By James S. Rizzo, Esq.*
“Out of intense complexities, intense simplicities emerge.” – Winston Churchill
There is very little “basic” about Medicaid. When faced with a life altering long term nursing home stay, it is important to consult a professional to review your family’s assets and income and to determine the best option, if any, for Medicaid eligibility. Everyone’s asset situation is different and there are exceptions and legal nuances to the figures below, so one should not rely on the numbers provided as legal advice. However, they are a good starting point to understand the complexities involved and the need to consult with a professional.
In brief, when a loved one needs to be placed in a nursing home, the payment options are: private pay, long-term care insurance or Medicaid, if you are eligible. The current average private pay cost in Central and Upstate New York averages $10,000 – $12,000/month and approximately $13,000+/month in the New York City and Long Island area. Long term care insurance can be cost prohibitive and should be scrutinized to see how much coverage per month is allowed and if such amount increases over time with inflation. Thus, as nursing home costs grow, Medicaid becomes a more relevant and viable option for many people. The Medicaid eligibility rules can be complex and there is much disinformation out in the public.
The general parameters for Medicaid eligibility in New York, updated for 2021, are as follows: for a married couple, the spouse at home is allowed to keep a range of marital assets between $74,820 – $130,380, one primary residence (with home equity value up to $906,000), one vehicle and pre-paid irrevocable funerals (for each spouse, children and their spouses). The spouse in the nursing home can keep up to $15,900 in non-IRA assets. The spouse at home is also generally entitled to keep the first $3,259.50/month of joint income (usually pension, IRA and Social Security amounts) but any remaining or “excess income” must be paid to the nursing home.
A single person is more vulnerable to a substantial loss of assets when entering a nursing home. He/she is generally entitled to keep $15,900 in assets, pre-paid irrevocable funerals and only $50/month in income. With the exception of traditional IRAs or other tax qualified funds, most assets above these thresholds can be considered “excess resources” which may be required to pay for nursing home care. While exceptions may apply to protect a primary residence, real property is generally more at risk when a single person enters a nursing home.
You may have also heard of the “5-year look back period”. In short, if an applicant has gifted or transferred an asset for a nominal sum (including real property or other assets over $1,000) within 5 years of applying for Medicaid, the NYS Department of Social Services (“DSS”) may apply a penalty for each transfer, no matter how well intentioned at the time. DSS will generally calculate the penalty based on the amount of the transfers divided by the “regional rate”, which increased in 2021 to $10,857/month in the CNY area, which includes Oneida, Lewis, Herkimer, Onondaga and Madison Counties.
For example, if a CNY resident transfers a home worth $220,000 for a nominal sum or as a gift to a child and ends up in a nursing home within 5 years of that transfer, DSS can generally take the value of the home and divide it by $10,857, to come to a penalty period of approximately 20 months. That means Medicaid will not pay for the nursing home until the penalty period expires. The nursing home resident must privately pay during that 20 month penalty period unless he/she gets the home or other assets back. After the penalty period expires, Medicaid will begin paying the calculated balance, which would also include the monthly “excess income” of the resident. Once a penalty is imposed it is difficult to remedy. The best practice is to address any potential penalty before making a formal Medicaid application.
Having the foresight to proactively set up an Irrevocable Medicaid Trust, where assets, including but not limited to your home and other real property, life insurance, a percentage of savings, brokerage accounts, CDs, stocks, bonds, etc., can be placed, usually pays for itself many times over due to the substantial asset protection it provides. Those assets will be protected 100% from nursing home costs when placed and kept in an Irrevocable Medicaid Trust after 5 years, so long as there is no nursing home event in that time.
Medicaid applications may be offered for submission by a nursing home at no charge; however, if there is an issue regarding eligibility, if substantial gifts or asset transfers have been made in the past 5 years, if there are multiple properties and different funds at stake, or if you are unsure of what you should do, contact an elder law attorney versed in the process.
Long term care Medicaid applications entail gathering a wealth of documents including 5 years’ worth of asset records. While there may be a concern with the legal cost, a professional consultation could save months of Medicaid ineligibility, keeping in mind each month may cost up to $10,000 – $12,000 until all so-called “excess resources” (as outlined above) are drained. One mistake could result in thousands of dollars in costs which might otherwise be avoided or mitigated by taking proper and timely measures.
Contact a professional and request a consultation to thoroughly review your situation if and when you or your loved ones face this situation. If you favor a more proactive approach, use the consultation to get information on crafting an Irrevocable Medicaid Trust to best suit your needs and to insulate your home and other valuable assets from this stressful scenario.
*This article is for informational purposes only and should not be construed as legal advice. James S. Rizzo is an attorney with the law firm of Rheinhardt and Bray, P.C., with offices in Rome and Ilion, NY and serving the CNY area. He has over 25 years of legal experience and currently concentrates in Estate Planning matters, including Wills, Revocable and Irrevocable Trusts, Powers of Attorney, Health Care Proxies, Asset Protection, Medicaid applications and planning. He can be reached at (315) 339-0503 or jrizzo@cnyelderlaw.com for a confidential initial consultation. Visit us on the web at cnyelderlaw.com – Last Revised: February 12, 2021.