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Medicaid Planning

What is Medicaid?

Medicaid is a federal and state funded and state administered medical benefit program which can pay for the cost of the nursing home if certain asset and income tests are met. One primary benefit of Medicaid is that, unlike Medicare (which only pays for skilled nursing), the Medicaid program will pay for long term care in a nursing home once you’ve qualified. Medicare does not pay for treatment for all diseases or conditions. For example, a long term stay in a nursing home may be caused by Alzheimer’s or Parkinson’s disease, and even though the patient receives medical care, the treatment will not be paid for by Medicare. These stays are called custodial nursing stays. Medicare does not pay for custodial nursing home stays. In that instance, you’ll either have to pay privately (i.e., use long term care insurance or your own funds), or you’ll have to qualify for Medicaid. The Medicaid laws are designed so as to afford those in need coverage of Medicaid. The laws and regulations also have been modified to allow the spouse not in the nursing home (the community spouse) some planning so as not to be impoverished just so that his/her spouse is in the nursing home.

Why Medicaid Planning is Necessary

As life expectancies and long term care costs continue to rise, the challenge quickly becomes how to pay for these services. Many people cannot afford to pay $5,000 per month or more for the cost of a nursing home, and those who can pay for a while may find their life savings wiped out in a matter of months, rather than years. Fortunately, the Medicaid program is there to help. In fact, in our lifetime, Medicaid has become the long term care insurance of the middle class. But the eligibility to receive Medicaid benefits requires that you pass certain tests on the amount of income and assets that you have. The reason for Medicaid planning is simple. First, you need to provide enough assets for the security of your loved ones – they too may have a similar crisis. Second, the rules are extremely complicated and confusing. The result is that without planning and advice, many people spend more than they should and their family security is jeopardized.

How Do I Qualify For Medicaid?

 To qualify for Medicaid, applicants must pass some fairly strict tests on the amount of assets they can keep. To understand how Medicaid works, we first need to review what are known as exempt and non-exempt (or countable) assets. Exempt assets are those which Medicaid will not take into account (at least for the time being). In general, the following are the primary exempt assets:

  • Home, (equity up to $525,000). The home must be the principal place of residence. The nursing home resident may be required to show some “intent to return home” even if this never actually takes place.
  • Personal belongings and household goods.
  • One car or truck.
  • Certain income-producing property.
  • Burial spaces and certain related items for applicant and spouse.
  • Up to $1,500 designated as a burial fund for applicant and spouse.
  • Irrevocable prepaid funeral contract.
  • Value of life insurance if face value is $1,500 or less. If it does exceed $1,500 in total face amount, then the cash value in these policies is countable.

All other assets are generally non-exempt, and are countable. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt. This includes:

  • Cash, savings and checking accounts, credit union share and draft accounts.
  • Certificates of Deposit.
  • U.S. Savings Bonds.
  • Individual Retirement Accounts (IRA), Keogh plans (401K, 403B). (Exempt for the community spouse in Kansas, if established by an employer).
  • Nursing home accounts.
  • Prepaid funeral contracts which can be canceled.
  • Trusts (depending on the terms of the trust).
  • Real estate (other than the residence).
  • More than one car.
  • Boats or recreational vehicles.
  • Stocks, bonds, or mutual funds.
  • Land contracts or mortgages held on real estate sold.

While the Medicaid rules themselves are complicated and tricky, it’s safe to say that a single person will qualify for Medicaid as long as he or she has only exempt assets plus a small amount of cash and/or money in the bank, up to $2,000 in Kansas.

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