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If there is a penalty period, it will result in a Medicaid private-pay period. This means that the individual will have to pay for their own costs in the nursing home for the duration of the penalty period. For example, it the individual has a monthly income of $1,500 and the nursing home costs are $7,000 per month, the question is how to make up that difference and pay for these costs. Generally, the Medicaid penalty period assumes that the applicant gifted or sold assets under fair market value in order to qualify for Medicaid.
While different states have slightly different Medicaid look back period rules, except for California with a 30-month look back period, most states have a 60-month look back period. An Emergency Medicaid Crisis occurs if your family member is in a nursing home, or will need to be soon, but doesn’t have the financial resources to pay for care. A Medicaid Attorney can help you structure your assets and quickly apply for benefits so you can get the care you need – ASAP.
Medicaid Penalty Period And Spend Down Strategies
Irrevocable trusts made during the look-back period are considered gifts. Therefore, they are in violation of the look-back period. However, irrevocable trusts made prior to the look-back period are not considered countable assets. Even gifts for special occasions, such as holidays, weddings, and birthdays, may result in penalization by Medicaid. Further complicating matters is the fact that gifting rules change by state.
While how much a nursing home charges depends on several factors, including its geographical location and the complexity and quality of care, Medicaid pays for all applicable expenses. That is a relief for most families because the average monthly cost of long-term care facilities in Michigan is between $8,000-$9,000. However, an applicant must qualify for benefits based on Medicaid’s restrictive means-based criteria. Once a resident of a nursing home has qualified for Medicaid, the family has no reason to be concerned about financial liability for future care. Federal law requires a nursing facility to accept the Medicaid payment from the welfare department as complete satisfaction, even though what department pays usually is less than the private pay rates. For that reason, helping a parent to preserve Medicaid eligibility is the most important thing an adult child can do to avoid being sued in the future by a nursing home for an unpaid bill.
Got Questions? Get Answers!
The reason for this penalty period is that these assets could have been used to help cover the cost of long-term care had they not been gifted or transferred. A Medicaid applicant is penalized if assets were gifted, transferred, or sold for less than the fair market value. Please note, asset transfers by the applicants spouse can also affect the applicant and can result in a Medicaid penalty period for the applicant.
In contrast, because nursing home care is expensive and the probability of having anything left to pass down to loved ones is reduced, the incentive totransfer assets to their family beforehand is more prevalent. The medicaid penalty period can seem very unfair to someone who made gifts without thinking about the potential for needing Medicaid. For example, what if you made a gift to your daughter to help her through a hard time? If you unexpectedly fall ill and need Medicaid to pay for long-term care, the state will likely impose a penalty period based on the transfer to your daughter. I also am not certain why the money cannot come out of the trust and be put into her account that pays the nursing home. As power of attorney for my bro I take money out of his CDs if needed and put them in his Trust Checking Account, which has automatic withdrawal of his AL monthly, his health care supplemental and etc.
Make Sure The Healthy Spouse Has Money To Survive
All of their income is being given to the nursing home, so none of the other bills are being paid. These are some serious problems that can have an effect on the whole family. While this may seem like a dire situation, there are some options that are available to individuals dealing with the shortfall of finances due to the Medicaid penalty period. The penalty period doesn’t have a limit to the length. The period is gotten from dividing the value of the assets being gifted or sold out and the penalty divisor. The definition of indigent is not specific, but certainly a person whose assets have been exhausted by the ongoing expenses of a long-term care facility would be indigent.
If a transaction is found to be in violation of the look-back periods rules, the applicant will be assessed a penalty. Penalties come in the form of a period of time that the applicant is made ineligible for Medicaid. This means they will not be able to receive care services paid for by Medicaid for a certain number of months or, sometimes, even years. The number of months that you are not eligible for Medicaid benefits is called the “penalty period.” Here is an example of how the penalty period works. Let’s say you live in New York City, and you gave your son or daughter a gift of $134,000 in January 2020. If you needed nursing home care in 2022 , and you filed a Medicaid application, your gift would fall within Medicaid’s look back period.
How Your Assets Impact Eligibility
To calculate the penalty period, it would be the value of the assets sold under fair market value or gifted out divided by the penalty divisor of the state the applicant applied. If you made gifts within five years before applying for Medicaid, Medicaid will not begin paying for your long term care until the cumulative monthly costs of your care exceed the value of the gifts you made. This period of time when Medicaid is not available is known as the Medicaid Penalty Period. Many seniors with limited resources find that their countable assets and/or income exceed their states Medicaid limits. To meet the financial requirements, they must carefully minimize or spend down excess funds on things like medical expenses, home improvements, a prepaid funeral plan, etc. Gifting cannot be part of an applicants spend-down strategy for Medicaid.
Thank you in advance for any help anyone can provide. It took lots of time and effort to set this whole thing up. I just don't want to mess it up with a stupid mistake.
The Medicaid look-back period is a very serious and complicated matter. The best way to avoid violating this period and receiving a penalty of Medicaid ineligibility is to consult a Medicaid planner before gifting or transferring any assets. A Medicaid planner can also offer assistance if you have violated the look-back period.
Essentially, the penalty is equivalent to the length of time one would have been able to pay for long term care had money not been gifted or assets sold under fair market value. The Medicaid penalty period, also called a divestment penalty period, is the timeframe of Medicaid ineligibility that results from violating Medicaid’s look back rule. The penalty period generally begins on the date an applicant applies for Medicaid and is denied for the sole reason of violating the look back rule; it does not start the date a disqualifying transfer was made. In some states, the penalty period might begin on the 1st day of the month in which one submits a Medicaid application and is denied. Once the penalty period is over, one can reapply for long term care Medicaid. For Medicaid eligibility purposes, there is an asset limit, which in the majority of states, is $2,000 for an applicant.
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