home can keep up to $15,450 in non-IRA assets. As for income (usually pension, IRA and Social Security amounts), the spouse at home is generally entitled to keep the first $3,160.50/month of joint income but any remaining or “excess income” must be paid to the nursing home.
A single person is much more vulnerable to a substantial loss of assets when entering a nursing home. He/she is generally entitled to keep $15,450 in assets, pre-paid funerals (for him or herself, children and their spouses) and only $50 per month in income. With the exception of IRAs or other tax qualified funds, most assets above these thresholds (including the primary residence) are considered “excess resources” which must be used to pay for nursing home care.
You may have also heard of the “five-year look back period.” In short, if an applicant has made a transfer or gift of an asset (especially real property and other assets over $1,000) within five years of applying for Medicaid, the state Department of Social Services can apply a penalty for each transfer, no matter how well intentioned at the time. DSS will generally calculate the penalty based on the amount of the transfers divided by what is called the regional rate, currently $10,068 per month for the central New York area, which includes Oneida, Lewis, Herkimer, Onondaga and Madison counties.
For example, if a CNY resident transfers a home worth $205,000 for a nominal sum or as a gift to a child and ends up in a nursing home within five years of that transfer, DSS generally takes the value of the home and divides it by $10,068, to come to a penalty period of approximately 20 months. That penalty period is the amount of time Medicaid will not pay for the nursing home.
The applicant must then privately pay for that 20 month penalty period unless they get the home or other assets back. After the penalty period expires, Medicaid will begin paying the calculated balance (which would also include the monthly “excess income” of the resident). Once a penalty is imposed it is difficult to remedy. The best practice is to address any potential penalty before making a formal Medicaid application.
Having the foresight to proactively set up an irrevocable Medicaid trust, where assets including but not limited to your home and other real property, life insurance, a percentage of savings, brokerage accounts, CDs, stocks, bonds, etc., can be placed, usually pays for itself many times over due to the substantial asset protection it provides. Those assets will be protected 100 percent from nursing home costs when placed and kept in an irrevocable Medicaid trust after five years, so long as there is no nursing home event in that time.
One should also be cautious to not apply for Medicaid until eligibility exists. Medicaid applications may be offered for submission by a nursing home at no charge; however, if there is an issue regarding eligibility, if substantial asset transfers have been made in the past five years, if there are a lot of properties and different funds at stake, or if you are simply unsure of what you should do, then you should contact an elder law attorney versed in the process.
The application process can be quite involved and entails gathering a wealth of documents including five years’ worth of asset records and transactions. While there may be a concern with the cost of hiring an attorney, a professional consultation could save months of Medicaid ineligibility, keeping in mind each month may cost up to $10,000 to $12,000 until all so-called “excess resources” (as outlined above) are drained. One mistake could result in tens of thousands of dollars in costs which might otherwise be avoided or mitigated by taking proper and timely measures.
Contact a professional and request a consultation to thoroughly review your situation if and when you or your loved ones face this situation. If you favor a more proactive approach, use the consultation to get information on crafting an irrevocable Medicaid trust to best suit your needs and to insulate your home and other valuable assets from this stressful scenario.
James S. Rizzo is an attorney with the law firm of Hilton Estate & Elder Law, LLC, with offices in Rome, Utica, Lowville and Boonville.
He has more than 23 years of legal experience and concentrates in Estate Planning matters, including Wills, Revocable and Irrevocable Trusts, Powers of Attorney, Health Care Proxies, Asset Protection, Nursing Home applications and Medicaid planning. He can be reached at 315-624-9600 or email@example.com for a free, confidential initial consultation. Visit us on the web at: www.hiltonlawny.com.