Introduction:
There are many Medicaid myths floating around out there. Elder Law Attorneys who practice in this field know most of them. For example, many confuse Medicare and Medicaid. They are not the same. Medicare pays for hospitalization, medical equipment, doctor visits and the like, but does not pay for much in the way of long term care. Medicaid on the other hand, pays for virtually all medical care if you qualify. Medicaid is the largest source of government funding for nursing home care. In Georgia, over 80% of all residents are Medicaid recipients. See Who Pays for Nursing Home Care (Georgia Nursing Home Association). The percentage is similar in Tennessee.
Perhaps the most prevalent Medicaid myth is the one about the Medicaid applicant’s home - that Mom will have to sell her home in order to qualify for Medicaid nursing home benefits. A variation on this one is that the applicant will have to give her house to the government or the nursing home. Neither of these are true unless you fall into a Medicaid trap by taking some action (or fail to take some action) that places assets at risk. Medicaid law is complex. One court described the federal and state laws governing the Medicaid program as the regulatory equivalent of the "Serbonian bog," quoting John Milton's epic poem Paradise Lost ("A gulf profound, as that Serbonian bog Betwixt Damiata and Mount Casius old, Where armies whole have been sunk."). These laws have been characterized by other courts as "almost unintelligible to the uninitiated," as an "aggravated assault on the English language, resistant to attempts to understand it," and as "labyrinthinan."
What appears below are our responses to many frequently asked questions about Medicaid and Medicaid Planning. If you have additional questions, please contact David L. McGuffey by email.
What benefits will Medicaid provide?
If my loved one is on Medicaid, won't they get substandard care?
Is Medicaid Planning legal?
Does Medicaid Planning impact my tax liability?
Will Medicaid take my house?
Who gets the saved assets?
How secure is the money?
Is there any impact on Social Security?
How long will it take to become eligible for Medicaid?
Is it a permanent solution?
Once in a nursing home, doesn't Medicaid require you to 'spend down' all your money on care before you can get on Medicaid?
Isn't it against the rules to give away your assets for the purpose of becoming qualified for Medicaid?
Don't you have to be broke to get on Medicaid?
How come everybody, including my attorney, says I can't give anything away?
Can't I find out from the Medicaid office how to protect assets?
My mother gave me $30,000 last year. Isn't she disqualified from Medicaid for three years?
If there was a way to protect assets from Medicaid, wouldn't my attorney tell me about it (which he has not)?
My father is in a nursing home. I am interested in saving as much of his money as possible for his grandchildren. What choices do I have?
My family has put me in charge of my mother's money, as she is in an Alzheimer's unit. Is there anything I can do where I would not lose control of her finances?
My mother lives with me and I'm still able to take care of her, but her health is deteriorating quickly. Is it too early to get started on a plan, or should I wait until she is in a nursing home?
Is the Georgia Medicaid Manual on the internet?
What benefits will Medicaid provide?
That depends on the state and on the class of assistance you are seeking. Here, we are primarily addressing nursing home Medicaid, but there are many other Classes of assistance. All state Medicaid programs provide benefits for nursing home care. They typically include room and board, nursing care, therapy, prescriptions, supplies and medical coverage. In most states, other types of care are available which are referred to as 'community based care.' Depending on your State, Community Based Care may cover care provided in assisted living facilities, residential care facilities, adult foster care facilities, home care and adult day care. Neither Georgia nor Tennessee provide coverage for care in assisted living facilities, but limited home health care is available. You will need to check with your local Medicaid office to find out which types of care are covered in your state, and if there are any special limitations or requirements for community based care.
Georgia Medicaid Eligibility Criteria
Tennessee Medicaid Eligibility Criteria
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If my loved one is on Medicaid, won't they get substandard care?
Quality of care is a function of the specific facility, rather than the pay status of the patient. Therefore, the most important decision you make is not how to pay for nursing home care, but which facility you use. The truth of the matter is that the majority of long term care patients are already on Medicaid. Sure, there are some 'high class' facilities that cater specifically to those clients for whom cost is not a consideration. But, most facilities will generally have a mixture of Medicaid and private pay patients. For the most part, the actual caregivers have no idea, nor do they care, which is which. Besides, every facility must abide by both state and Federal standards of care. It is against the law to provide substandard care. In addition, every state has an Ombudsman program available to patients and their families to investigate such problems. And, regardless of whether the patient is private pay or on Medicaid, the more involved the family, the better the care of the patient. If you are concerned about your loved one's care, we suggest that you purchase Nursing Homes Getting Good Care There (2nd Edition). This book, published by the National Citizens' Coalition for Nursing Home Reform will help you understand what nursing home care should be like and will help you understand a nursing home resident's rights.
Nursing Home Resident's Rights
Choosing a Nursing Home
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Is Medicaid Planning legal?
Yes. We would not help you do anything illegal. In 2002, Mr. McGuffey co-authored an article entitled Medicaid Planning: Can It Be Justified?: Legal and Ethical Implications of Medicaid Planning, 29 William Mitchell Law Review 111 (2002). There, we examined Medicaid Planning in the context of our current health care market. We concluded that, in the United States, health care is a commodity (e.g., like corn, or cars, or clothing) and you get what you can pay for. In any market, there is no moral or legal reason why you should pay more than the lowest legal price. When we help you plan for Medicaid eligibility, we are showing you how to use the Federal and state Medicaid rules exactly as they are written to get the lowest legal price for long term care. You will learn how to use the rules to your advantage, but you will not be doing anything illegal.
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Does Medicaid Planning impact my tax liability?
It might. Although the Medicaid rules and the tax rules are very different, some Medicaid Planning strategies can trigger a tax liability. For example, in Tennessee, there is a gift tax, so if you "gift" money to someone other than your spouse, you may be required to pay a gift tax of up to 7.5%. If you "gift" your home to your children, they may get what the IRS calls a "carry-over basis" in the property and when they sell it, they may have to pay capital gains tax. Those factors need to be considered in any Medicaid Plan, but the bottom line is that the tax rules and the Medicaid rules are different so don't get them confused. One common point of confusion concerns annual gifting. Many people have heard that they can give away $11,000 per year without a gift tax penalty and they think the same rule applies to Medicaid. It doesn't and that type of gift can trigger a Medicaid penalty. We’re talking apples and oranges here! Don't confuse tax rules with Medicaid rules!
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Will Medicaid take my house?
You will NOT have to turn your house over to Medicaid to qualify for help. Medicaid may place a lien against your house if you enter a nursing home permanently. However, there are several exceptions to this. If you or your spouse or certain others live in the house, Medicaid will not count your house as a resource in determining your eligibility. If you can no longer live there and none of the other specified persons are living there, then Medicaid could ask you to sign an agreement to list your house for sale or rent. In practice, they don't do this in Georgia or Tennessee (this week). Even if it sells, Medicaid does not normally have a claim against the proceeds, unless a lien has been filed. Instead, you may have to go off Medicaid until your countable assets fall within allowed levels. Medicaid cannot tell you how to spend the proceeds, although there are rules about giving money or property away.
Medicaid does have a preferred claim against your estate for care provided from age 55 on. If your house is part of your estate when you die, and if certain persons don't reside there, then it could be sold to reimburse Medicaid for your medical expenses. With careful planning, you can reduce this risk.
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Who gets the saved assets?
In our view, this is the wrong question to ask. The first issue we try to address is how are we going to get quality care for "Mom or Dad." We call this an "Elder-centered approach." We might need to spend some money to get the highest quality of care. However, if we save money, then the assets (which belong to Mom or Dad) should go where the owner says they should go. We are not in the business of altering someone "estate plan" unnecessarily. Thus, if assets are transferred, they are usually given to (1) the person Mom or Dad tells us to give them to; (2) to the persons named in their Will; or (3) to their closest relatives (who would inherit the Elder's assets if the Elder died without a Will. From Medicaid's point of view, though, it does not matter who gets the assets.
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How secure is the money we save?
That depends on what you do. The money is as secure as you want to make it. Since the money is typically transferred to family members, it's their decision as to where the money is placed, or to what use it is put. Although we do recommend that the transferred money be maintained, intact, until after the death of the patient, that is a personal decision on the part of the family. Be aware, however, that some strategies will come under scruitiny after the Medicaid recipient dies. For example, Georgia recently (8/5/04) issued estate recovery regulations where the State claims it has the right to void certain transactions. Whether the State can legally do that remains to be seen. Another thing you should be aware of is that when you give away money, its not your anymore. Thus, if you give $100,000 to your children and then they decide to spend it on themselves, you may not have any recourse. We are very wary of advising you to give away money you might need.
One thing we always tell clients, however, is that we provide competent advice. We do not provide guaranties regarding the security of assets. We can't make promises because we don't get to make the rules and the rules change virtually every time the legislature meets.
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Is there any impact on Social Security?
Probably not, but it depends on whether you are receiving SSI as opposed to Social Security retirement or disability benefits. There is no impact on retirement or disability benefits, but some strategies might impact eligibility for SSI. Therefore, it is important to determine which type of benefits you are receiving.
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How long will it take to become eligible for Medicaid?
It depends on what you decide to do. Medicaid eligibility is linked to variables such as income, expenses, value of assets, etc., which are unique to the State where you are applying for benefits. What we teach you is how to use the Medicaid rules to get a resident financially qualified as quickly as possible, while protecting as much of the resident's assets as possible. The reason why we protect assets is, as we mentioned above, you get the health care you can pay for. Therefore, the more we protect, the more health care you can afford.
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Is it a permanent solution?
Once Medicaid eligibility is established, you usually keep it unless your circumstances change. Factors that could alter eligibility include receiving an inheritance, receiving a divorce or personal injury settlement, or selling an exempt asset. Other factors out of our control include changes in the Medicaid rules. However, if something like that happens, though, we can usually work with you to get back on Medicaid.
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Once in a nursing home, doesn't Medicaid require you to 'spend down' all your money on care before you can get on Medicaid?
You have to be technically broke before you can qualify for Medicaid, but Medicaid does not require that you spend your money on anything in particular. The issue is planning to make sure you spend your money the right way. We will not advise you to spend money just for the sake of spending it. That does not benefit you any more than needlessly spending it on nursing home care.
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Isn't it against the rules to give away your assets for the purpose of becoming qualified for Medicaid?
Yes and No. The most immediate concern is the gifting penalty. You can give away your money, but if you do, then you will be denied Medicaid benefits for a period of time roughly equal to the amount of "nursing home care" you gave away. This is the Medicaid gifting "penalty." If you decide to give away your assets, we will help you do it in a manner than minimizes the penalty.
Another thing some people have heard about is the "Granny's Lawyer Goes to Jail" law. To put a stop to perceived Medicaid Planning abuses, Congress made it a crime for a person to transfer assets to qualify for Medicaid. Such a hue and cry arose over the "Granny Goes to Jail" law that Congress amended it in 1997 to make it a crime to advise, for a fee, a person to transfer assets, although it is entirely legal for the person to do so in order to qualify for Medicaid. A federal court in New York enjoined enforcement of this statute that had placed lawyers at risk of criminal prosecution for advising clients about transferring assets in order to qualify for Medicaid. On March 11, 1998, U.S. Attorney General Janet Reno sent a letter to President of the Senate Al Gore and House Speaker Newt Gingrich, in which she indicated that she would not enforce or defend the law because it "plainly is unconstitutional under the First Amendment." Since that time, although the statute remains on the books, it has not been enforced.
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Don't you have to be broke to get on Medicaid?
Sort of. But "broke" in the real world may or may not mean the same thing as "broke when qualifying for Medicaid." We can show you how to get there while protecting most of your estate to pay for additional health care or other purposes such as passing surplus assets to your family or to charity.
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How come everybody else says I can't give anything away?
Because the 'everybody else' you've been talking to is not spending their free time reading the Medicaid rules. We study the rules so we are prepared to help you when you come see us.
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Can't I find out from the Medicaid office how to protect assets?
Let's think about that one. If you protect your assets, the State pays a larger percentage of your nursing home bill. Do you really think the State is going to help you do that? Similarly, have you ever gotten a phone call from the IRS telling you that if you'd filled out your tax return differently, your tax bill would be lower? I doubt it. However, even if the State was inclined to help you, Medicaid workers are not allowed to give you financial or legal advice.
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My mother gave me $30,000 last year. Isn't she disqualified from Medicaid for three years?
No. That's a common Medicaid myth. Instead, what we look at is whether there was a gift within the last 36 months and, in this case, there was. If so, a Medicaid penalty will be calculated. It may or may not prevent your Mom from getting Medicaid benefits depending on the size of the gift and when it was given.
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If there was a way to protect assets from Medicaid, wouldn't my attorney tell me about it (which he has not)?
Most attorneys do not know the Medicaid rules the same way most attorneys do not know the tax rules. There are literally mountains of Medicaid rules and they change frequently. Unless you see an attorney who deals with Medicaid on a regular basis, they probably can't help you. To explain further, Medicaid is one of the largest components of the state budget, and when the economy falters, budget cutters look for ways to change the rules to limit eligibility and provider reimbursement. At the same time, it is the only tool the federal government has to deliver health care to the uninsured. The Medicaid program has been changed many times over the years adding great complexity. On top of all that, it is a joint federal-state program leading to much variation in rules between states. Maintaining an expertise in Medicaid requires constant monitoring of changes in the law.
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My father is in a nursing home. I am interested in saving as much of his money as possible for his grandchildren. What choices do I have?
Well, again, you may be asking the wrong question. First, we need to take care of your father. After we address his needs (remember, it's his money), then we look to see what he would want to do with his money. If your father wants to give it to his grandchildren, then we can help him do that.
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My family has put me in charge of my mother's money. She is in an Alzheimer's unit. Is there anything I can do where I would not lose control of her finances?
We can help you with Mom's finances, but let's keep our eye on the ball here. The real issue is making certain Mom gets A+ care. We do that by preserving Mom's money to pay for care. We can help you do that by helping you assess where she's at, what benefits she may be entitled to receive and where she need to be. Of course, operating without a plan is like driving without a map. You may get lost in the long term care maze and you may run out of money. Once the money is gone, so are your options.
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My mother lives with me and I'm still able to take care of her, but her health is deteriorating quickly. Is it too early to get started on a plan, or should I wait until she is in a nursing home?
Often it is too late if you wait. For example, if you are healthy and can afford it, long term care insurance is your first line of defense to the catastrophic financial losses of nursing home care. There are numerous ways to make long term care insurance affordable for the average person. Also, while you are healthy, be sure to have an Elder Law Attorney prepare a Durable Power of Attorney and Designation of Health Care Surrogate for you. Properly drafted documents can insure that your spouse, child or other trusted person will have the ability to take whatever steps are necessary to protect you and to preserve your estate. An accident, stroke or other sudden change of health could make you incapable of executing these valuable documents. Without these documents, your family could be forced to spend thousands of dollars on guardianship proceedings for your protection. It's never too early to start planning. The sooner you get started, particularly if care costs are currently relatively low, the greater the portion of her estate that can be preserved.
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Is the Georgia Medicaid Manual on the internet?
Yes. The Manual itself is at www.odis.dhr.state.ga.us/3000_fam/3480_medicaid/MAN3480.doc. We have placed an "Index" page on our website at the following link: www.mcguffey.net/gamedicaidmanual.htm.