Medicaid Application Pitfalls

People sometimes ask, “Can I do a Medicaid application by myself?” From an attorney’s point of view, that’s somewhat like asking a doctor if you can do an operation by yourself. But you wouldn’t ever ask the doctor that because of all the unknown steps and complications of the operation. In many respects, the pre-operative preparation, the double checking that takes place, and being ready to deal with all the complications that can arise, are analogous to going through the Medicaid process. Here’s why.

The pre application preparation is much more than gathering financial information. It
requires going through that information to discover if there are transactions, or spending, or unknown assets that can derail the application. For example, if there is a small life insurance policy that exceeds $1,500 in face value, the cash value will count toward the $1,600 Medicaid limit. I am aware of a case where the son of the applicant did not realize a policy existed, and when it was pointed out to him by the Department of Social Services, which did find it, he failed to cash it in for several months, and the nursing home successfully sued him for the tens of thousands they had not been paid. And there may be income taxes owed if certain assets are sold.

After reviewing the information and before submitting the application to the Department of Social Services, it also requires an analysis to determine if there are special rules that will allow assets to be protected, and if there are steps that can be taken to protect the assets. For example, with a husband and wife, the home should be transferred to the healthy spouse, which can be done within the five year lookback period without a penalty. Another rule allows transfer of assets to a child who has lived with the parent for at least two years, and who has given care to
the parent which was needed to keep the a parent out of a nursing home. Without knowing about these rules, huge amounts of assets may be lost. At a very minimum, prepaid funeral contracts or pay down of debt should be considered before paying the nursing home.

Once the application is submitted, there could be a mistake made by the Department of Social Services in either denying the application, or deciding to impose a penalty period for “transfer of assets” to a child or other person. This may require an appeal, called a fair hearing, to get the error corrected. That type of appeal requires careful reference to the rules and probably a memorandum of law, which points out where the mistake was made, and why the regulations allow the transfer.

Yet another situation often arises where an applicant has too much income to qualify for home care. There is almost always a way to solve this, but it requires setting up a “pooled trust” which has the effect of making the income not countable. This usually requires legal expertise to satisfy the pooled trust rules. It can make the difference between success and failure.

In summary, there is far too much at stake to go without accurate and thorough legal advice. The sensible approach is to work with an elder law firm that knows the law, and can get the care that your family needs while preserving as many of the assets as allowed under the Medicaid law.