Don’t spend down to $2,000 and THEN apply!
Medicaid is one of those words that can bring out powerful emotions in people. No one wants to go on Medicaid, but here is the reality, it provides health coverage to more than 4.6 million low-income seniors. And part of that healthcare is paying for seniors to live out their lives at home, in Assisted Living or Skilled Nursing facilities.
Our goal is to keep mom at home, so early in her care planning I started thinking about how we could use Medicaid to keep her there. You see, the good news is mom is in relatively good health for someone that is 85. The flip side, with any luck, she will outlive her money.
This post does not explain the Medicaid program, or what it takes to qualify, because each state manages its Medicaid offerings. This post shares what we have learned about the five years “look back” requirement. In simple terms, it means that in applying for Medicaid, I must prove that mom (or dad) did not gift someone with $500.00 or more in assets (money or property) over the last five years.
Given this restriction on gifting and the look back period, if there is a possibility you may need Medicaid at some point, then start planning and acting as if you WILL apply from day one. It will save you a world of trouble in the end. (Jump to Tips on how to prepare for applying)
I suggest that part of your initial planning includes looking for an eldercare attorney that will do a brief, free, consultation with you. Understanding up front what current Medicaid requirements are for your state will help you plan for an eventual application. The single biggest mistake most families make is spending down to 2,000 and then applying. You will undergo a penalty period before Medicaid kicks in. If you have spent down all your money how do you pay for care?
While putting together mom’s care plan, initially I struggled with the best way to approach live in care. Should we go direct (private pay), or use an agency? This decision is fraught with pitfalls not the least of which is money. But our decision was impacted by learning about Medicaid requirements, penalties, and what it would take to hire someone and pay employment taxes. (More on this decision in a future post.)
Pulling together the five year look back:
Hoo boy, I quickly learned that you don’t understand the time this requires until you start looking for paperwork and making the phone calls needed to gather 60 months of documentation. Thank God dad was organized and left me contact information. Without it, trying to figure out what he had done would have been impossible. But even with this information, there are deposits he made over $500 dollars that I have no clear documentation on and yet I must answer the question: “Where did these funds come from?” and provide verification. And for checks he wrote over $500.00 the question is: “Where did these funds go?” It’s like putting together a puzzle blindfolded.
I didn’t realize that I would have to provide documentation on accounts that we closed when dad died and that includes the ones that were in his name only. For example, Dad paid his credit cards by check but the credit companies took the money out directly with Electronic Funds Transfer (EFT). Because there is no physical copy of a check, I find myself gathering five years of credit card statements to prove those amounts.
We have been fortunate with the willingness of many financial institutions to help us pull together documentation. But I can’t find monthly statements for one insurance policy that paid out upon dad’s death. A call to the insurance company left me with the advice to have my mother write a letter to them requesting monthly statements, but “I doubt you will get them due to privacy laws, but you can try.” I got the same answer when I asked for a letter stating the policy had been closed and paid out. Seriously? I have the policy and proof of the payout check but will that be enough for Medicaid? I don’t know.
I can’t say enough about the customer service at the small community bank my parents use. The staff there has copied five years’ worth of statements for ALL accounts, even those we closed when dad died, and “unbundled” deposits I had made that were above $500. All without charging us.
- Find an Eldercare attorney that you can trust and practices in your state. Trying to figure out the financial aspect of Medicaid on your own will more than likely result in a denial.
- Find out if your parents have kept paper copies of all financial statements and where they are filed. If there is no paper trail, be sure to get contact names, phone numbers and passwords. Armed with this information, you can go online for copies. Or, request copies from the company. Be prepared to send a letter and a copy of your POA with these requests.
- If you cash in insurance policies, make a copy of the check before depositing and keep any documentation proving payout.
- Keep clear records of where money is deposited or how it was used. For example, I paid for my father’s funeral and then was paid back when insurance money came in. I will need to show that transaction to prove it was not a gift to me.
- If you close an account like a credit card, keep the final statement that shows zero balance and ask for a letter stating the account was closed. Even though mom has her own credit card, I will need to prove that dad’s credit cards were closed because it is during the five years look back.
- As you close accounts, don’t bundle deposits if the sum of all checks will be more than $500.00. Make deposits in amounts less than $500. When we closed PSE&G and opened an account in mom’s name, I bundled that refund check along with several others into one 900.00 deposit. Now I need to get copies of each check to show where the money originated.
Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.