Financially Fit in 5

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Why You Need to Understand Medicaid as You Age

I’ve just spent countless hours working on a Medicaid application for a senior citizen who is running out of funds and resides in an assisted living facility. It has been a grueling application, taking hours of work and filled with reams of paperwork. In this third part of Financially Fit in Five’s Senior Series, let’s talk about why you should know about Medicaid long before you or a loved one might need it. We’ll get into the crux of the matter and how you might be able to avoid a similar situation after reading this brief overview of Medicaid.

For the purposes of this blog, we will focus on Medicaid as it relates to a senior citizen. This blog is an overall discussion, and you should always seek professional guidance in your State and under your specific circumstances. This post will approach Medicaid using an example of a senior who resides in an assisted living or nursing home facility.

Medicaid is a health insurance program for individuals and families who cannot afford health insurance care costs. Medicaid is a joint Federal – State program. States set eligibility requirements within Federal Standards. Eligibility requirements vary depending upon the State. This does create a complex, bureaucratic set of rules that vary from State to State, which is why an individual must seek out advice in one’s own State.

An item worth noting about Medicaid is that there is an Estate Recovery Program – Medicaid is required to recover from the enrollee’s estate the cost of certain benefits that were paid out for their care. More and more, as States struggle with budgets, you see stories and articles about Medicaid seeking reimbursement from estates on monies which were paid out.

After meeting the basic requirements for eligibility, a senior must have a medical need and a financial need to be eligible for Medicaid. The individual would have to meet both in order to move forward in the application process. So, you cannot have a financial need without the medical need (and visa versa).

Medicaid will review income – Social Security, alimony, defined pension benefit income, and the like. Medicaid is the “payer of last resort” so the income will be applied toward the cost of the nursing home and other health care costs. Again, income standards are State based, and one would need to determine their State’s requirements.

To meet the financial need, a nursing home resident may have no more than $2,000 (two thousand dollars) in countable assets. (There are other rules if you are married and your spouse is not in a nursing home/assisted living facility and, again, those rules are determined and vary by the State in which you reside.)

What is a countable asset? Assets which are countable include investments, checking and savings accounts, CD’s, money market accounts, and the cash value of life insurance policies. If you are married, and your spouse lives in the home you own together, that is normally considered a “non-countable asset.” But go back to the Estate Recovery Plan and keep in mind that the asset may be part of such recovery. Prepaid funeral trust (irrevocable) would also be a non-countable asset. (This is just an overall, general listing and intended to give you an idea and not apply to your individual circumstance.)

Now the reason I brought up the application in the beginning of this blog is because, in order to prove that you have a financial need, there is a 5 (five) year Medicaid look back period. That means Medicaid wants copies of all the statements for all the countable assets for the five years prior to the date of eligibility….every bank statement, investment statement, life insurance policy statements, and, for any payment that is in excess of $500 (five hundred dollars), Medicaid will also require proof of payment – either a copy of the bill or the cancelled check. It is expected that, over the prior 5 years, the funds would have been used for the individual’s health care needs. The using of assets for non-health care can trigger a penalty period or Medicaid ineligibility.

So, the take away here is that as you or a loved one looks toward the future, record keeping will matter. It is time consuming and arduous to go back and recover five years of monthly statements and copies of bills and checks. Take the time to think out the five year scenario and put a plan in place to keep documents and statements in order. I have found that by using on-line bill pay and downloading statements and documents onto a USB drive the recordkeeping is much easier. You can also set up a filing system with a binder or accordion folder. Using the guidelines, you would want to keep the annual Social Security award letter, each monthly statement for each source of income and each countable asset, and copies of any bills in excess of $500 (five hundred dollars). Additional forms to have a copy on hand would be birth and marriage certificates, divorce decrees, Power of Attorney documents, death certificate of spouse ( if applicable), and copies of current medical insurance cards.

Thanks for reading this edition of Financially Fit in Five.