Most older adults in the United States qualify for Medicare. Those who have worked to support themselves and those married to qualifying wage-earners can receive Medicare medical coverage in their golden years. Medicare is a valuable resource that helps cover basic medical expenses. However, Medicare does not cover long-term care costs such as nursing home expenses or the cost of in-home nursing support. Individuals experiencing physical or cognitive decline later in life often need medical support that Medicare doesn’t cover. Their best option is to apply for Medicaid benefits.
Medicaid is a needs-based program and is very strict about evaluating applicants. The state looks at an individual’s income and their countable assets. It also reviews any significant financial transfers that occurred within five years of the application. Those with large gifts or transfers in their recent financial history may be subject to a penalty.
What is the Medicaid penalty?
If a Medicaid applicant transferred assets in the 60 months prior to their application, the state determines the total value of the assets transferred. The process involves converting that amount of money into a number of months of care costs. After comparing the value of gifts and transfers to the current average monthly cost of nursing home care, the state then makes the applicant responsible for covering their own expenses for that many months.
People may spend a year or longer ineligible for benefits. Although they no longer have access to or control over the assets they gifted or transferred to others, they have to spend roughly an equivalent amount covering their own medical expenses before they are eligible for Medicaid benefits.
The Medicaid penalty puts intense financial stress on individuals who may not be in a position to support themselves. Those who might require Medicaid benefits later in life may want to plan ahead to make qualifying for Medicaid simpler. Planning when preparing for retirement or after health decline begins can help people avoid the Medicaid penalty.
Proper Medicaid planning can help people qualify quickly when they need benefits and can protect their assets from estate recovery efforts. Older adults who understand how the Medicaid program works can plan ahead of time to better ensure that they receive support when they need it the most.
