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Healthcare, and especially long-term care is expensive.
In Indiana, the average annual cost for a private room in a nursing home exceeds $93,000.00. The increasing population of aged Americans aggravates this problem because as more people age and need more long-term care, the cost will rise. This, in turn, will strain public resources because many Americans do not have enough savings to pay for their own long-term care.
According to a Fidelity Investments Report, around 55% of Americans are at risk for not being able to pay for essential services during retirement. While Fidelity recommends saving 10% to 15% of after-tax income, the United States Bureau of Economic Analysis tells us that the average personal savings rate is 5.7% in the U.S. For these reasons, Medicaid is an important source of health care coverage for many, many elderly and disabled Hoosiers. In the future, we can expect Medicaid’s importance to increase.
Medicare can help to an extent. It pays up to the first 100 days in a nursing home, but it only covers nursing home care when the patient was transferred to the nursing home after inpatient admission to a hospital through 3 midnights. Most supplemental insurance policies are contingent on Medicare coverage. So, supplemental policies are generally unhelpful.
Hence, again, the need for Medicaid. Medicaid is a state and federal partnership wherein Indiana administers the federal healthcare payment system. In Indiana, the Family and Social Services Administration (FSSA) manages Indiana’s Medicaid system. Medicaid helps older and disabled Hoosiers pay some of their healthcare expenses, but applicants must satisfy wealth and income requirements to qualify.
Medicaid pays an unmarried Indiana patient’s nursing home costs if the patient owns “resources” worth less than $2,000.
Resources are nonexempt assets like money, life insurance, investments, land, and vehicles.
Medicaid exempts some assets from the resource definition like pre-paid funerals, income-producing real estate, and household goods and personal effects.
Rule to Prevent Spousal Impoverishment
Federal law protects a Medicaid applicant’s spouse (the “Community Spouse”) from impoverishment. The Community Spouse is allowed to keep normal exempt assets, plus all real estate and one car as additional exempt assets.
If the couples’ total resource value is below a certain minimum value ($24,180 in 2017), the spouse can keep all of the resources.
If the couple’s total resource value is more than the minimum and less than double the maximum value ($241,800 in 2017), the Community Spouse can keep 1/2 of the resources.
If the couple’s total resource value is more than double the maximum value, the Community Spouse can only keep the maximum value ($120,900 in 2017).
The couple must either spend excess resources (a spend-down) or use the excess for exempt assets. The couple should try to avoid transfer penalties which are triggered if they give assets away or sell them for less than fair market value.
Lookback and Transfer Penalties
A transfer penalty is a Medicaid determination that an applicant is ineligible for giving gifts or selling resources for less than market value within the preceding 5 years (the “Lookback Period”) before the date of an application. FSSA computes a period of ineligibility by dividing the dollar value of the property transferred by Indiana’s average monthly nursing home cost.
The disconcerting part about this penalty is that it starts when the applicant needs nursing home care and has resources below the resource limit. So, the penalty starts when the claimant is most vulnerable. This penalty is not a “paper tiger”. On the contrary, it has teeth.
Andrew Can Help!
Like VA rules and regulations, Medicaid eligibility rules are complicated and dense. Drew can help navigate the Medicaid maze.