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Truth or Consequences

Truth or Consequences

Scuttlebutt, gossip and secondhand information on Medicaid rules is often partially or
totally wrong. That can cause panic in families facing the need for long term care at home or in a nursing home care. Even worse, wrong information can result in loss of family life’s savings and less care for a loved one and it can create a totally false sense of safety leading to great financial loss.

One major source of confusion is what Medicare covers, versus Medicaid (Title 19).
Medicare can cover medical expenses for doctors, hospitals and prescriptions, depending on what parts of Medicare you are on. It can also pay for short term rehabilitation up to one hundred days if you have had a three day stay in a hospital as an admitted patient. It can also pay for limited care to transition back home. It does not pay for permanent long-term care at home, or in a nursing home. Medicaid is what pays for long term care if you qualify. 

A common belief is that you are going to lose your home if you go on Medicaid. It is true if you are a single person and permanently go into a nursing home and solely own your home. Then it is a countable asset and the state will make you sell it to pay for your care. It is not fully accurate if you are single and live in your home. The state will give you Medicaid if you qualify, and will not touch the home while you live there. It will recover what it paid after you die. If, however, you are married, the house can be transferred to your spouse at the last minute and will be fully protected, without any pay back if your healthy spouse lives longer than you. then proper planning with a specific will that satisfies the law, can then protect most of the house if the healthy spouse dies first.

Another rumor is that the “state is going to take all my income”. The truth is if you are home if you go on Medicaid, you will be able to keep your income to pay for your living expenses up to $2,523 per month. If it exceeds that, the law allows some of the excess to be put into a “pooled trust” to go toward living expenses such as taxes and insurance. If you are married, the healthy spouse can keep all of his or her income.

Another common rumor is that you can give away $16,000 per year. That is a gift and inheritance tax law, but it is completely false for Medicaid. If you give away money and apply for Medicaid within 5 years, you will be disqualified for Medicaid for one month for every $13,863 dollars you gave away. There are exemptions, such as giving money to a disabled child.

In short, people can shoot themselves in the foot if they don’t understand that difference and give away money and then need care within five years.
The most common belief is that nothing can be done to protect assets within the five-year lookback period. That is completely inaccurate for a married couple, and may be partially wrong for a single person. If you are a typical couple with a house and a few hundred thousand dollars of savings, it is almost certain that all assets can be protected if the letter of the law is followed. 

Even if you are single, it may be possible to protect assets if you are living at home, or you have a disabled child, or your child lived with you and took care of you for two years to keep you out of a nursing home. The law allows the house to be transferred to such children without penalty at the last minute.

If you are a married person, the assets can be transferred to the healthy spouse, and if the total assets exceed the allowable limit, the healthy spouse can by what is called a single premium immediate annuity and the money will no longer count under the Medicaid law. There are downsides to doing this, so as in much of life, the pluses and minuses must be evaluated.

If a friend, or relative tells you they heard from someone that something can or cannot be done, take it with an ounce of caution. Stories get greatly distorted as they are passed from person to person, just like that circle of childhood friends playing that game whispering from one ear to the next, and the last person hears something quite different from what the first person said.

Don’t rely on rumors. Get competent and accurate information and advise. You worked hard for your life’s savings and weather you are single or married, the Medicaid laws and regulation have provision that can protect families for financial devastation.
Attorneys Stephen O. and Halley C. Allaire are partners in the law firm of Allaire Elder Law.
Attorneys Stephen O. and Halley C. Allaire are members of the National Academy of Elder Law. Attorneys, Inc.
Allaire Elder Law is a highly respected, and highly rated law firm with offices in Bristol, CT.
We can be contacted by phone at (860) 259-1500 or by email.

If you have a question, send a written note to us and we may use your question in a future column.

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