Medicaid Planning Facts
Florida Medicaid is the state and federal partnership that provides health coverage for selected categories of people, including the elderly, in Florida. Because having low income and virtually no assets is an eligibility requirement, one of the most complex areas of estate planning involves preparing someone with significant income and assets for eventual Medicaid eligibility. This subset of the estate planning practice area involves concepts that form an important knowledge base for anyone planning for retirement in Florida.
These concepts include activities of daily living (or ADLs for short), nursing home care expenses, income thresholds, asset thresholds, the asset lookback period, Medicaid trusts, and Medicaid advice. Each one of these concepts plays an important role when someone is planning for Medicaid or considering the implications of becoming eligible for Medicaid.
Nursing Home Care Expense
70% of senior citizens will eventually reach a stage in which they will need some form of long-term care. For many, this means moving into a nursing home. Nursing homes in Florida and elsewhere in the US are extremely expensive for the average person. It is not unusual for a single person to pay $8,000 per month to reside in a licensed nursing home, and most people in nursing homes live in them for an average of nearly 3 years according to the National Care Planning Council.
Medicare, the Federal program that provides healthcare to the elderly, does not cover nursing home expenses. However, Medicaid does. The eligibility requirements for Medicaid are much more restrictive than those of Medicare and include both medical and financial tests.
Activities of Daily Living (ADLs)
If the Medicaid applicant can perform certain activities of daily living, they would be considered too able-bodied and therefore ineligible. If so, their application would be rejected.
There are six specific activities that deal with the person’s ability to independently manage their mobility, hygiene and sustenance without the care of a professional. These unassisted activities are:
1. Dressing or putting on clothes
3. Transferring from a bed or chair to a standing position and back
6. Using a toilet
There is graded eligibility based on the degree of assistance that a person needs. If, for example, a Medicaid applicant requires assistance with one out of the six ADLs, then they would be eligible for a category of care called “adult care.” Adult care is assistance by an unskilled (non-nursing professional) person, usually in the home of the applicant.
When a Medicaid applicant cannot perform two out of six ADLs, they qualify for: “assisted living” support. Assisted living is non-medical personal care in a non-institutional social setting, often the person’s own home or a home-like environment.
If three or more out of the six ADLs are not manageable without assistance, and or if a physician’s diagnosis of “severe dementia” is obtained, then an applicant will qualify for Medicaid’s highest level of care, “nursing facility”. A nursing facility is a medical institution where skilled nurses care for the individual in a clinical setting.
In addition to the ADLs, each applicant is required to meet a financial means test which includes both income and asset thresholds.
Medicaid is designed to support individuals and households that are near the poverty line in terms of income.
To be eligible for Medicaid, an applicant must have an annual household income (before taxes) that is below a specified amount for their state. For example, in 2021, an elderly couple’s household would need to make no more than $23,169 per year before taxes to become eligible for Medicaid in the State of Florida.
Medicaid is intended for people with virtually no assets. For a senior applying for coverage to pay for long-term care, the limit on countable assets is $2000. While certain exceptions apply (a home up to a certain value and a car, for example, are exempt) exempted assets may be recovered after the death of the individual Medicaid recipient to repay the government for the cost of long-term care.
Elderly who have not already outlived their income and assets often “spend down” their assets so as to qualify for Medicaid at a later date. This may mean giving descendants and loved ones their inheritances early.
Those who spend down assets have various options. One such option is directly giving away assets meant for inheritance while the Medicaid applicant is still alive. There are pitfalls to this approach, in particular the five-year “lookback period” of spent-down assets. A Medicaid trust is another option.
Asset “Look back” Period
Florida’s Department of Children and Families makes an effort to prevent people from positioning themselves financially to appear poor in order to receive Medicaid benefits. Therefore, in order to receive Medicaid, an applicant must not have passed-on any assets for less than their fair market value within five years of making an application for Medicaid benefits.
This five-year window is known as the “look back” period. One must give away their assets at least 60 months before applying for Medicaid or become ineligible.
…in 2021, an elderly couple’s household would need to make no more than $23,169 per year before taxes to become eligible for Medicaid in the State of Florida.
Note that while overt gifts are considered passing on assets in a way that affects Medicaid eligibility, selling property or assets for their fair market value is not.
One legal exception to the five-year look-back period is that an applicant may give away her assets to a trust. Such a trust is irrevocable and under the control of a trustee.
Applicants may also create income-only Medicaid trusts. A Medicare recipient may continue to receive under-the-threshold income from the trust while keeping the principal in the trust and therefore it would not be considered income by the Medicaid program.
Income and assets in Medicaid trusts must be used to pay for long-term care to offset the government’s costs on a 1:1 basis. Working with an estate planning attorney with a background in Medicaid planning will ensure that the best solutions are combined when rearranging assets prior to beginning a Medicaid application. If you have assets and income and anticipate needing long-term care, it is important, due to the complexity of Medicaid applications, not to attempt to go it alone.
In the State of Florida, only an attorney is legally authorized to advise clients on Medicaid Planning. Advice from non-lawyers, including financial planners and other non-legal professionals, is prohibited by law. This is because the components of Medicaid Planning involve the creation of trusts, drafting of powers of attorney and interpretation of state and federal laws, all of which constitute the practice of law.
If you are managing the process of making yourself or a loved one eligible for Medicaid, be sure to seek the advice of a legal professional who has the knowledge and experience to guide you through this complex area of estate planning law.
South Florida Law
South Florida Law is a full-service estate planning, business and real estate law firm that can assist families in employing a variety of strategies during Medicaid means-testing to become Medicaid eligible. We can also proactively work with families, couples and individuals to protect their homes from Medicaid’s estate recovery program. The best time to begin planning for Medicaid is years before nursing home services are needed. Contact us today for a consultation by calling (954) 900-8885 or via our contact form.