Nursing Homes & Medicaid

Feb 22, 2016

By Michael P. Coleman, estate planning and elder law attorney of Lantz Law Inc of Dartmouth, Massachusetts.

If you’re reading this article, chances are you know why we wrote it. The cost of nursing home care these days is astronomical. Families routinely pay more than $12,000 a month for their loved ones to be cared for in a nursing home, and, sadly, most residents of nursing homes have no choice but to be there. Thus, savings and assets accumulated as the result of many years of hard work and diligent planning are spent in no time. At $12,000 per month, $144,000 would be spent in one year. How long would it take the average person to save that much money? Now you may be thinking to yourself, “Is this where Medicaid comes in?” Well, yes, but it’s complicated.

Medicaid is a federal program administered by MassHealth here in Massachusetts. Many people confuse Medicaid and Medicare. We explain that Medicare is basically health insurance while Medicaid is what pays for long term care, such as an extended stay in a nursing home. The catch is that in order to qualify for Medicaid coverage, a person, or a married couple, can have only minimal assets. A married couple can keep roughly $120,000 in liquid assets, one car, a $1500 burial account, life insurance if the cash value is less than $1500 and their house, maybe. This means that everything else must be “spent down” before a person in a nursing home will qualify for Medicaid. This “everything else” includes, but is not limited to, all money in retirement accounts (regardless of whether there is significant tax liability for withdrawing the money), all cash value in any life insurance policies, and all money in any bank accounts. Additionally, the person in the nursing home is allowed to keep only $72.80 per month for personal need, the rest of the person’s income goes to the nursing home. So, any pension money, social security payments, or other income that the spouse in the nursing home was earning now goes to the nursing home, leaving the spouse outside the nursing home with only their own income sources. Once all that money has been handed over to the nursing home, one can apply for Medicaid and, provided everything was done properly, Medicaid will begin paying for nursing home care.

One common response after explaining this is “Why not just transfer everything to the kids and then apply?” Medicaid has what is known as a “five year look-back period”. Any assets transferred within the five years prior to applying for Medicaid can create a disqualification period. By way of example, John, needs to go into a nursing home. Knowing that the money will have to be spent on nursing home care if they don’t get rid of it, but not knowing about the five year look-back period, John and Mary give $100,000 to their children. When they go to apply for Medicaid, they find that John is disqualified from receiving Medicaid benefits for more than 300 days (after he is otherwise qualified, meaning all other money has been spent) because of the $100,000 transfer. So, transferring everything to the kids is not going to work, unless it is done five years prior to needing nursing home care, but who would want to do that?

Now, we mentioned above that a married couple might be able to keep their house. Spouses can transfer assets between themselves within the five year look-back period without incurring a penalty. Thus, the spouse going into the nursing home can transfer his or her interest in the house to the spouse remaining outside the nursing home right before applying for Medicaid. But then what if that spouse needs nursing home care?

So, as you can see, this is a complicated issue, with many nuances not mentioned in this article. There are things that can be done to help protect assets, and even things that can be done within the five year look-back period that won’t create a disqualification period. It is, however, very important to consult with a qualified attorney when taking any action. Don’t be like John and Mary.

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