WHAT IS MEDICAID PLANNING?

Published: March 21, 2019

WHAT IS MEDICAID PLANNING?

Medicaid planning is structuring your finances and assets to optimize your ability to pay for coverage of the future costs of long-term care, such as in-home or nursing care.
Medicaid planning is similar to tax planning; we all want to look at our financial situation to minimize tax liability throughout our lives and to our estates after we die. Medicaid planning is the same–it’s possible to minimize our out-of-pocket care costs through Medicaid eligibility.
Financial strategies, supported by the laws of the state in which you live, may be utilized so that one spouse may retain assets while the other spouse can be supported by Medicaid for their long term care costs. Many of these laws are in place so that a healthy spouse isn’t punished financially while the care needs for the ill spouse can be supported via Medicaid.

WHY DO I NEED A MEDICAID PLAN?

We all know that any form of long-term or nursing care is very expensive. As we age, particularly when one spouse requires long-term care and the other can live independently, the concerns about financial security for both are considerable.
Medicaid planning can provide Medicaid eligibility for one spouse while preserving assets for the healthy spouse.
Ideally, your Estate Planning will be put in place long before any question of Medicaid eligibility arises–while you are still living independently and healthy.
- Medicaid planning can be done once the need arises, but the process requires time, expertise and patience.
- The sooner you establish your plan, the more options you will have available.

HOW CAN I DETERMINE MY MEDICAID ELIGIBILITY?

How your finances compare to the federal and state guidelines determines Medicaid eligibility. Your current health situation figures in as well. It’s a complicated analysis that a professional such as an elder care attorney should undertake with you.
Items such as income, real estate, savings accounts, brokerage account balances, and insurance policies are among the items that can determine your eligibility. Again, it depends on the state in which you live.
- Eligibility may differ slightly for married and single people.
A professional’s assessment should be done before you fill out any forms to apply for Medicaid.

WHAT WILL MY MEDICAID PLAN INCLUDE?

Everyone’s financial situation is unique, and every state has different guidelines, so there are no hard or fast rules about what your plan will involve.
Here are some examples of Medicaid plan components:
- The simplest form of Medicaid planning is having an experienced professional assist you with filling out the application forms. If your eligibility is straight-forward, this is the right path for you.
- A more complicated plan for a married couple can include:
  - Establishing irrevocable trusts. This removes certain assets from your eligibility calculation.
  - A transfer deed for your primary home. When the well spouse plans to continue to live at home, your state may allow a deed transfer into the well spouse’s name. This will protect the home from liquidation to cover costs of care.
  - Establishing an annuity. An annuity can help you “spend down” assets per the Community Spouse Resource Allowance (CSRA) for your state. You purchase an annuity with existing assets; the annuity provides a source of steady income for the healthy spouse, while setting up Medicaid eligibility for the ailing spouse.

Here’s a simple example of an annuity – based solution for a married couple:

James (80) and Julia (77) live in New Jersey. James has recently been diagnosed with Dementia. He will need to move to a memory care residence since his care needs will soon go beyond what Julia can handle. His memory care residence will cost $8,000/month.

The couple’s Medicaid-countable assets total $250,000.

Julia’s goal is to get James eligible for Medicaid and move him into the memory care facility she has chosen–while providing income for herself and preserving their assets. Julia makes an appointment with Scott Bloom, an eldercare attorney, to put together her Medicaid plan. She brings all of their financial information with her to the appointment.

For starters, Scott states that James’ and Julia’s community assets must be “spent down” to $123,600, under New Jersey law for the Community Spouse Resource Allowance (CSRA) threshold. Right now, James and Julia are currently over New Jersey’s CSRA by $126,400 ($250,000 minus $123,600).

Scott recommends Julia set up a Medicaid–compliant annuity which will be funded by their CSRA “excess” of $126,400. The annuity is set up for 5 years, which will give Julia a monthly income of approximately $2,100, on top of her existing $1,500/month pension income–for a total of $3,700.

Without this Annuity strategy in place, James memory care would have consumed James’ and Julia’s CRSA “excess” in a little over 15 months. With the Annuity, Julia receives the entire annuity income benefit from the CRSA “excess.”

There are other components in James’ and Julia’s Medicaid plan, like the calculation how much of James’s income will go toward his Medicaid co-pay. This scenario is a bit lengthy for a blog post–see your eldercare attorney to dig into the details of this aspect of your plan.

• The Medicaid system is subject to yearly changes in federal and state rules, so it’s best to retain a professional who is up to date on the law–someone who can counsel you throughout the application process and can alert you of pending changes to the Medicaid system–especially when it’s time to apply for your annual eligibility.

HOW DO I PREPARE FOR A MEDICAID PLANNING DISCUSSION?

You’ll need to gather all of the information on your financial situation, including:

Most recent tax return–federal and state.
Annual income statements–pension, social security, annuities, etc.
Bank account statements
Brokerage statements
Real estate holding (s) description/deeds, mortgage balances
Insurance policies

To get started with your Medicaid Plan, talk to the professionals at the Scott D. Bloom Law office.

To schedule your free consultation,
email us, or call 1-215-364-1111
or 1-855-992-6337 (Toll Free)

CLIENT Testimonial

It can be quite confusing to determine which Medicare plan is best for you. There are several types of plans, and each has its own advantages and disadvantages. Understanding some basic features will help you decide how to maximize your healthcare dollars and choices. You should review your choice periodically, especially as elements of the Inflation Reduction Act of 2022 change prescription medication and vaccine policies. Coverage can also change from year to year..

There are three basic types of plans:

Original Medicare
Medicare Advantage
Medigap

Original Medicare

Medicare is a government health insurance plan for people 65 and older. Original Medicare, sometimes called traditional Medicare, comes in several parts. Each part covers different things and has various associated costs.

Most people do not pay for Part A as it was deducted from their taxes paid while working. It is primarily for hospital visits and nursing care. However, there are many fees associated with being in a hospital that Medicare does not cover, which you still might have to pay out of pocket.

Part B requires monthly premiums, which can be deducted from your social security. You can elect to enroll in part B through Original Medicare. It covers a portion of doctors' visits, durable medical goods, and more.

Part D covers the cost of many prescription medications. You can add it to Original Medicare or purchase it as part of a Medicare Advantage plan.

Medicare Advantage

Medicare Advantage is offered through private insurance companies that Medicare approves. Most plans include Parts A, B, and D of Original Medicare with some variations from the original. There are a wide variety of Medicare Advantage plans, including Preferred Provider Organizations (PPO) or Health Maintenance Organizations (HMO). PPOs tend to have higher premiums and offer more choices than HMOs. Medicare Advantage HMOs and PPOs often have higher premiums than traditional Medicare because they usually cover more expenses, including prescription drug costs, vision, hearing, and dental.

However, the overall costs, premiums, plus out-of-pocket expenses for Advantage plans can be lower than Original Medicare because the private insurers manage patient care and limit choices. They assemble networks of hospitals and physicians to control their costs and reduce their customer's premiums. They also restrict access to certain providers and increase the cost of care obtained out-of-network.

Traditional Medicare allows people to seek care from any provider participating in Medicare, which includes virtually all hospitals and physicians.

Medigap

Medigap is a co-insurance or supplement to Original Medicare. You can enroll when you first enroll in Part B. It is also available through Medicaid, a union, or a former employer when you qualify for both programs. You can’t have both Medicare Advantage and Medigap plans. Medigap helps cover expenses that Original Medicare does not cover, such as co-pays and deductibles. Due to the enrollment restrictions, you should strongly consider Medigap when you first become eligible.

The Right Choice for You

With all the different plans, parts, choices, and restrictions, it is crucial to consider your priorities for care. Limited access to doctors and hospitals may become important if you need specialized medical care, such as cancer treatment. Before enrolling, consider what specialty hospitals are included in Advantage plans. Likewise, Advantage plans can make it difficult to see a specialist for ongoing and chronic conditions due to limitations in long-term care services. An estate planning lawyer or elder law attorney can help address long-term care planning and the potential to qualify for Medicaid when necessary.

The Kaiser Family Foundation has put together a cost analysis to help you determine when Medicare Advantage would save you money. As you can see, the longer you stay in the hospital, the less advantageous an Advantage plan becomes.

Consumer Reports notes that the JAMA reported that seniors on Advantage plans often get more preventive care than those on traditional Medicare plans. JAMA published a comprehensive paper about how Medicare plan choice affects spending and discovered that Medicare Advantage enrollees usually spend less.

A Guide in Choices after 65

Enrolling in the right Medicare coverage is one of many decisions that will affect your quality of life in your senior years. We are here to help you navigate a wide variety of choices.

If you have questions or would like to discuss your legal matters, please do not hesitate to contact our office at 215-364-1111 to schedule a consultation.

- Medigap, Medicare Advantage, and Traditional Medicare

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CLIENT Testimonial

Attorney Scott Bloom is a God send in difficult times. He is caring, knowledgeable, answers questions promptly with clarity, honesty, and accuracy. Scott is compassionate and works with the client as if he is part of the family. I consider myself blessed to have found Mr. Bloom to take care of my family's elder care business.

- Nahla F., Upper Freehold, New Jersey

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NEED Legal Help?

Schedule An Appointment

Call Today: 215-364-1111
Toll Free: 855-992-6337