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- AlerStallings

The Medicaid Spend Down Rule Explained 


Choosing a nursing home is stressful, and figuring out how to pay for it isn’t any easier. That’s what makes the confusion about what Medicaid and Medicare cover all the more difficult. There is a way to get assistance with your long-term care costs, but you must first understand the ins and outs of the Medicaid Spend Down Rule and take action at the right time.  


First, let’s address one of the most common misunderstandings about Medicare and long-term care. While Medicare does pay for short-term care under limited circumstances, it will not cover long-term care. That means if you’re enrolled in original Medicare (Medicare Part A) and have a qualifying hospital stay (at least three days of inpatient, not for observation), Medicare will pay a portion of the cost of your stay at a skilled nursing facility afterward for up to 100 days. The catch is that you must be admitted for the same reason you were hospitalized within 30 days of leaving the hospital.  


So, what happens after those 100 days, or if you never had a qualifying hospital stay, and can’t afford the continued cost of long-term care? Theoretically, that’s where Medicaid would come in. The problem is you may have too much money. Not only does Medicaid have eligibility limits, it also has rules regarding your countable assets in excess of those limits. This is designed to keep people from disposing of their assets at a moment’s notice—say by transferring everything to their adult child—to qualify for Medicaid. However, that’s not the end of the road. You could potentially qualify through a Medicaid Spend Down. 


In a Medicaid Spend Down, you’ll use the money you have in excess of the eligibility limit to pay for qualifying medical expenses until your excess income is expended. Qualifying expenses include medical bills for you or your spouse, prescription drugs, hearing aids, eyeglasses and more. It’s like how a deductible works with your health insurance—you have to pay a certain amount out of pocket before coverage kicks in.  


Unfortunately, there’s no such thing as a free lunch. Medicaid will want reimbursement. If you’re single, Medicaid will use your home and other assets to offset the cost of care. if you’re married, Medicaid will wait until both you and your spouse have passed or entered a nursing home. Let’s look at an example: 


Jack and Jill have $240,000 in assets. Jack falls down and needs nursing home care. They pay out of pocket for care until they’ve spent down the money in excess of their Medicaid eligibility limit (no more than $2,000 in countable assets for a single person, or in Jack and Jill’s case, $130,380 for a married couple). Now they can receive Medicaid coverage. Under Medicaid’s rules, they can keep the home so Jill has somewhere to live while Jack is in the facility; however, Medicaid puts a lien on the house. Once Jill passes away or goes into a long-term care facility, the house will go into foreclosure.  



Here are a few ways Jack and Jill could have kept their home: 


1.) They could have hired an elder law attorney to try to save at least some of their assets. However, there’s no guarantee on how much they’d be able to retain. 

2.) They could have purchased long-term care insurance. However, because it’s expensive and hard to qualify for, it may have been beyond their reach. 

3.) They could have gotten an asset protection trust, a type of irrevocable trust that would have shielded their assets from the nursing home. For this to be effective, they would have had to put their assets into the trust at least five years prior to when Jack needed long-term care to avoid the Medicaid lookback period. 


Of those options, the third is the best. And while option two—long-term care insurance—isn’t possible for many people, creating an asset protection trust is. It can be a powerful tool, but remember: it’s just one type of trust in a toolbox that contains many others. It’s wise to consult with an elder law attorney to explore all your options.  


- AlerStallings

Receiving an unexpected prognosis happens differently for everyone, but the earth-shattering effects are heartbreaking no matter what. In our practice, we’ve helped many families through these difficult situations. We know that in the wake of receiving the news, it can be hard just to put one foot in front of the other. That’s why we want to share our recommendations for what to do next:



1. Ensure Safety


First and foremost, it’s important that your loved one and those surrounding them are safe. Everything else can wait until you’re confident your loved one isn’t going to be at risk in their daily activities and has the right team in place to support them. That can mean:


– Eliminating trip hazards in and around the home

– Securing the level of support their condition requires, such as in-home or 24-hour care



2. Evaluate Legal Documentation


Once your loved one’s physical safety is secured, it’s time to locate and review their estate plan. You’ll want to understand what documents are in their plan, such as wills, trusts and powers of attorney. Knowing where those documents are will ensure they’re accessible when needed. It also enables you to engage an elder law attorney to update the plan if necessary so your loved one has all the appropriate legal tools in place to protect them. This is a crucial step, as out-of-date or inadequate estate planning could potentially leave your loved one’s finances and final wishes in peril.



3. Achieve Financial Awareness


Speaking of finances, your next step is to understand where your loved one’s accounts are located and who currently has access to them. If your loved one’s significant other relies on the funds in these accounts for financial support, you’ll want to make sure their access is maintained. This will be an important step if your loved one gave someone power of attorney to handle their financial matters.



4. Secure Care


In the first step, the focus was securing your loved one’s safety immediately. Now, it’s time to consider what level of care they’ll need long-term. Navigating the different types of specialists and facilities can be confusing, but your loved one’s physician will likely provide some guidance on options suited for the type of care your loved one will need. In most cases, choosing the exact provider or facility isn’t something the physician can do for you, but that’s why you’re addressing this step now. Doing so gives you more time to do your due diligence and ask the right questions so you feel confident in your decision.



5. Create a Protection Plan


With your loved one’s physical well-being addressed, it’s time to ensure the well-being of their assets. The cost of care—both short-term and long-term—can quickly erode their savings without proper planning. Those who don’t take action may even be at risk of losing their home. Thankfully, there are legal tools that can guard against this, such as an asset protection trust. Assets put in an asset protection trust, including investments and your loved one’s home, are shielded from the cost of care so long as they’ve been in trust for at least five years, which is the Medicaid lookback period. But even if this isn’t an option for your loved one, an elder law attorney can provide other options to minimize their financial risk without compromising the care they need.


Finally, it’s important to know you’re not alone in this difficult time. Our caring attorneys are here for you to provide a listening ear, guidance and comfort in the way forward. As hard as it may be to know what to do next, just by virtue of seeking out this information you’re already well on your way to doing right by your loved one.


- AlerStallings

Spring is here and when it comes to a deep clean, ‘tis the season to leave no stone unturned. Every dust bunny and bit of unnecessary clutter is quaking in its boots. But before you toss that dust cloth in the wash, you might want to give your estate planning binder a quick once over, too.


Proponents of spring cleaning will tell you the practice has a host of benefits, like reducing anxiety, improving focus, and making you happier. In our experience, updating your estate plan has the same effect, too. So why not multiply the “everything in order” good vibes by making your estate plan part of the ritual? Here’s how.


First the Basic


It might seem obvious, but you should first check that the following information is still correct. You’d be surprised how often it’s overlooked:


 –  Has your will been updated in the last 5 years?


–  Do you need to update your address?


–  Have you experienced any changes in your family situation, such a marriage, divorce, birth or death?


–  Are the listed beneficiaries still consistent with your wishes and current circumstances? (This is particularly important if you answered “yes” to the prior question about changes in your family situation.)


–  The same question also applies to your executor, guardian, or trustee, or agent. Have there been any changes that could impact their ability to serve in the role?


Now for the Deep Cleaning


Easy enough, right? You’re on the home stretch. As you start to leaf through the remainder of your estate plan, ask yourself the following:


–  Have your assets changed– such as a new home or business?


–  Are any applicable financial accounts correctly titled in the name of your trust?


–  Do the beneficiary designations on your assets still match those on your estate plan?


–  Do you need to add or update instructions for the care of your pet(s)?-


–  Are you considering making a large financial gift to charity or another individual this year that could have consequences for your estate plan or tax planning?


Next Steps


Let’s say you’ve found some areas that need to be updated or may require attention later this year (for instance, if you know you’ll be planning to move). What should you do next? That’s the easy part. Get in touch with your estate planning attorney to make them aware of the necessary changes. They’ll take it from there. If your estate plan was created by our team, we offer free lifetime support for your documents and annual check-ins, so you never have to hesitate to give us a call.


Once you have your updated estate plan in hand, it’s time for the final step: shredding the outdated documents. Not only is this important for protecting your privacy, but also to avoid any confusion for your loved ones down the line.


That’s all there is to it! Congratulations on completing your spring cleaning. Now go enjoy your thoroughly clean home!