Are you worried that you’ll have to sell everything you own and be penniless before you or a senior loved one can qualify for Medicaid? Maybe someone told you to not bother applying for Medicaid because you own an expensive home and won’t be eligible. Or, maybe you’re leaving it to the government to sort Medicaid out for you and your family.
If you’re relying on friends and relatives for Medicaid advice and information, you’re probably getting a lot of misinformation. Read six of the most common Medicaid myths to see how they can affect your or a loved one’s care.
6 Medicaid Myths
It’s “extremely common” for people to have misconceptions about Medicaid, says Abigail Wolf, an elder law attorney at the Elder & Disability Law Center in Washington, D.C. That’s because Medicaid rules are so complicated that people often don’t know where to begin.
“Even when we get other attorneys here as clients, it’s hard for them,” says Wolf. “For the average person… there’s a lot of information to learn about and digest, and it’s usually an emotional time on top of everything else.”
Here’s what you need to know about six common Medicaid misconceptions and how they can affect you or a senior loved one’s long-term care:
1. Any penalty period is the same length as my state’s look-back period.
When you apply for Medicaid benefits, there’s a “look-back period” where Medicaid reviews things like account statements, deeds and tax returns looking for asset or cash transfers of non-exempt resources, including gifts to others. That’s because if you’re applying for Medicaid, the government program wants to make sure you didn’t give away money that could now be used to pay for skilled nursing or other services. If you gave away or transferred cash or non-exempt property exceeding your state’s limit, Medicaid will impose a penalty period during which you can’t receive Medicaid benefits. “People often mistakenly believe that a five-year look-back period means there is always a five-year penalty,” says Jeffrey Asher, an elder law attorney in New York, New York.
“The look-back period is merely the period of time during which Medicaid reviews account statements and other proofs of ownership when processing a Medicaid application for nursing home care. That is not the same as a penalty period,” says Asher. “The penalty period is the period of time a Medicaid application is disqualified for Medicaid benefits as a result of transfers discovered during the look-back period.”
When calculating the penalty period, Medicaid divides the amount of non-exempt assets you gave away or transferred during the look-back period by the average cost of a skilled nursing residence in your area. “The penalty period could be five years if the amount you gave away or transferred divided by the average cost of skilled nursing residence care equals five years, but the penalty could also be as little as a few months, depending on the amount,” says Asher.
2. I can’t keep my income if my spouse is receiving Medicaid for nursing home costs.
While it’s true that one spouse’s assets (money and property owned) will count towards the other spouse’s Medicaid eligibility, income is generally treated separately, says Wolf.
Many states go by the “name on the check” rule, which means they only count the applicant spouse’s income toward eligibility. Examples of income include pension and social security.
“Typically, most of the applicant spouse’s income will be paid to the nursing home as a contribution to the cost of care,” says Wolf. “In some cases, a non-applicant spouse will qualify for an income allowance from the applicant spouse’s income.”
3. I don’t need to worry about Medicaid planning.
An elder law attorney can assess your entire financial picture, figure out what you or a loved one can keep and then determine how to best utilize funds over the countable asset limit, possibly saving you money that you might otherwise spend on a nursing home later.
“The earlier people come to us, the more planning options we have available to use,” says Wolf.
“It’s important that people realize how costly long-term care can be and the sooner we can qualify them for Medicaid, the more money we can protect.”
4. I know all about Medicaid from my friend’s experience.
Not true. Your friend in another state is subject to state-specific Medicaid rules that may be different from those in your own state. Even your neighbor usually has a different situation than you or a spouse.