Although you may not want to think about it, there is a good chance that you (and/or a spouse)will end up in a long-term care facility toward the end of your life. The longer you live, the better the odds that you will eventually need long-term care. For the average person, paying for that care becomes an issue, which is why almost half of all seniors receive Medicaid benefits. If you have never applied for Medicaid before, now is the time to learn more about the Medicaid eligibility rules.
The Cost of Long-Term Care
If you have managed to go your entire life without ever even considering the need to qualify for Medicaid, you are likely wondering why you need to be worried about Medicaid eligibility now. The answer lies in the cost of long-term care — costs that you are statistically likely to incur during your retirement years. Nationwide, the average cost of a year stay in a long-term care facility is about $80,000. North Carolina is about in line with the national average with a year stay in long-term care averaging $85,000. Given that the average length of stay is 2.5 years it becomes easy to see how long-term care costs can quickly deplete your life savings. Moreover, neither most private insurance policies nor Medicare will cover the costs associated with long-term care, leaving Medicaid as the only option for many seniors. Although Medicaid does cover long-term care, you must first qualify for benefits.
Medicaid Eligibility Rules — Income and Asset Limits
The problem qualifying for Medicaid for most seniors is found in the income and asset limits. Though you may not have income that exceeds the program limits, your “countable resources” may be a problem considering the limit is as low as $2,000. Your “countable resources” usually include everything you own except for certain exempt assets, such as a vehicle, household furnishings, and your principal residence.
Medicaid’s Five Year “Look-Back” Rule
Knowing that your countable resources cannot exceed the program limit you may wonder why you cannot simply transfer those assets into someone else’s name. The reason is found in Medicaid’s five year “look-back” rule. The “look-back” rule refers to Medicaid’s ability to review your finances for the five year period prior to applying for benefits for assets transfers. If you did make any assets transfers, and they do not qualify for an exemption, you will face eligibility sanctions. Medicaid employs a formula for determining the length of the sanction that divides the value of the transfers by the average cost of nursing home care in the state. For example, if you transferred assets valued at $150,000 during the look-back period, and the average monthly cost of nursing home care in North Carolina is $7,000, you would suffer a sanction of 21.43 months ($150,000/$7,000 = 21.43) Therefore, you would not get any help from Medicaid with your nursing home expenses for the first 21.43 months.
There are some asset transfers that are considered exempt from the transfer sanctions. A general exemption may apply if you can prove by the “greater weight of the evidence” that the earlier transfer was made exclusively for reasons other than to qualify for Medicaid. As the applicant, you have the burden of proving the transfer has nothing to do with your anticipated need to qualify for Medicaid benefits. In addition, transfers to certain beneficiaries are considered exempt and will not trigger sanctions, including transfers to:
- A spouse (or anyone else for the spouse’s benefit);
- A blind or disabled child;
- A trust for the benefit of a blind or disabled child; or
- A trust for the benefit of a disabled individual under age 65 (even for the benefit of the applicant under certain circumstances).
Finally, special rules also apply to the transfer of your primary residence. If you transferred your primary residence to any of the following people it will not trigger a sanction:
- A child under age 21;
- A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home; or
- A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided such care that the applicant did not need to move to a nursing home.
For additional information, please download our free estate planning worksheet. If you have additional questions about Medicaid eligibility in the State of North Carolina contact the experienced estate planning attorneys at The Law Offices of Cheryl David by calling 336-547-9999 to schedule an appointment.