Medicaid planning is part of the social safety net, reserved for those who truly cannot take card of themselves. This doesn’t mean, however, that those in the middle class, or even the affluent, cannot access benefits for long term care.
The problem is that to qualify for these benefits involves a long process of qualifying and spending down assets in order to accomplish this.
There are ways to avoid this, such as turning your assets into “non-countable” assets. There are legal and legitimate ways to do this and qualify for Medicaid.
Note: if you at seeking a great primer on the subject I recommend Gabriel Heiser’s book, Medicaid Secrets, as an amazing resource to give you a good idea of what is considered good Medicaid planning…and also what is illegal and considered Medicaid fraud.
But there are inherent problems with Medicaid planning and I need to take you through them so that you have a clear understanding of the challenges and hurdles facing you, both now and in the future.
You Really Cannot Own It
In order for you to avoid having to spend your assets down to pay for your long term care costs, you have to take these out of your name and transfer ownership in most instances. There are safe, legal and legitimate ways of doing this from a Medicaid planning perspective without getting into the trap of Medicaid fraud.
However, the catch is that you end up giving up control of your assets. This means you really can’t count on having access to whatever it is you transferred. Whole books could be written of the horror stories of seniors who have legally transferred assets to their children and had their life savings lost due to theft, gambling, drugs, divorce, etc…
There are ways to avoid this outcome, through the setting up of a trust. That entire concept is beyond the scope of this article, but the point is you really need to make sure who you are transferring your assets to is the right person for the job.
The Future of Medicaid
In case you haven’t been watching, our nation is hemorrhaging debt at a rate of almost a trillion dollars a year. That’s $1,000,000,000,000.00 a year! Combine that with the fact that our demographics situation is horrible over the next 20 years is we have the makings of a catastrophe.
Note: By demographics I mean that our population is aging. We will have more and more seniors seeking the benefits of programs such as Social Security, Medicare and Medicaid, yet there will be fewer workers paying the taxes to support the system. And that’s why all three are projected to go bankrupt over the next 20 years.
We have already seen substantial changes to Medicaid over the last few years, such as the look-back period going from 3 years to 5 years. Let me ask you a question. Do you really think 10 years isn’t around the corner?
And what about any other cuts to the system? Who will qualify? Will you be forced to sell your home and have ALL of your assets sold for long term care? What changes will the new health care law bring to the table? What currently legitimate techniques in Medicaid planning will be considered illegal in the future?
As our nations fiscal problems get worse, entitlement programs such as Social Security, Medicaid and Medicare will eventually be on the table. And we just don’t know what those changes in fact will be.
Medicaid Planning is Complicated
Just try and sit with an elder law attorney and figure this stuff out. Or better yet, understand that Medicaid is a joint Federal-State program where the states have wide latitude in how they can comply with Federal mandates.
This means that there are 50 sets of rules governing 50 separate states when it comes to Medicaid.
It gets better, because something that is perfectly legal on one state from a Medicaid planning perspective can be considered Medicaid fraud in another.
Like I said, Medicaid planning is complicated and there is no way around it.
Yes, it’s expensive. It wouldn’t surprise me if the legal bills for setting up a Medicaid plan ranged from $10,000 and up. But in all honesty this really is a case of being penny wise and pound foolish.
If you are looking for safe, legal and legitimate ways to shelter your life savings from nursing home costs it is going to cost you, no doubt. So investing in and finding the right elder law attorney could be one of the best investments you ever make.
I Didn’t Plan On This
Most aspects of Medicaid planning deal with the potential upside of the situation. And by that I mean people are thinking about the process of protecting their life savings from the effects of nursing home costs.
And if you have busted your tail your whole life you would like to have something to pass down to your family.
But in many cases people aren’t thinking about what they could potentially be giving up for the right to protect their assets…and that needs to be factored into the equation.
Here are some of the things you need to consider…
Medicaid pays for nursing homes, but not necessarily the one you want to go to. Beggars can’t be choosers and you are not in a position in many instances to choose. Normally the list of facilities willing to take Medicaid is short…and those willing to take “Medicaid pending” patients is even shorter.
Note: Medicaid pending is where the nursing home takes card of you…and does not receive payment (sometimes for months) until your Medicaid application is approved.
While on Medicaid you can all but forget having a private room. So figure on having at least one roommate. And this can lead to a while host of problems.
And Medicaid does not pay for assisted living facilities. And while they are beautiful, they are either private pay or for those with long term cafe insurance.
Explaining the problems of Medicaid planning above was not meant to deter you from proper financial planning when it comes to protecting your life savings. But it was meant to inform you of all of the available options at your disposal…and the consequence of those options.
Medicaid planning can protect your nest egg from long term care costs, but it can limit your options. And I wanted you to be aware of everything before going forward.