The extremely high cost of nursing-home care is creating a crisis for many individuals and their families in this country. In Colorado, the average cost of nursing home care in the state can easily exceed $80,000 per year in many cases. The high costs associated with this care has pushed Medicaid into the role of primary payer for long-term care. Unfortunately, many individuals discover too late that qualifying for Medicaid is no simple matter. Because of a number restrictions explained below, it is wise to plan well ahead for Medicaid eligibility.
It is important to know certain key points regarding Medicaid eligibility:
Basic Medicaid qualification requirements
In addition to medical-necessity requirements, to be eligible for Medicaid as an individual, your assets generally cannot exceed $2,000 and you can have no more than $2,199 per month in income. In order to reach the asset and income caps, it requires a thoughtful strategy.
Working with your professional adviser, you will need to determine which of your assets are exempt from the limitations and the rules you must abide by in reducing your assets in order to qualify for Medicaid.
Assets exempt from Medicaid’s asset calculations
In Colorado, the following assets are exempt from income and asset consideration:
Equity in a primary residence up to $552,000 (potentially more if a spouse, minor or blind or disabled child currently lives in the primary residence);
One vehicle;
Personal property such as furniture, clothing, appliances, etc.;
Up to $1,500 in life insurance and $1,500 in burial insurance;
Retirement accounts, while countable as an asset, may have lower countable values based on taxes and other penalties that will be applied because of early withdrawals;
Certain commercial, irrevocable, nonassignable annuities. Payments from these types of annuities are considered as income during the month when the payments are received;
Certain types of promissory notes, which are to be paid out in equal payments and that cannot be canceled upon your death.
Plan ahead to avoid trouble during the 60-month “Look Back” period.
In attempting to qualify for Medicaid, it is vital that you do not make gifts to others during the five-year period before the date that you apply for coverage.
Transfers without consideration during the five year look-back window often generate large penalties including the withholding of Medicaid until the value of the gift or transfer has been recouped in nursing home payments.
Income or disability trusts may allow for Medicaid eligibility if your monthly income or assets exceed the Medicaid limitations.
In some cases, an income trust may be used to qualify an individual for Medicaid long-term care benefits when the individual’s monthly income exceeds the income cap of $2,199, but is less than the average monthly cost of nursing home care in his or her region of the state.
Subject to specific requirements, disability or pooled trusts may be used to qualify for Medicaid in cases in which an individual’s assets exceed the $2,000 Medicaid asset limitation.
Given the high costs for nursing home care, it is more important than ever that you consult with a knowledgeable professional adviser to determine your best course of action in preparing for the future and protecting as many of your assets as possible.
Charles C. Spence is partner with the Durango law firm of Maynes, Bradford, Shipps & Sheftel. He practices in the areas of elder law, estate planning, business and tax law. Reach him at cspence@mbssllp.com.
