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MEDICAID PLANNING FAQ

Contents

Q:

MYTH ONE: I’ll have to give the state my home and everything else if I get Medicaid!

A:

TRUTH: The Medicaid Estate Recovery Program (MERP) can make a claim after you pass for repayment of the money it paid for benefits received during life. BUT MERP CAN ONLY RECOVER AGAINST PROPERTY PASSING THROUGH PROBATE. Any property which passes outside of probate – like bank accounts with pay on death provisions – is not subject to MERP.

Lady Bird Deeds pass the homestead outside the probate process and avoid MERP for the biggest resource most Medicaid recipients have at death.

There are also exceptions for property passing by probate including:

  • Property passing to the surviving spouse or

  • where an unmarried adult child has been living in the home for more than a year prior to the death of the recipient.

For most people, there is a reason for MERP to apply!

Q:

MYTH TWO: I can have nothing if I want to get Medicaid benefits.

A:

TRUTH: Long Term Care Medicaid Benefits do have asset limitations, but significant resources can often be protected. Many items do not count toward the asset limitations, including:

  • The homestead up to $536,000 for a single person, unlimited value for a married couple

  • A car of any value

  • An irrevocable pre-need funeral plan

  • Real property up for sale

A single person can have $2,000 in “countable resources”. With a husband or wife still at home, you can protect up to an additional $115,920 in countable resources. With both husband and wife in a facility, one can get Medicaid regardless of their available assets

Q:

MYTH THREE: I can’t get Medicaid because my income is too high.

A:

TRUTH: Any person whose monthly income is insufficient for their care at a nursing facility can meet the income requirements. If your gross monthly income is over $2,130 in 2013, you will be denied Medicaid benefits unless you have a Qualified Income Trust, sometimes called a Miller’s Trust. A Miller’s Trust works by making income not counted for eligibility purposes. The income deposited into the Miller’s Trust account is simply disregarded when determining eligibility. You still pay your applied income to the facility, but Medicaid will pick up the difference between the income and the cost of care – often thousands of dollars a month.

Q:

MYTH FOUR: I can fix my asset problem by giving it to my kids.

A:

TRUTH: Medicaid will assess a transfer penalty for most transfers made for less than fair market value. Medicaid will start the penalty period on the first day of the month in which you have less than $2,000 in countable resources to pay the facility, though you will have to pay privately until the whole transferred amount is paid off.

Medicaid can look back for 5 years for transfers made without adequate compensation.

There are exceptions, including:

  • Transfers between spouses

  • Transfers made to a disabled child or for the sole benefit of a disabled child and

  • Transfers to certain Educational Trust Funds for the benefit of people under the age of 21.

Q:

MYTH FIVE: Medicaid is welfare.

A:

TRUTH: Long-Term Care Medicaid and STAR+PLUS Waiver are work-based programs. In order to receive these types of Medicaid benefits, you must have paid into the system (either yourself or your spouse) and be eligible for a work benefit such as Social Security, Medicare, or Veterans benefits.

Q:

MYTH SIX: I can’t qualify because I paid into Texas Teacher’s Retirement, not social security.

A:

TRUTH: If you qualify for Medicare benefits, you can be eligible, even if you didn’t pay into Social Security, Railroad Retirement, or Civil Service.

Q:

MYTH SEVEN: I can’t go home with Medicaid benefits.

A:

TRUTH: If you are well enough to go home but still need help in the house, the STAR+PLUS Waiver program can help. STAR+PLUS Waiver is a program that can pay for some in-home health care and modifications to the home. STAR+PLUS can be applied for even if you don’t go into a nursing facility and get Long Term Care Benefits first, but there can be a waitlist that way.

Q:

My mom needs help in her home with bathing and dressing. But Medicaid said we might have to wait months or even years to get those services. How are people supposed to survive the wait to get help?

A:

One of the wonderful things Medicaid can do is to provide people with in-home health care to prevent them from being placed in a nursing facility. It can help them stay home, and can pay for a family member to provide that care. It is a source of safety and stability, and, more importantly, it allows them to live in their own homes for as long as possible. But that rosy picture doesn’t account for the problems faced in obtaining these benefits.

It’s a terrible situation- she’s not sick enough to need a nursing home, where she could get benefits almost immediately. Yet, if you are fortunate to only need a measure of help, you are stuck at home alone for months. Many do not survive the wait. The federal government requires the nursing home benefits be offered immediately, but not home health care. States can do more for their people, but not less. Texas has a history of getting in trouble for being too stingy with the benefits. which are called “waiver programs.” If your mom goes on a wait list for years until her name comes to the top, only then can she apply and receive benefits.

In the meantime, she must find other ways to ensure she has care. Often, this means that she will suffer more falls, more hospital visits, and more social isolation. She may have to rely on family members, friends, and on simply denying herself the care she needs. Congress is considering changes that would require home benefits be available as quickly as are nursing home benefits. The Home and Community Based Access Act would end the wait lists. Call your congressperson and let them know that you support the Act. For now, get your mom on the waiting list by calling 855-710-3237.

Q:

My dad needs more care than we can give him at home, but they can’t afford to pay for a nursing home. My parents own a home, a car, and have some savings, so they can’t get Medicaid. Please help!

A:

Great news- your parents can still get Medicaid, even if they own a house, car, and have some savings. I am always moved when I watch clients react upon learning they can easily qualify for Medicaid. It’s like a cloud has lifted from their eyes, revealing a ray of hope. Please don’t assume you do not qualify for home healthcare or nursing home benefits. You may be closer than you realize.

Medicaid rules allow a spouse who needs nursing care to keep anywhere from $26,076 up to $130,380 cash in the bank, as well as a car and a home. The healthy spouse keeps the first $3,259.60 that comes every month, no matter which spouse receives it. If their monthly income is higher than $3,259.60, anything above that is paid to the nursing home. The idea is to allow the healthy spouse to continue living in the community as long as possible. In contrast, the cash limit for single people is only $2,000, plus a house and a car. The common myth is that Medicaid is only for the poorest. However, there are more than 40 Medicaid programs in Texas, and the handful for elder and disability care are designed for working-class, middle-class citizens.

In 1993, Congress, in order to avoid impoverishing all Americans at the end of their lives, included provisions in the Omnibus Budget Reconciliation Act to pay for end-of-life costs, while still allowing a few necessities, like a home, car, and modest savings. The rules were designed to encourage the type of behavior they deem to be good public policy. Educating future generations is encouraged by allowing people with to make contributions to 529 C education funds for children and grandchildren, and then qualify for Medicaid the following month. Likewise, saving money through employment plans like 401Ks and IRAs is encouraged by allowing Medicaid recipients to keep some of those funds, and they DO NOT count toward the resource limits.

Q:

My dad needs Medicaid to pay for his home health care, but he makes more than the income limit. It says he can’t make any more than $2,382, but he makes $3,000. It’s still not enough to cover his care. Please help!

A:

He can qualify for Medicaid! I have had clients who make more than $5,000 per month who still received Medicaid. As long as your dad’s monthly care needs exceed his income, he can get Medicaid. And you have hit upon my pet peeve: there is no income “limit” for long term Medicaid benefits, it is merely a rule. It says if you make more than $2,382, then you can fix the problem with something called a Qualified Income Trust, or commonly known as a Miller’s Trust, named after a gentleman who had the same problem as your dad. Poor Mr. Miller only made a few dollars more than the so-called “limit.” The courts ruled that you can’t just toss someone aside over income limits. As long as his medical needs exceeded his income, Medicaid was ordered to create a system for those who make too much, yet still can’t afford the care. So they came up with the QIT. It’s just a fancy bank account, where your dad’s money will be deposited, and from there he can then use the funds to cover his household expenses. All you need to do is hire a competent attorney to draft a Qualified Income Trust, open a bank account, and redirected his income through the new bank account. It’s that easy! He could qualify as soon as the first month that his income passes through the QIT.

I do caution you to not think about this QIT as a conventional trust. It’s not like any other, in that you don’t put any assets into the trust, you just allow his income to flow through it. At the end of his life, if there is any money left in the QIT, all those funds must be paid to the state for reimbursement of Medicaid payments.

Q:

I don’t have many assets, just my home, car, and some investments. I’m thinking of putting my house in my daughter’s name. There are two reasons: I heard the state will take my home if I get Medicaid, something I would like to prevent. Also, I want to avoid probate costs later on. Are there pitfalls I should consider?

A:

Your question reminded me of the client who came to me only after she used a notary to transfer her home to her son, who promptly kicked her out. I’m sure your child would never do something so vile, but I can’t guarantee it. Beyond the concern of giving up all rights to your home, that transfer could cost you the ability to access home health or nursing home benefits if you need them in the next five years. That’s because Medicaid has a transfer penalty of $213.17 per day for anything transferred for less than fair market value in the past five years. If you transfer a home worth $213,000, then you can’t get Medicaid for 1000 days. And the penalty only starts running once you are in the nursing home. That’s called the “look back period.” You will be unable to access Medicaid during that time. Can you promise not to get sick and need nursing care until November of 2026?

A much better approach is to use a revocable Transfer on Death Deed or Ladybird Deed. They are enhanced life estate deeds, which means nothing actually transfers until the moment of your demise. At that time, all of your legal interests in the property transfer automatically to whomever you named in your deed, in this case, your daughter. And if you decide you don’t want your daughter to have the home, or if you decide to sell it, then you can always revoke the deed. And the best part is both of these deeds avoid the Medicaid Estate Recovery Program. In other words, if you have one of these deeds, the state can’t even attempt to take your home after you die, no matter how much care you received from Medicaid. That’s because the state can only try to grab assets that pass through the formal probate process, like Declaration of Heirship or Probate Administration of a will. The Ladybird Deed and Transfer on Death Deed both remove your home from the formal probate process, and allow automatic transfer. After your death, your daughter merely takes your death certificate to the Central Appraisal District and fills out their form. The district will then replace your name with hers as the owner of the home. These are the only deeds that you can use without risking a Medicaid penalty. When considering a deed, please talk to your attorney about a future-interest transfer deed. When it comes to the formal legal history of your largest asset, it’s best to get good advice before signing anything.

Q:

I was told that the State would take my mom’s house away if she got Medicaid benefits. Is that true?

A:

The program you’ve been told about is the Medicaid Estate Recovery Program (MERP). The answer is that, in some very few cases, the State can recover from the probate estates of people who receive long-term care Medicaid benefits, like the ones providing in-home care or nursing home care, if the person started receiving those benefits after age 55. The good news is that this program is absolutely avoidable in Texas. MERP is not a lien program- it can only recover from probate estates. Probate estates are the assets you must do a probate proceeding to transfer title on. For most people getting Medicaid, that’s the house. The easy way to avoid this is to do a Lady Bird deed or Transfer on Death deed on the house to transfer it outside of the probate process and free from recovery. The deed can be done before or after your mom starts getting the benefits, so long as it is done during her lifetime. Even if she doesn’t plan to avoid MERP, it is often avoidable.

There are a number of exemptions and waivers. If there is a surviving spouse, MERP absolutely cannot recover. If there is a disabled child, a child under 21, or an adult, unmarried child living in the home who has been living there for at least 1 year prior to the death of the Medicaid recipient, there can be no recovery. A number of waivers also exist for beneficiaries with limited incomes, ranging from a total release of the claim to a partial waiver of recovery. In either case, no MERP claim should ever be paid without first consulting an attorney to ensure that it must be paid. The easiest way to do that, though is to do a Lady Bird deed or Transfer on Death deed and pass the house to your mother’s intended beneficiaries absolutely free from recovery by MERP in Texas. Don’t let her be too afraid of this program to get the benefits she needs.

Q:

My mom refuses Medicaid because she was told the State will take her home away. Is that true?

A:

The short answer is: no, not with good planning. The program your mom has been told about is the Medicaid Estate Recovery Program (MERP). Sometimes the State can recover from the probate estates of people who receive long-term care Medicaid benefits. The good news is that this program is absolutely avoidable in Texas.

First, MERP can only recover from probate estates. To avoid this, simply sign a Lady Bird deed or Transfer on Death deed on the house. This transfers the home automatically, which avoids probate and MERP.

Second, even if she doesn’t sign a Ladybird Deed or Transfer on Death deed, MERP is often avoidable. If there is a surviving spouse, MERP can never recover, not even after the surviving spouse dies. If there is a disabled child, a child under 21, or an adult, unmarried child living in the home who has been living there for at least 1 year prior to the death of the Medicaid recipient, there can be no recovery. A waiver or partial waiver is also possible for beneficiaries with limited incomes.

In either case, no MERP claim should ever be paid without first consulting an attorney who specializes in this area to ensure that it must be paid. Don’t let mom be too afraid of this avoidable recovery program to get the benefits she needs!

Q:

Mi madre se niega a Medicaid porque le dijeron que el Estado le quitaría su casa. ¿Es eso cierto?

A:

La respuesta corta es: no. No con una buena planificación. El programa del cual su madre ha sido informada es el Programa de Recuperación de Medicaid (MERP). A veces, el estado puede recuperarse de los estados de sucesión de las personas que reciben beneficios de Medicaid a largo plazo. La buena noticia es que este programa es absolutamente evitable en Texas.

En primer lugar, MERP solo puede recuperarse a través de bienes sujetos a proceso de testamentaria. Para evitar esto, simplemente firme una escritura de Lady Bird o una escritura de transferencia de la casa en caso de muerte. La casa se transfiere automáticamente”, evitaría el proceso de testamentaria en cuanto a la casa y el MERP.

En segundo lugar, incluso si ella no firma una Escritura de Ladybird o una Escritura de transferencia en caso de muerte, el MERP a menudo es evitable. Si hay un cónyuge sobreviviente, el MERP nunca puede recuperarse, ni siquiera después de que el cónyuge sobreviviente fallece. Si hay un niño con discapacidad, un niño menor de 21 años o un adulto soltero que vive en el hogar y que ha vivido allí durante al menos 1 año antes de la muerte del beneficiario de Medicaid, no puede haber recuperación. También es posible una exención o renuncia parcial para los beneficiarios con ingresos limitados.

En cualquier caso, nunca se debe pagar una reclamación MERP sin consultar primero a un abogado que se especializa en esta área para asegurarse de que se debe pagar. ¡No deje que mamá tenga miedo de obtener los beneficios que necesita por razón de este programa evitable!

Q:

My dad is in a nursing home, and they say he can’t get Medicaid because his income is too high. Is there any way to fix it?

A:

Absolutely. There is an income limit for every Medicaid program. For nursing home Medicaid this year, the income limit is $2,313 in gross monthly income. If you’re dad’s income is higher than $2,313 per month, then he isn’t income eligible for nursing home Medicaid benefits.

However, there is a solution. Your father can create a Qualified Income Trust (QIT), also sometimes called a “Miller’s Trust”. This is a special kind of trust that allows the trustee (probably you) to establish a trust bank account. If you correctly put your father’s monthly income into that trust account and pay it out in the right ways, Medicaid will disregard the monthly income for deciding if he meets the income limit. They will still consider it in determining his copayment to the nursing home, though. For example, if his income is $3,000 from Social Security and you put all of it into a QIT, then properly pay it out, he will be income eligible for that month.

QITs have complicated rules and income is only one of the tests Medicaid uses to determine eligibility. It’s important that you seek out good legal counsel who can get you an individual plan to ensure that your father is able to get the care he needs.

Q:

I don’t have many assets, just my home, car, and some investments. I’m thinking of putting my house in my daughter’s name. There are two reasons: I heard the state will take my home if I get Medicaid, something I would like to prevent. Also, I want to avoid probate costs later on. Are there pitfalls I should consider?

A:

Your question reminded me of the client who came to me only after she used a notary to transfer her home to her son, who promptly kicked her out. I’m sure your child would never do something so vile, but I can’t guarantee it. Beyond the concern of giving up all rights to your home, that transfer could cost you the ability to access home health or nursing home benefits if you need them in the next five years. That’s because Medicaid has a transfer penalty of $213.17 per day for anything transferred for less than fair market value in the past five years. If you transfer a home worth $213,000, then you can’t get Medicaid for 1000 days. And the penalty only starts running once you are in the nursing home. That’s called the “look back period.” You will be unable to access Medicaid during that time. Can you promise not to get sick and need nursing care until November of 2026? A much better approach is to use a revocable Transfer on Death Deed or Ladybird Deed. They are enhanced life estate deeds, which means nothing actually transfers until the moment of your demise. At that time, all of your legal interests in the property transfer automatically to whomever you named in your deed, in this case, your daughter. And if you decide you don’t want your daughter to have the home, or if you decide to sell it, then you can always revoke the deed. And the best part is both of these deeds avoid the Medicaid Estate Recovery Program. In other words, if you have one of these deeds, the state can’t even attempt to take your home after you die, no matter how much care you received from Medicaid. That’s because the state can only try to grab assets that pass through the formal probate process, like Declaration of Heirship or Probate Administration of a will. The Ladybird Deed and Transfer on Death Deed both remove your home from the formal probate process, and allow automatic transfer. After your death, your daughter merely takes your death certificate to the Central Appraisal District and fills out their form. The district will then replace your name with hers as the owner of the home. These are the only deeds that you can use without risking a Medicaid penalty. When considering a deed, please talk to your attorney about a future-interest transfer deed. When it comes to the formal legal history of your largest asset, it’s best to get good advice before signing anything.

Q:

My mom had a stroke and needs rehab. The nursing facility says she can only stay for 20 days, but I thought Medicare would cover 100 days of rehab. Why the difference?

A:

Great news: mom can and should get her 100 days of rehab if you can advocate on her behalf. Your mom is getting the "21-day miracle" treatment. Often, the patient cannot go home, and the family is not prepared to care for them. Begin your advocacy by asking the facility if the discharge is in accordance with the lawsuit Jimmo v. Sebelius. Jimmo resulted in a Corrective Action Order from the Centers for Medicare and Medicaid Services. Insurance companies have been using a standard of "must show improvement" or "has maxed out" which are wrong and harmful to patients. All you need to show under JIMMO is that your mom's health would decline without the therapy. There is no requirement to show improvement. Financing is always a factor, and insurance companies contracting through Medicare are happy to cut off care at 20 days rather than pay for the 100 days. In this case, Medicare covers 100 percent of the first 20 days, and only 80 percent of the last 80 days. For those who cannot pay privately, Medicaid can pay the difference. Twenty days is scant time for families to prepare to care for loved ones at home. Ask the facility to help you speak directly to the insurance company about your Jimmo concerns. ment.