I recently hosted Kevin Condon of Grenier, Humes and Nolan, LLP, on my podcast to discuss many of the misconceptions we see from clients when it comes to Medicaid. Kevin’s practice is predominately focused on elder law estate and long-term care planning, which made him the perfect guest to discuss and dissect Medicaid.
Below I’ve highlighted the seven most common myths surrounding Medicaid, and how we can debunk them with facts and better understanding.
Myth #1: “I don’t need Medicaid because I have Medicare”
Medicare and Medicaid are the cousins of health care. While related, and government funded, they operate as two entirely unique programs.
Medicare and Medicaid were created in 1964 but were designed to serve two entirely different populations. Medicare was intended as a national health insurance program for people that had paid into the system for X amount of years. After 65, they were then eligible for hospital insurance, physician services, and now prescription drug coverage. Medicaid on the other hand was intended for people with little or no assets.
Therefore, Medicare is available to you regardless of your assets and income, while Medicaid has a financial means test (i.e. your income and assets are below a certain threshold).
The other major distinction between the two is what Medicare doesn’t cover. Medicare doesn’t cover home care and Medicare doesn’t cover nursing home care. Which is something you want to be extremely clear about before you retire so you're not stuck footing an unexpected and expensive bill.
Myth #2: “There’s only one way to utilize Medicaid”
Medicaid is divided into two different categories, each with their own qualifications.
- Chronic Medicaid - Individuals who meet the financial means test are eligible for partial and entire coverage of their stay in a long-term care facility under Chronic Medicaid. This is the most commonly understood area of Medicaid.
- Community Medicaid - This service provides personal care aide or home care aide to individuals. This section of Medicaid does not have the same restrictions as far as financial means because there is no look back into your assets. Therefore, if you find yourself in need of home care you can simply transfer your assets to a trust, spouse, or child, and instantly qualify.
Myth #3: “I have assets in a revocable trust, so I have them protected”
When it comes to qualifying for everything Medicaid has to offer, you need to have your assets in an irrevocable trust. This type of trust, compared to a revocable, disconnects you entirely from the assets, which you will need in order to qualify for Medicaid.
Myth #4: “I added my child as a joint owner so now I’m protected”
Medicaid will consider all assets in a joint account as belonging to an applicant. So, if you’ve opted for the revocable trust and added your kids to the account for convenience purposes, Medicaid will still consider 100% of those assets as available to you.
Myth #5: “My gift of $15,000/year per child won’t affect my eligibility for Medicaid.”
For starters, the concept of free gifting has nothing to do with Medicaid. That is a stipulation from the IRS as a taxation concept. Meaning that there is no free pass on gifting under Medicaid. Regardless if you gift one, two, or fifteen thousand dollars, Medicaid will add that up over a five-year period, and say listen, you gave away assets that could have been used to cover nursing home costs. And as a result, you’re ineligible for coverage. Don’t mix up tax laws with Medicaid/Medicare laws.
Myth #6: “I’m going to live in my home forever and pass away peacefully, so why do I need Medicaid?”
Statistically speaking, for individuals over the age of 65, 50% will require some time in a nursing home. The average length of stay is a little over 2 years. How does that translate for us? Chances are we are going to need nursing care at some point.
While it can be difficult to envision a future without your mobility and the freedoms afforded to those living in their own home, it’s important to be aware and plan accordingly for the possibilities. Planning for something doesn’t mean you’re sacrificing control. It’s simply a safeguard around your nest egg of assets.
Is there a perfect time to start transferring money? While there is no accounting for the future, the mid-70's is probably the most appropriate time to start planning for asset transfers.
Myth #7: “If I place my assets in an irrevocable trust, I will have absolutely no control over them.”
If there’s one place where people object to planning, it’s around this misconceived notion that you’re going to lose total control. Fear of losing control inhibits so many clients from doing this type of planning.
With an irrevocable trust you will have to give up some of your control -- but not all of it. If done correctly, an irrevocable trust can be written to allow an individual the ability to substitute a trustee (if you’ve selected poorly from among your children), and change the beneficiary and the absolute right to reside in that trust as long as they choose.
The main control a client would give up with an irrevocable trust is the ability to reach in and act on the principle of the trust. However, your trustees can act on your behalf and manage this for you if necessary. With enough checks and balances, you can ensure your children don’t go rogue on mom and dad’s trust.
As you can see, Medicaid is a complicated service, but it can benefit a person if they understand how to use it correctly. I recommend seeking the guidance of a Medicaid expert when it comes to developing a strategy that fits your needs and your comfort level.
For more information on these Medicaid myths, be sure to check out my latest podcast here. If you’re looking for a great Medicaid planning attorney, reach out to Kevin Condon at firstname.lastname@example.org