Although advance Medicaid planning is preferable and provides much better options, people in this unfortunate position can employ crisis strategies to spend-down assets in permissible ways to achieve eligibility. Among other things, this type of planning frequently involves the use of a special type of annuity, called a single premium immediate annuity (SPIA) to convert countable assets into a noncountable income stream.
Yes, so long as the gifts are outside the 5 year look back period. However, after the gifts are made, you will have no control over how the assets are used and the assets will be vulnerable to the recipient’s creditors. For example, a parent who gives assets to a child that gets a divorce may see those assets awarded to the child’s ex-spouse by a court. There may also be adverse tax consequences for such transfers as well, particularly when real estate is involved.
A properly constructed Medicaid Asset Protection Trust, a type of irrevocable trust, can be used to protect assets from nursing home costs. After 5 years have passed, any assets placed into such a trust are not countable when determining eligibility.
Insurers offer long term care policies and life insurance policies with long term care riders to protect against these costs. However, such policies are not inexpensive and the applicant must pass medical underwriting in order to qualify. Note that long term care insurance that generally provides at least $125 per day of nursing home coverage for at least 2 years with an elimination period (days services are provided before benefits “kick in”) of not more than 1 year will protect the home from a MassHealth lien.
The home of a MassHealth applicant or spouse is generally considered a noncountable asset, so long as the equity in the home is under a certain limit. As of 2021, that limit is $906,000. However, MassHealth will place a lien on the home to recover for benefits paid. The lien must be satisfied in order to sell the home. For many married couples, the lien is paid following the death of the second spouse, when the home is sold during estate administration.
MassHealth calculates the period ineligibility by dividing the total value of the disqualifying transfers by the average monthly cost of a private patient receiving nursing home case in Massachusetts at the time of the application, as determined by the agency. For example, if a community spouse gifted $150,000 to a child within the 5 year look back period and the average cost of nursing home care was $15,000 at that time, MassHealth would impose a 10 month period of ineligibility.
For those seeking MassHealth coverage of nursing home care, the agency generally reviews any transfers of assets for less than fair market value going back five years from the date of the application. Any such transfers may be deemed disqualifying, which will result in a penalty period being imposed on benefit eligibility.
Many couples in this situation apply for Medicaid benefits. In Massachusetts, Medicaid is administered by MassHealth. In order to qualify for MassHealth nursing home benefits, an individual may only have $2,000 in countable assets. For married couples, the institutionalized spouse may only have $2,000 in assets and the community spouse may only retain a certain amount of countable assets, called the Community Spouse Resource Allowance (CSRA), which is adjusted yearly. As of 2023, the CSRA is $148,620.
Medicare only provides limited coverage for nursing home care. There are many exceptions, but generally Medicare will only pay for up to 100 days of nursing home care so long as the move to a qualified nursing home was preceded by a hospitalization of at least three days and the patient requires nursing home level care.