We can’t plan properly without considering the potential need for Medicaid.
Florida Medicaid planning is a process during which you can structure your assets and income before you may need to qualify for Medicaid. By doing so you can increase your change of qualifying for Medicaid benefits and keeping more of your assets for you, your spouse, and your heirs. Your goal should be to protect your assets for your family and maximize the benefits of the Medicaid program including the cost of long term care! You may need a special Medicaid planning attorney or you may be able to work with an elder lawyer or estate planning attorney depending on the complexity of your personal situation.
Each year we see long term care insurance policy premiums increase by substantial amounts. There are many markets where a commercial long term care insurance policy is not even available. As the policies increase in cost so too do the costs for the long term care itself. Here in Florida statistics show an average monthly cost of $8,600 for long term care. You may already be aware of how hard it is to find an affordable but qualified care provider! The combination of all these factors means many, if not most, people must use the federally funded Medicaid program to provide them care if there is a disability related or age related infirmity or disability. Nationwide Medicaid is the most common “nursing home insurance” for our country’s middle class citizens.
Please, do not confuse Medicaid, long-term care coverage with the health insurance program called Medicare. While the names can be inadvertently exchanged they are most definitely NOT the same. Medicare is health insurance developed by the government as an entitlement program mostly for elder persons – this has been in place since the mid 1960’s. Medicare is available for you if you are 65 years old or more and have PAID INTO the system or if you are under 65 and have a disability. Medicaid is a “need based program” to assist disabled persons who cannot afford to pay for their own care. Medicaid can provide you with medical care AND long term, skilled nursing care in an assisted living facility (this is known as an SNF – Skilled Nursing Facility). You must show a financial need and your medical necessity/disability. Medicaid is funded by both the State of Florida and the Federal Government with the split about 50% federal and 50% state. Medicaid is administered in Florida by the State of Florida. Medicare is completely funded by the federal government and the entire program is managed and administered by the federal government. In Florida our Medicaid program must meet the federal requirements otherwise we won’t receive the federal funding. In other states requirements for eligibility and available benefits may be very different from our rules in Florida. There are also frequent changes to the rules here in Florida.
Just to make this all very unclear Medicare does cover some of your cost of care at an SNF (such as rehabilitation short term SNF care) but NOT long-term nursing care such as a traditional nursing home. Medicare will cover up to 100 days of care at an SNF but only after you spend three days at the hospital AND your doctor “orders” SNF or a physical therapy regimen is required. If you have home care ordered by your doctor Medicare will likely cover some of that cost. Specifically Medicare pays the first 20 days of nursing care and days 21-100 after a daily co-payment. You can get Medicare Supplement Insurance to assist you in covering the “nursing home deductible” or co-payments under Medicare.
If you require nursing care longer than the 100 days of care provided by Medicare then you must either pay out of pocket, have some supplementary policy OR apply for Medicaid benefits. That which is offered by Medicaid is often the last source for funds to cover nursing care for many people in the United States. And don’t think Medicaid is going to be easier to qualify for than Medicare – it isn’t. Medicaid is complicated and harder to qualify for than Social Security and for Medicare. Many standards must be met and regulations are complicated some of which are federal regulations and others are regulations promulgated by Florida.
One initial requirement for Medicaid is that the applicant must be classified as “disabled.” Who, according to Social Security Administration, is a person who is over the age of 65, blind, or unable to do any substantial gainful activity due to severe physical or mental impairments that will result in death or which have lasted for more than one year and are expected to continue for not less than one year. What does that mean? It means people under the age of 65 may receive Medicaid benefits if they need an SNF and they meet the terms of a “disability”. Our federal government pays income to disabled people using Supplemental Security Income (known as SSI). If you are receiving SSI based on a disability you meet the requirements for Medicaid. People over 65 do not need to be physically or mentally disabled if the doctors say the person requires SNF care.
To receive Medicaid you must prove you are a U.S. citizen or that you have been lawfully admitted as an alien registrant. Here you must also show that you reside in Florida and intend to remain in Florida as your principle residence and your domicile. If you meet residency, medical, and age criteria, you must then qualify for Medicaid under the Florida income terms and asset rules. There are also limits on how much assets a person and his spouse may have in order for an applicant to receive Medicaid assistance.
Florida Medicaid Planning Options
Medicaid planning involves arranging assets and income to meet Florida state requirements on Medicaid eligibility and the basic strategies are:
- Spend down your assets by buying replacement assets that are not counted toward Medicaid asset limits such as improvements/repairs to your home, purchasing cars and paying for advance funeral/burial expenses.
- Transfer assets to your spouse who is not likely to need long term care.
- Transfer assets to your children but this must be done MORE than five years prior to Medicaid application (5 year look back period).
- Create a Medicaid qualifying income trust (a “Miller Trust”) and hold income in excess of the Medicaid income limit in that trust entity.
- Create a Florida Medicaid trustor a qualified income can allow you to shield some assets / income while receiving long term care.
Other things to consider when attempting qualification include: asset transfers to applicant’s spouse are permissible notwithstanding that assets of both spouses are included in a Medicaid application; Transfers to a minor child who is blind or disabled; and transfers to a special needs trust for the benefit of a disabled adult under the age of 65 is also allowed. Also you may, without penalty, transfer your homestead to your sibling who already has an equity interest in the home OR to a caregiver who has lived with you, in the home, for a minimum of the past two years and if those caregiver services have delayed your need for institutional care. Note that almost all other transfers within five years of a Medicaid application are presumed to have been divestitures of assets made with the intent to qualify the transferor for Medicaid.
To help you understand the Medicaid penalty: In Florida, the average monthly cost of care is approximately $8,350 in 2016. For example your transfer/divestiture of an asset worth $16,700 might result in a two-month penalty of benefits. ($16,700 / $8,350 = 2).
If a disallowed divestiture is uncovered when you are in process applying for Medicaid you will have a penalty period. The penalty period will not begin until you spend down your assets to the point where you are finally eligible to receive ‘Medicaid long-term care assistance.’ So you have to spend down to almost nothing and then figure out how to pay for your care for those penalty months starting with the month you are ELIGIBLE. Ultimately, you may find that it is still the best choice to divest inside the 5 year period if you are likely to need long term care beyond the five-year period and the applicant has sufficient exempt assets to privately pay for care during the anticipated benefit penalty assessment.
Activities with your assets prior to the 5 year look-back period have risks to you. Some folks make valid transfer of assets to the kids and everyone agrees the kids will use that gift to support you or supplement your care when needed. BUT, there is always a but, once you gift funds, that money belongs to them—you have no way to force them to spend that money on your care. And worse those funds you gifted can be accessed by the child’s creditors! A ‘judgment creditor’ can seek those assets in your child’s name regardless of the originating source or your/your child’s intents.
Medicaid and Medicare are complicated systems to master. Utilize a professional to guide you and your family through the process.
Call Mario, Gunde, Peters, Rhoden & Kelley, LLC for a consultation about your estate planning and incapacity planning. 321-631-0506, Cocoa Village and Melbourne