Medicaid is the federally mandated health care program that Georgia provides to seniors who need to live in a skilled nursing facility. Medicaid planning helps families ensure that a spouse will not be impoverished by nursing home expenses, that a single nursing home resident is not required to become destitute to receive Medicaid, it can protect the family home from estate recovery and can even allow someone to leave an inheritance to their families.

Georgia Medicaid Planning — Overview

How To Pay For The Nursing Home

One of the things that concerns most people about nursing home care is how to pay for that care. There are basically four ways that you can pay the cost of a nursing home:

Long Term Care Insurance – If you are fortunate enough to have this type of coverage, it may go a long way toward paying for the cost of the nursing home.
Pay with your own funds – This is the method many people choose first. Quite simply, it means paying for the cost of a nursing home out of your pocket. Unfortunately, with nursing home bills averaging between $5,000 and $8,000 per month in our area, few people can afford a long-term stay in a nursing home.
VA Assistance – This type of benefit may be available to someone over sixty-five years of age or disabled who either served in the military or is a surviving spouse of someone who served in the military. VA special pensions can help to pay nursing home bills. Hurley Elder Care Law attorneys are accredited with the VA to provide more information on VA special pensions.
Medicaid – This is a primarily federally funded and state administered program that pays for the cost of the nursing home if certain asset and income tests are met.

What is Medicaid?

Medicaid is a needs based public benefits program that is primarily funded by the federal government and administered by each state. The Medicaid program will help pay for long term custodial care in a skilled nursing facility. It is the resident’s responsibility to contribute his/her monthly income toward the cost of care and the remaining charges are paid by Medicaid. Custodial care refers to assistance with the activities of daily living (i.e., activities like dressing, bathing, toileting, preparing meals and so on).

What About Medicare?

There is a great deal of confusion about Medicare and Medicaid.

Medicare is the federally funded health insurance program primarily designed for individuals over age 65. There is a limited long-term care component to Medicare. In general, if you have had a hospital inpatient stay of at least three days, and then you need to go into a skilled nursing facility (often for rehabilitation), then Medicare may pay for a while.

If you have met these criteria, Medicare will pay the full cost of the nursing home stay for the first 20 days and will continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that’s about $141.50 per day. In order to qualify for these 100 days of coverage, however, the nursing home resident must continue to meet Medicare criteria. It is never possible to predict how long Medicare will cover the “rehabilitation.” From our experience it often falls far short of the 100 day maximum. Also be aware that if you have a Medicare Advantage plan, your coverage may be even more limited.

Why Plan for Medicaid?

As life expectancies and long-term care costs continue to rise, the challenge quickly becomes how to pay for these services. Many people cannot afford to pay $5,000 per month or more for the cost of a nursing home. Even those who can pay for a while may find their life savings wiped out in a matter of months, rather than years.

Fortunately, the Medicaid Program is there to help. In fact, in our lifetime, Medicaid has become the long-term care insurance of the middle class. But the eligibility requirements for Medicaid benefits force you to meet certain financial tests. These tests place limits on the amount of income and assets that you can have. The reason for Medicaid planning is simple… you plan so that if you need it, you will be eligible to receive Medicaid benefits.

Exempt Assets and Countable Assets

To qualify for Medicaid, you must pass some fairly strict tests on the amount of assets you can keep.

To understand how Medicaid works, we first need to review what are known as exempt and non-exempt (or countable) assets.

Exempt Assets

Exempt assets are those that Medicaid will not include in the asset total to determine eligibility. In Georgia, the following are the primary exempt assets:

• Home Place The applicant’s house and all adjoining land and all buildings on the property are excluded from resources if the equity value of the home is $500,000 or less;

• Household Goods Including furniture, decorations, art, and appliances are excluded;

• Burial Exclusion The applicant and his/her spouse can each have up to $10,000 designated for burial expenses. This can consist of a prepaid funeral contract with a funeral home or funds designated for burial in a bank account. The face value of life insurance is applied toward the burial exclusion amount first;

• Burial Space Items Burial plots for the applicant and immediate family are excluded as well as certain other items at the burial site. There is no dollar limit on the cost or value of the burial space items;
• Automobiles One automobile is excluded regardless of value and whether or not it is in use. Note that junked or recreational vehicles are counted as resources;
• Personal Items Personal items such as clothing and jewelry are excluded;

• Retirement Funds Retirement funds such as IRA’s, 401k’s, and pensions are excludable resources if they are being distributed in periodic payments that include a portion of principal. These payments are counted as income in the month received.

• Non-marketable Assets. Assets are excluded while the applicant is making a bona fide effort to sell the asset. A bona fide effort may be evidenced by an advertisement in the newspaper, a listing with a real estate agent or a FOR SALE sign on the property. The property must be listed for no more than its current value, and the applicant must accept an offer if it is at least 2/3 of the current value.

Countable Assets

Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt. This includes the following.

• Life Insurance Policies The cash value of whole life or other life insurance policies is counted as a resource if the burial exclusion maximum has been reached with other assets;

• Investments Stocks, bonds, mutual funds;

• Checking Accounts

• Savings Accounts

• Certificates of Deposit

• Money Market Accounts

While the Medicaid rules themselves are complicated and tricky, for a single person it is safe to say that he or she will qualify for Medicaid so long as the total assets are either exempt and/or are less than $2,000.00. (This is the limit in Georgia).

Some Common Questions:

I’ve added my kids’ names to our bank account. Do they still count?

Yes. The entire amount is counted unless you can prove that some or all of the money was contributed by the other person who is on the account. This rule applies to cash assets such as:

• Savings and checking accounts
• Credit union share and draft accounts
• Certificates of deposit
• U.S. Savings Bonds

Can’t I Just Give My Assets Away?

Giving may be possible; however, it is critically important that you have the advice of an attorney well versed in Medicaid rules.

The law has severe penalties for people who simply give away their assets to create Medicaid eligibility. There is a look back period of five years. In Georgia, for example, every $4,916.55 given away during the look back period prior to a Medicaid application creates a one-month period of ineligibility.

Though some families do spend virtually all of their savings on nursing home care, Medicaid does not require it. There are a number of strategies that can be used to protect your family’s financial security.

Medicaid Planning For Married Couples

In Georgia, the at-home or community spouse is allowed to keep all countable assets up to $109,560.00. The amount of the countable assets which the at-home spouse gets to keep is called the Community Spouse Resource Allowance (CSRA).

Each state also establishes a monthly income floor for the at-home spouse. This is called the Community Spouse Maintenance Needs Standard (CSMNS). This permits the community spouse to keep a minimum monthly income of up to $2,739.00.

If the community spouse does not have at least $2,739.00 in income, then he or she is allowed to take the income of the nursing home spouse in an amount large enough to reach the CSMNS (i.e., up to $2,739.00). The nursing home spouse’s remaining income goes to the nursing home. This avoids the necessity (hopefully) for the community spouse to dip into savings each month, which would result in gradual impoverishment.

To illustrate, let’s assume the community spouse receives $800.00 per month in Social Security. Let’s also assume that her spouse who is a nursing home resident has an income of $2,000.00 per month from Social Security and his pension.

$2,739.00	CSMNS
$800.00	community spouse’s income
$1,939.00	amount to be diverted to community spouse

In this case, the community spouse will receive $1,939.00 per month from the nursing home spouse’s Social Security and pension and the rest of the nursing home spouse’s income will then go to pay for the cost of his care. The nursing home spouse does get to keep a monthly personal needs allowance: a whopping $50!

Once again, this does not mean that there are not other planning alternatives that the couple can pursue.

Consider the following case studies.

Case Studies

Case Study #1

Medicaid Planning for Married People

Ralph and Alice were high school sweethearts who lived in Smyrna, Georgia their entire adult lives. Two weeks ago Ralph and Alice celebrated their 51st Anniversary. Yesterday Ralph, who has Alzheimer’s disease, wandered away from home. Hours later he was found sitting on a street curb, talking incoherently. He was taken to a hospital where he is being treated for dehydration. The family doctor tells Alice she needs to place Ralph in a nursing home. They both grew up during the Depression and have always tried to save something each month. Their assets, totaling $182,000, not including their house, are as follows:

Savings Account $30,000

CD’s $90,000

Money Market Account $50,000

Checking Account $12,000

Residence (no mortgage) $80,000

Ralph gets Social Security and pension checks totaling $1500.00 each month; Alice’s Social Security check is $450.00. If Alice and Ralph have to pay the private pay rate to the nursing home, their entire life savings will be gone in less than two years! What’s more, Alice is afraid she won’t be able to pay her monthly bills, because a neighbor told her that the nursing home will be entitled to all of Ralph’s Social Security and pension checks.

There is good news for Alice. It is possible she will get to keep her income, most of his income and most of their assets . . . and still have the state Medicaid program pay Ralph’s nursing home costs. While the process may take a little while, the end result will be worth it.

To apply for Medicaid, she will have to go through the Georgia Department of Family and Children Services (DFCS). If she does things strictly according to the way DFCS tells her, she will only be able to keep her home and $111,560 ($109,560 for the community spouse + $2,000 for the applicant spouse) of their assets plus she will be entitled to a minimum monthly income to pay her expenses.

But the results can actually be much better than the traditional spend-down, which everyone talks about. Alice might be able to turn the spend-down amount of roughly $75,000 into an income stream for her that will increase her income and meet the Medicaid spend-down right away. In other words, if handled properly, Ralph might be eligible for Medicaid from the first month he goes into the nursing home.

Please note that this will not work in every case. That is why it is important to have an Elder Law attorney guide you through the system and the Medicaid process to find the strategies that will be most beneficial in your situation.

Alice will have to get advice from someone who knows how to navigate the system. But with proper advice she may be able to keep most of what she and Ralph have worked so hard for. This is possible because the law does not intend to impoverish one spouse because the other spouse needs care in a nursing home. This is certainly an example where knowledge of the rules and how to apply them can be used to resolve Ralph and Alice’s dilemma.

Of course, proper Medicaid planning differs according to the relevant facts and circumstances of each situation as well as the state law.

Case Study #2

A Trust for a Disabled Child

Margaret and Sam have always taken care of their daughter, Elizabeth. She is 45, has never worked, and has never left home. She is “developmentally disabled” and receives SSI (Supplemental Security Income). They have always worried about who would take care of her after they die. Some years ago, Sam was diagnosed with dementia. His health has deteriorated to the point that Margaret can no longer take care of him. Now she has placed Sam in a nursing home and is paying $4,000 per month out of savings. Margaret is even more worried that there will not be any money left for the care of Elizabeth.

Margaret is satisfied with the nursing home that Sam is in. The facility has a Medicaid bed available that Sam could have if he were eligible. Medicaid would pay his bill. However, according to the information she got from the social worker, Sam is $48,000 away from Medicaid eligibility. Margaret wishes there was a way to save the $48,000 for Elizabeth after she and Sam are gone. There is.

Margaret can consult an Elder Law attorney to set up a “special needs trust” with the $48,000 to provide for Elizabeth. As soon as Margaret transfers the money to the trust, Sam will be eligible for Medicaid. Elizabeth won’t lose her benefits, and her security is assured.

Of course, all trusts must be reviewed for compliance with Medicaid rules. Also, failure to report assets is fraud, and when discovered, will cause loss of eligibility and repayment of benefits and perhaps even criminal penalties. Still, some people question making gifts before entering a nursing home.

Case Study #3

Can Financial Gifts to Children Protect Your Assets from Medicaid?

After her 73-year-old husband, Harold, suffers a paralyzing stroke, Mildred and her daughter, Joan, need advice.  The doctor tells them that Harold needs long-term care in a nursing home. They have some money in savings, but not enough. Mildred doesn’t want to lose her house and all their hard-earned money. She doesn’t know what to do.

Joan has heard about Medicaid benefits for nursing homes, but doesn’t want her mother left destitute in order for Harold to qualify for them. Joan wants to ensure that her father’s medical needs are met, but she also wants to preserve Mildred’s assets.  Joan and Mildred wonder if Mildred can just give her money away to Joan as a gift, so that she doesn’t lose it when Harold applies for Medicaid. Joan asks, “Can’t my mother give away $13,000 a year?” That way Joan could keep the money for Mildred to meet Mildred and Harold’s future needs.

Joan has confused general estate and gift tax laws with the issue of asset transfers and Medicaid eligibility. The Federal Gift Tax provision allows people to give away $13,000 per donee per year without having to file a gift tax return. What they do not know is that this refers to a Gift Tax exemption. It has nothing to do with Medicaid. A “gift” to a child in this case is actually a transfer and Medicaid has very specific rules about transfers.

At the time Harold applies for Medicaid, the state will “look back” five years to see if any gifts have been made. The state does not let you just give away your money or your property to qualify for Medicaid. Any gifts or transfers for less than fair market value that occurred during the look-back period will cause a delay in Harold’s eligibility for Medicaid.

So what can Harold and Mildred do? They may be able to institute a gifting program, save a good portion of their estate and still qualify for Medicaid. But they have to set it up just right; the rules are very nit-picky. You should consult a knowledgeable advisor on how this may be done.

Estate Recovery

Will I Lose My Home?

Many people who apply for Medicaid benefits to pay for nursing home costs ask this question. For many, the home constitutes much or most of their life savings. Often it is all the couple has to pass on to their children.

Under the Medicaid regulations, the home is an exempt asset (so long as the equity value is less than $500,000). This means its value is not taken into account when calculating eligibility for Medicaid benefits. But in 1993, Congress passed a little-debated law that affects hundreds of thousands of families with a spouse or elderly parent in a nursing home. That law requires states to try to recover the value of Medicaid payments made on behalf of nursing home residents. Estate Recovery does not take place until the recipient of the benefits dies (or until both spouses are deceased if it is a married couple). Then, federal law requires that states attempt to recover benefits paid from the recipient’s probate and in some cases non-probate estate. Generally, the probate estate consists of assets that the deceased owned in his or her name alone without beneficiary designation. The non-probate assets include assets owned jointly or payable to a beneficiary.

About two-thirds of the nation’s nursing home residents have their costs paid in part by Medicaid. Obviously, the Estate Recovery law affects many families. The asset most frequently caught in the Estate Recovery web is the home of the Medicaid recipient. A nursing home resident can often own a home and receive Medicaid benefits without having to sell the home. But upon death, if the home is part of the probate or non-probate estate, the state may place a lien on the property in the amount necessary to reimburse the state for the Medicaid payments that were made.

The state of Georgia recently began a Medicaid Estate Recovery Program. Fortunately, there are ways to protect your property in Georgia or to at least minimize your exposure to Estate Recovery. Since Medicaid rules are constantly changing, you will need assistance from someone knowledgeable about these rules.

Medicaid Planning in Georgia