What is the difference between Medicaid and Medicare and how can I protect my assets from being spent on nursing home costs?

Medicaid is a “needs-based” governmental program that provides for long-term care for those who need financial assistance.  Individuals who are blind or disabled may qualify medically for Medicaid, however, an applicant also has to be financially eligible.   Generally, this necessitates that the “available assets” of an applicant are below $2,000.00.  The only assets considered “unavailable” (and therefore do not disqualify an individual for Medicaid benefits) are the applicant’s house (where the applicant resides), a car, an irrevocable funeral plan and a life insurance policy with a face value of $1,500.00, or less.   Assets held in a Special Needs Trust or Third-Party Supplemental Needs Trust are also exempt.   (Please see our section on Special Needs Trusts).  Everything else is considered “available” and precludes eligibility.

In the situation where a disabled person is over the age of 65, he or she automatically qualifies for Medicare.  However, Medicare does not provide for chronic, long-term care, but is only available for acute medical conditions (those lasting under 100 days).  In order to obtain governmental benefits for extended at-home, assisted living or skilled nursing home care, an individual must qualify for Medicaid.  Thus, a Medicaid applicant is required to “spend down” almost all of his or her assets.  The only other alternative to paying out of pocket is to obtain long-term care insurance (not traditional health insurance) which most people do not do because of what they perceive to be its prohibitive cost.

In the case where a spouse seeks to qualify for Medicaid, the government deems that person to be the “institutionalized spouse” (“IS”) and the “well” spouse to be the “community spouse” (“CS”).   It is important to understand that the community spouse’s assets (other than his or her income) are also considered “available” to pay for the institutionalized spouse’s medical care.  It does not matter how long the marriage, whether it is a first or second marriage, or in whose name the assets are held, the current spouse is responsible to spend down his or her own assets to obtain Medicaid eligibility for the institutionalized spouse.  The community spouse is only permitted to retain the house in which the community spouse resides, a car, an irrevocable funeral plan and a life insurance policy with a face value of $1,500.00 or less, as well as an additional amount referred to as the “Community Spouse Resource Allowance” or  “CSRA.”  Based upon the calculated spend down,  the community spouse is permitted to keep a maximum of $113,640.00 or a minimum of $22,728.00 (2012 figures).  These figures are adjusted on a yearly basis for inflation.    All other assets of the community spouse as well as the institutionalized spouse must be liquidated and spent down in order to obtain Medicaid eligibility for the institutionalized spouse.

Monthly costs for nursing home care in New Jersey are now averaging $10,000.00 a month, or more.   At that rate, many families’  assets may be quickly depleted.   However, with proper planning, it may be possible to protect some or all of those funds.  Waiting to plan reduces options and increases the chances that much of what you saved during your lifetime may needlessly be spent on your medical long-term care.   In recent years, the government has made it harder to avoid these costs.   For example, the government now looks back 5 years to determine whether an applicant has given away any money for purposes of qualifying for Medicaid.  Still, there are various exceptions to these spend down rules.  The Law Office of Richard M. Cohen will assist in drafting caregiver agreements (to provide payments to family members), transferring your house to your children through the use of the “caregiver exception,” or transferring your assets to a disabled child, when applicable.   There are many ways to accomplish the spend down of your assets in order to qualify for Medicaid and may even include the use of a special Medicaid approved annuity.

Consulting with the Law Office of Richard M. Cohen when you or a family member is first diagnosed with  Alzheimer’s  disease, senile dementia or some other physical or mental disability is one of the best steps that you can take to protect your rights and potentially preserve thousands of dollars for your family.