Beyond Water

And … What Is Medicaid?

Elizabeth Anderson, The Law Network, PC, and Mike Henley, MD Henley & Associates

Introduction Many surprises can come up when overseeing care for a friend or loved one. One of the unexpected issues involves paying for the care a loved one might need and covering other expenses incurred when serving as a trustee or Power of Attorney (POA).

No matter the form of care that is needed, it is not cheap. According to the American Council on Aging (ACOA) (1), the national private-pay average for individual nursing home rooms was $108,405/year, or $297/ day. A shared room was $94,900/year or $260/day. But those figures are not set in stone. ForbesHealth (2) reports an even higher range of $280 to $550/day, or $9,000 to $15,000/month. However, the Forbes article does reference the ACOA data as a worthwhile resource, and it should be noted that the ACOA presents cost figures in regions of several states that exceed the average prices listed earlier. Table A provides a sample of statewide nursing home care price estimates based on ACOA data. Not all states are listed in the table. The aim of Table A is to show representative examples of costs in states in different parts of the of the nation. It is important to note that location, private or shared room, and type of care needed impact pricing. Also, within states, nursing home costs can vary based on location (e.g., urban, rural).

Assisted Living

Assisted living is less expensive but can still cost tens of thousands per year. For example, data from AssistedLiving. com (3) for California shows a cost of more than $144,000/ year ($12,020/month) at the high end, and around $10,400 ($873/month) at the low end. The monthly cost for this form of care falls anywhere between these two extremes.

Table A: Examples of Nursing Home Care Price Estimates

State

Alabama Arkansas California Colorado Florida Illinois Kansas Louisiana Maryland Massachusetts Minnesota New York Ohio Texas Washington Statewide Averages* Private Room Daily Cost $231 $220 $400 $320 $317 $235 $224 $199 $400 $445 $430 $435 $270 $233 $344 Yearly Cost

$84,315 $80,300 $146,000 $116,709 $115,523 $85,866 $81,760 $72,719 $146,000 $162,425 $156,859 $158,797 $98,550 $85,107 $125,597 Shared Room Daily Cost $220 $200 $322 $282 $285 $206 $207 $189 $340 $415 $381 $420 $240 $169 $310 Yearly Cost

$80,118 $73,000 $117,530 $102,810 $103,843 $75,190 $75,555 $69,113 $124,100 $151,475 $139,211 $153,300 $87,600 $61,503 $113,150

United States $297 $108,405 $260 $94,900

Source: Based on sample data from table at https://www.medicaidplanningassistance.org/. The full table includes data for different regions and urban areas within each state.

Assisted living can be anything from small cottages in a community or small apartments, to group homes in converted single-family homes. A common theme is that these facilities provide services (e.g., meals, assistance in toileting and bathing) for those not needing long-term care. The cost is affected by the types of services. In the previous paragraph, the high-end cost would be the price one might pay when receiving several services (e.g., bathing, dressing, toileting, dispensing of medicines, mobility assistance, etc.). In contrast, the low-end cost might represent a facility where the primary services are some meals and housekeeping.

Home Care Services

When a loved one’s health precludes independent living, a third option is to bring the help to the residence where he/she lives. At the simple end, this can involve someone to help with cooking, cleaning, companionship, shopping, and transportation to medical appointments. More involved care in the home could involve assistance with bathing and dressing. For those in greater need, care providers may be hired for a daytime shift, or even 24/7 care. The initial cost for assistance with the simple tasks can be around $25/hour. From there, the cost rises, based on the type of care providers and their training. For example, a registered nurse would be much more per hour.

In the case of home care, one would likely work with an agency that would place the caregivers. The value agencies provide is pre-screening of caregivers and the simplicity of being a one-stop service for the different care needs. However, there can be multiple business models within this approach. For example, when helping with my mom, we discovered a firm that would provide caregivers, but in this case, one would pay a placement fee to the agency, for example $20 for a three-hour shift, and then an hourly rate paid directly to the caregiver. In other cases, the caregivers are direct employees of the agency.

Paying for the Long Term Above, we have listed yearly costs in the six figures, which over time will diminish a life’s savings, and eventually take it all—even in the case of the careful saver. For the above types of care, private paying is expected. Of course, there are long-term care insurance policies that will help cover these costs, but with restrictions, based on the policy. The bottom line is that for many families, they will eventually reach the point where the loved-one’s savings are gone and it is necessary to enter a government-run program called Medicaid, which will help qualified individuals to pay for their long-term care.

Much more could be written about the topics covered in the introduction of this article, but for the duration, Elizabeth Anderson, a Denver-area based attorney whose legal practice includes elder law, has graciously agreed to answer some questions from the Analyst about this important topic. Her answers follow.

Medicaid Basics and How It Works The Analyst: What is Medicaid?

Elizabeth: Medicaid is a needs-based program. It is a joint state and federal program that will, in essence, “cover the rent” at an assisted living or skilled nursing facility. Medicaid can also pay for in-home health aides or community-based care.

The Analyst: How does one qualify to be on Medicaid and what are the requirements (financial and otherwise)? Is the application process simple, or is an outside professional needed?

Elizabeth: There are many types of Medicaid programs, and each program has its own requirement process. Qualifying for Medicaid Long-Term Care, the type of Medicaid that covers the cost of the care facility or in-home care for the elderly, can be a little difficult. To qualify for Medicaid Long-Term Care, a threepart test must be met. First, the applicant must have a medical need. If the applicant is over 65 and having difficulty with at least two activities of daily living, such as bathing, toileting, dressing, eating, transferring, and mobility, the person will likely qualify. Second, the applicant’s income must fall below a certain limit. Each of the 50 states has its own criteria, and these figures change each year. Medicaid uniformly, however, includes the same streams of income in this calculation: income from pensions, Social Security, and retirement accounts. Third, the applicant’s assets must fall below a certain limit. A single (unmarried) applicant can only own $2,000 of assets. If a married couple is applying, they can have combined assets of only $3,000. If only one spouse is applying for Medicaid, the applicant spouse can have $2,000 of assets and the healthy spouse can have $137,400. These figures are based on the 2022 figures for

the state of Colorado. Certain assets, such as a primary home, one vehicle, and prepaid cremation or funeral plans, are considered exempt assets.

The Analyst: If one is on Medicaid, what does Medicaid pay for? What will it not pay for? For example, if a nursing home costs $10,000/month, how much of that $10,000 is paid by Medicaid and how much by the patient?

Elizabeth: For nursing home Medicaid participants, nearly all of a participant's monthly income will be paid toward the cost of the nursing home care, and Medicaid will generally pick up the balance. Each state allows the Medicaid participant to retain approximately $30–$200 a month as a personal needs allowance.

The Analyst: Does someone on Medicaid have to requalify yearly?

Elizabeth: Yes. Medicaid eligibility does not automatically get renewed. Each year, a renewal form must be completed with the required supporting documentation for proof of income and assets.

What Does Medicaid Help With? The Analyst: Is Medicaid only designed for older people in nursing homes or assisted living facilities? Or do they have programs for younger people as well?

Elizabeth: There are actually dozens of different types of Medicaid programs. For instance, there are special programs for children, adults under age 65, parents and caretaker relatives, pregnant women, SSI-eligible persons, seniors, and individuals with intellectual or developmental disabilities. Each program has different qualification requirements. While generally, the strictest qualification process is for assistance through the Medicaid Long-Term Care program, it is important to find out eligibility for the specific program you are enrolling in.

The Analyst: Will Medicaid pay for in-home care, or must one live in a care facility?

Elizabeth: Medicaid can pay for in-home care services, but there is typically a cap on how many hours of services or the number of visits a Medicaid participant is allowed each week. Once the level of care exceeds these limits, then a transition to a care facility may be necessitated. Financial Requirements? The Analyst: What is the 5-year look-back rule?

Elizabeth: We typically encounter the 5-year look back rule when someone is trying to qualify for Medicaid Long-Term Care. Since this program has a resource limit as part of the eligibility criteria, Medicaid wants to ensure that Medicaid applicants are not simply giving their assets away in order to qualify. With this in mind, the applicant must disclose to Medicaid any gifts they have made in the past five years. Gifting includes assets that were sold under fair market value and assets that were transferred without fair consideration. If a gift was given in the past five years, a penalty may be applied. A penalty is simply a period of time that the applicant is ineligible. This means that, even though a person may qualify for Medicaid, Medicaid will not pay for care during the period of ineligibility, so the applicant or the applicant’s family must find the means to privately pay for care during the time period of ineligibility. This rule may appear harsh, but had those assets not been gifted, Medicaid would not have needed to pay for care.”

The Analyst: What is “spend down” and what does it affect?

Elizabeth: Generally, when we talk about spend down, this means that the individual is spending down all of their available assets in order to become eligible for Medicaid. For a single person, this may mean they are spending down their nonexempt assets to $2,000. If you are a couple applying for Medicaid, then they would need to spend down their nonexempt assets to $3,000.

The Analyst: How does it work? For example, if I gave my son $75,000 three years ago, and then needed to go into an assisted living facility or a nursing home and ran out of my own private pay money a year later, would that $75,000 gift impact my qualifying for Medicaid?

Elizabeth: Definitely. Since the gift was within the 5-year Medicaid lookback period, Medicaid would determine there is a period of ineligibility. This period of ineligibility is based on where you live and the average cost of care for your particular county. For instance, let’s say the average monthly cost of care in your area is $8,776 a month. Medicaid will state the penalty is $75,000 divided by $8,776, which is 8.55 months in which they would not pay for care. Your son would need

to “cure” this gift, i.e., he would need to pay the money back, to eliminate the penalty, or the applicant will need to find another means to pay for care during this period of ineligibility.

The Analyst: Are there “spousal protection” rules in the event one spouse is healthy but the other one must be admitted into a nursing home?

Elizabeth: Medicaid will look at both spouses’ assets to determine eligibility, but Medicaid does allow the non-applicant spouse, better known as the “community spouse,” to keep up to $137,400 in available resources. A portion of the applicant spouse’s income may be shifted to the community spouse in order to prevent spousal impoverishment. The community spouse is also entitled to any exempt assets, such as their primary home, one car, a prepaid cremation/funeral plan, and $1,500 cash value life insurance.

The Analyst: Can one still own a house and be on Medicaid?

Elizabeth: Yes, a home is generally considered an exempt asset, but the Medicaid applicant must live in the home or have an “intent to return,” and the home’s equity interest must be less than $636,000. If a community spouse lives in the home, these criteria do not apply, and the home is considered exempt. Real estate can be tricky, though. If the community spouse sells the home, moves into a care facility, or dies, the home could become subject to estate recovery after the Medicaid participant dies.

The Analyst: After someone dies, can Medicaid make a claim to all remaining assets, or do they follow a formula? If there is real estate or, for example, valuable collectibles (e.g., coins, antiques), could Medicaid claim part or all of it?

Elizabeth: Medicaid allows for estate recovery. Medicaid is sort of like a loan. If the Medicaid recipient has the means to pay back Medicaid, then Medicaid has the right to collect. Generally, when an individual is on Medicaid, they have spent down their assets. The only asset left to collect from is usually the home. If the home is no longer considered exempt, Medicaid can place a lien on the property in order to be paid back. Medicaid can only recoup what it spent, so if there is a balance remaining after Medicaid is paid back, those excess funds will pass to the next of kin.

Medicaid and One’s Family? The Analyst: The bottom line is that I want to be able to leave some type of inheritance to my family. How can I do so legally and avoid Medicaid’s requirements of a maximum of $2,000 in assets?

Elizabeth: There are a few tools we use in estate planning to shield assets from long-term care. Those tools work best when we have the luxury of time. We can gift money or place funds into various types of irrevocable trusts if we can wait more than five years to apply for Medicaid. As long as the asset is gifted or placed in an asset protected trust outside of the five-year lookback period, the person who created the trust will not be penalized for those gifts. If a client cannot wait five years to apply for assistance, then we may need to look at other tools, such as life care agreements, Medicaid exempt annuities, and irrevocable funeral/cremation accounts.

The Analyst: What happens if someone on Medicaid inherits money or real estate? Do they get kicked off Medicaid?

Elizabeth: They can definitely get kicked off if those inherited funds are not spent down below the Medicaid threshold by the end of the month the funds were received. This is why an appropriate estate plan is so important. If you want to leave an inheritance to anyone who is currently eligible for Medicaid or is likely to become eligible and is under the age of 65, it is imperative that they do not inherit these funds outright. Through the use of a Supplemental (Special) Needs Trust, an individual can inherit and remain eligible for their government assistance programs. If a Supplemental Needs Trust is not created, then, typically, the Medicaid participant is kicked off of their benefits, and they will be forced to spend down.

Useful Resources/Closing Comments The Analyst: Are there any useful websites or books about Medicaid that you would recommend?

Elizabeth: Unfortunately, most websites are too general to provide specific guidance and, as the Medicaid thresholds change yearly, many resource books become quickly outdated. With this in mind, I recommend you

go directly to the source. Check out your state’s local Medicaid website. They are full of helpful information.

The Analyst: Thank you for your time. Is there anything you would like to add to our conversation?

Elizabeth: Don’t be afraid to ask for help. Medicaid is complicated, and there are many rules to consider. This is especially true if you are contemplating protecting assets from long-term care. Consult a local Medicaid eligibility specialist or attorney who specializes in this field.”

References

1. ACOA (accessed June 2022). “2021 Nursing Home Costs by State and

Region,” American Council on Aging, www.medicaidplanningassistance.org. 2. Wigand, M. (June 24, 2022). “How Much Do Nursing Homes Cost?”

ForbesHealth, www.forbes.com/health/healthy-aging/how-much-do-nursing-homes-cost/#scrollto_nursing_home_costs_and_expenses_section. 3. AssistedLiving.com (accessed June 2022). “What Is the Cost of Assisted

Living?” A Place for Mom Inc., New York, New York.

Disclaimer

The content of this article is based on the authors’ personal experiences and/or professional training. It is not intended to be legal advice. Readers with questions should seek the advice of a licensed attorney to address their specific situation.

Beyond Water… is a new column for the Analyst to address issues that members of AWT face in addition to their important work in the water treatment business. If you have an idea for an article, please feel free to send your suggestion to Mike Henley at mdhenleywater@gmail.com. We welcome your input. Elizabeth A. Anderson, Esq., is an attorney specializing in estate planning, business planning, special needs planning, and elder law. She is a partner of the Law Network, P.C., a trusts, estates, and business planning law firm in Metro Denver. Ms. Anderson started her legal career working for the New York State Appellate Court. While there, she represented individuals with mental illness, intellectual and developmental disabilities, and the elderly in a variety of court proceedings, including Guardianships and Conservatorships. When she is not working or volunteering, she enjoys time with her husband and their two young sons. Her family loves adventure, and you will often find them hiking, skiing, or travelling. Ms. Anderson may be contacted at elizabeth@coloradoestateplanners.com.

Mike Henley provides consulting services through MD Henley & Associates and serves as technical editor of the Analyst. He formerly was editor of Ultrapure Water Journal for 27 years and has been active in several aspects of water treatment and the associated businesses for more than 30 years. Mr. Henley’s background includes helping with the organization of the technical programs at more than 60 UPW conferences, including Water Executive Forums.

©2022, Elizabeth A. Anderson, The Law Network, P.C. ©2022, MD Henley & Associates.