What is “Medicaid planning”?
As part of my law practice, I frequently advise clients on long-term care planning concerns, including with respect to “Medicaid planning” concerns for elderly and disabled Hoosiers. What is “Medicaid planning” in this context?
When a client or a client’s family member either (1) has to enter or already has entered a nursing home in Indiana because of disabilities or age-related infirmity, or (2) is likely to enter a nursing home in Indiana within a few years, determining how to pay for the ongoing cost of that care usually becomes a paramount concern. In those situations, I frequently provide advice and plans to clients as to how to lawfully preserve assets and income while concurrently arranging for payment of the ongoing nursing home expense. Typically, these wealth-saving plans are accomplished by interacting with rules and regulations for the Indiana Medicaid program, in order to get Indiana Medicaid to pay some or all of the nursing home expense. Accordingly, this part of my law practice is usually referred to as “Medicaid planning.”
In my practice, I find that many of my clients have common misconceptions about how long-term care expense is paid. In most scenarios, the cost of nursing home expense for an elderly or disabled Hoosier will be paid in one of the following three (3) ways: (1) privately, with the assets and income of the elderly or disabled Hoosier or his or her immediate family; (2) through benefits paid under a long-term care insurance policy purchased in advance of need; or, (3) through the Indiana Medicaid program. Of these three (3) methods, payment via the Indiana Medicaid program is by far the most common; most Hoosiers in this situation do not have long-term care insurance in place, and many cannot continuously afford to privately pay a nursing home approximately $6,000 to $8,000 per month. Further, it is important to know and remember that Medicare (which is a different government program than Medicaid, even though they share a similar name) does not generally pay for long-term care provided at a nursing home; instead, Medicare typically only pays for long-term care at a nursing home if the patient requires skilled services or rehabilitative care, and then only for a maximum of 100 days (with the usual payment period being much shorter).
Medicaid planning typically has two modes: crisis and non-crisis. In crisis mode, the elderly or disabled Hoosier typically has already entered the nursing home or is about to enter, and he or she (and his or her immediate family) frequently has immediate concerns and needs regarding what assets and income can be lawfully saved while still qualifying to have Indiana Medicaid pay the nursing home bill. In non-crisis mode, the elderly or disabled Hoosier is generally not already so elderly or disabled that nursing home care is a certainty; however, he or she has reached an age where the need for nursing home care is a realistic possibility at some point within perhaps a few years.
When in crisis planning mode, the financial tests and rules set forth in the Indiana Medicaid laws appear, at first glance, to generally require the elderly or disabled Hoosier to spend most of his or her assets and income on the nursing home expense before Indiana Medicaid will help pay. Usually, the easiest thing (but sometimes the costliest thing) for the family to do in this situation is to spend the elderly or disabled Hoosier’s assets and income down to virtually nothing, in an effort to get him or her in a position where he or she will finally qualify to have Indiana Medicaid pay the nursing home expense. However, this is frequently where Medicaid planning and a knowledgeable attorney can make a significant difference. A knowledgeable attorney familiar with the Indiana Medicaid laws knows that lawful options typically exist under the Indiana Medicaid rules in a crisis-planning situation whereby certain amounts of income and assets can frequently be preserved in one fashion or another while still getting the elderly or disabled Hoosier promptly qualified for Indiana Medicaid to pay some or all of the nursing home expense. Particularly when the elderly or disabled Hoosier is married and his or her spouse will continue living at home, significant planning opportunities frequently exist in a crisis-planning situation.
When in non-crisis planning mode, the financial tests and rules set forth in the Indiana Medicaid laws once again make it appear, at first glance, that little can be done to help preserve a Hoosier’s assets and income should nursing home expense be incurred at some point in the future. However, once again, this is frequently where Medicaid planning and a knowledgeable attorney can make a significant difference. A knowledgeable attorney familiar with the Indiana Medicaid rules knows that, in many situations, a host of planning opportunities is routinely available to help that Hoosier and his or her family preserve and/or transfer assets and income in a lawful, Medicaid-friendly way. In some instances, this will involve the use of certain gifting strategies and certain kinds of irrevocable trusts.