10 Medicaid Myths
Myth # 1. You are allowed to give away $19,000 a year without a Medicaid divestment penalty.
Fact: $19,000 is the amount of the annual gift exclusion that is allowed before gifts to an individual must be reported to the IRS. This does not apply to Medicaid. In reality, most gifts that are given in the previous 5 years are subject to a divestment penalty. This means that Medicaid will not pay for nursing home expenses for a given amount of time even though the patient otherwise qualifies for Medicaid.
Myth # 2. It’s a good idea to spend as much as you can before you go into the nursing home so you can qualify quickly.
Fact: While it may help you to qualify quicker in some instances, in other situations if you spend down before you go into the nursing home, you will have less money available to you or your spouse after you qualify. Also, you may be spending money needlessly because you may already qualify for Medicaid and not even realize it.
Myth # 3. I’ve already given my money to my kids in my will so it’s protected.
Fact: A will is completely unrelated to Medicaid qualification. A will only applies after the person has passed away while Medicaid deals only with the assets that are available at the time of application.
Myth # 4. I have more than $2,000 in assets so I can’t qualify for Medicaid.
Fact: The standard asset limit has increased to $9,660. However, because some assets are countable while others are not, in some situations you may be able to have more than the standard asset limit and still qualify for Medicaid. Additionally, when the patient has a spouse who is not in the nursing home, the spouse will be allowed to keep some or all of the assets after the patient is on Medicaid.
Myth # 5. When I’m on Medicaid, my social security income will go straight to the nursing home.
Fact: Your Social Security income will still be deposited into your bank account. However, in most situations there will be a Patient Pay Amount that will need to be paid each month to the nursing home.
Myth # 6. I’m in the nursing home and I only have enough money for 2 more months. I should apply now so I’ll be approved and be on Medicaid by the time my money runs out.
Fact: You should only apply for Medicaid after your countable assets are low enough; otherwise you will be denied. While it may take up to 45 days for you to be approved for Medicaid, your coverage will be effective as of the beginning of the month that you applied.
Myth # 7. If I go on Medicaid, I’m going to lose my home to the nursing home.
Fact: In Michigan, you can keep your home as long as you are living when you are on Medicaid. However, Michigan now has Estate Recovery which means the state can put a lien on the home after the patient and their spouse both pass away in order to recover the cost of Medicaid expenses. A Medicaid consultant can recommend a way to protect the home from Estate Recovery without incurring a divestment penalty.
Myth # 8. I can buy prepaid funerals for my kids as a way of spending my money down.
Fact: While certain funeral costs can be prepaid for your children without a divestment penalty, you cannot prepay the entire amount of a child's funeral.
Myth # 9. I’m covered by Medicare and my supplemental insurance for 100 days. I don’t have to think about Medicaid until that is finished.
Fact: It is a good idea to get the information you need earlier rather than later. If you need to spend some of your assets, it will usually be easier if you have more time to do it. Furthermore, you may need to cash in a life insurance policy or an annuity in order to spend it down and qualify for Medicaid; it can sometimes take several weeks to get this money. Also, if any assets have been gifted, it may be helpful to qualify for Medicaid early in the 100 days so the divestment penalty will be in effect during the time that is already being covered by Medicare and your supplemental insurance.
Myth # 10. I need to hire a lawyer to apply for Medicaid because it’s so complicated.
Fact: In most cases, you will not need a lawyer to qualify for Medicaid. A Medicaid consultant is considerably less expensive than an attorney and can give practical information. However, in some situations a lawyer may be recommended to prepare certain legal documents.
Myth # 1. You are allowed to give away $19,000 a year without a Medicaid divestment penalty.
Fact: $19,000 is the amount of the annual gift exclusion that is allowed before gifts to an individual must be reported to the IRS. This does not apply to Medicaid. In reality, most gifts that are given in the previous 5 years are subject to a divestment penalty. This means that Medicaid will not pay for nursing home expenses for a given amount of time even though the patient otherwise qualifies for Medicaid.
Myth # 2. It’s a good idea to spend as much as you can before you go into the nursing home so you can qualify quickly.
Fact: While it may help you to qualify quicker in some instances, in other situations if you spend down before you go into the nursing home, you will have less money available to you or your spouse after you qualify. Also, you may be spending money needlessly because you may already qualify for Medicaid and not even realize it.
Myth # 3. I’ve already given my money to my kids in my will so it’s protected.
Fact: A will is completely unrelated to Medicaid qualification. A will only applies after the person has passed away while Medicaid deals only with the assets that are available at the time of application.
Myth # 4. I have more than $2,000 in assets so I can’t qualify for Medicaid.
Fact: The standard asset limit has increased to $9,660. However, because some assets are countable while others are not, in some situations you may be able to have more than the standard asset limit and still qualify for Medicaid. Additionally, when the patient has a spouse who is not in the nursing home, the spouse will be allowed to keep some or all of the assets after the patient is on Medicaid.
Myth # 5. When I’m on Medicaid, my social security income will go straight to the nursing home.
Fact: Your Social Security income will still be deposited into your bank account. However, in most situations there will be a Patient Pay Amount that will need to be paid each month to the nursing home.
Myth # 6. I’m in the nursing home and I only have enough money for 2 more months. I should apply now so I’ll be approved and be on Medicaid by the time my money runs out.
Fact: You should only apply for Medicaid after your countable assets are low enough; otherwise you will be denied. While it may take up to 45 days for you to be approved for Medicaid, your coverage will be effective as of the beginning of the month that you applied.
Myth # 7. If I go on Medicaid, I’m going to lose my home to the nursing home.
Fact: In Michigan, you can keep your home as long as you are living when you are on Medicaid. However, Michigan now has Estate Recovery which means the state can put a lien on the home after the patient and their spouse both pass away in order to recover the cost of Medicaid expenses. A Medicaid consultant can recommend a way to protect the home from Estate Recovery without incurring a divestment penalty.
Myth # 8. I can buy prepaid funerals for my kids as a way of spending my money down.
Fact: While certain funeral costs can be prepaid for your children without a divestment penalty, you cannot prepay the entire amount of a child's funeral.
Myth # 9. I’m covered by Medicare and my supplemental insurance for 100 days. I don’t have to think about Medicaid until that is finished.
Fact: It is a good idea to get the information you need earlier rather than later. If you need to spend some of your assets, it will usually be easier if you have more time to do it. Furthermore, you may need to cash in a life insurance policy or an annuity in order to spend it down and qualify for Medicaid; it can sometimes take several weeks to get this money. Also, if any assets have been gifted, it may be helpful to qualify for Medicaid early in the 100 days so the divestment penalty will be in effect during the time that is already being covered by Medicare and your supplemental insurance.
Myth # 10. I need to hire a lawyer to apply for Medicaid because it’s so complicated.
Fact: In most cases, you will not need a lawyer to qualify for Medicaid. A Medicaid consultant is considerably less expensive than an attorney and can give practical information. However, in some situations a lawyer may be recommended to prepare certain legal documents.