Top Nine Medicaid Mistakes

1. Believing that Medicare or health care insurance pays for long-term in-home or nursing home care.
It doesn't. You pay for it, unless you do proper planning.

2. Thinking that Medicaid is only for the poor
In 1965, this government public benefit program began that way; however, currently there is no other government plan for seniors to avoid long-term care cost impoverishment (a $132,000 annual cost in Morris and Bergen County nursing homes) other than private long-term care insurance. As a result, Medicaid now pays for 65 percent of the long-term care costs throughout the U.S.

3. Thinking it's too late to plan
It's never too late to do long-term care planning, even after a loved one enters a nursing home. Although the Deficit Reduction Act changed the transfer rules in 2006, legal planning opportunities continue.

4. Gifting assets too early/too late
First, it's your money (or your house, or both). We make sure you are cared for yourself first. Don't risk your financial security by transferring everything to your children for $1. What if they have marital, creditor or addiction problems you are not aware of? Improvident transfers can cause difficult tax, health care and Medicaid eligibility problems. With proper planning, you can maintain control. Since Feb. 8, 2006, asset transfers to others are subject to a five-year look-back and penalty period before public benefits eligibility (Medicaid), unless our planning shortens that penalty time period. Before that date, the maximum penalty time was three years.

5. Believing that Medicaid covers only nursing home care
Wrong. There are Medicaid programs for at-home care, assisted living and skilled nursing facilities. Certain transfers are allowable without jeopardizing Medicaid eligibility. These include transfers to disabled children, a caretaker child and certain siblings and into a trust for a child or other party who is a minor, blind, disabled and under age 65; transfers to a special-needs trust or pooled disability trust of accident settlement proceeds or an inheritance received after a person is on Medicaid or Supplemental Security Income.

6. Failing to use protections for the spouse of a nursing home resident
These include protecting the home from a spouse's medical spend-down, petitioning by the at-home spouse for an increase in the limited Medicaid resource or income allowance, and sheltering the at‑home spouse's IRA/401(k)/403b from the infirmed spouse's medical spend-down costs.

7. Applying for Medicaid too early/too late
Applying too early will result in a longer ineligibility period. Applying too late can mean needless medical spend-down and loss of many months of eligibility. Apply on time to avoid problems.

8. Not getting expert help.
A Medicaid application is a complex financial and medical qualification process that most people deal with only once in their lives. Tens or hundreds of thousands of dollars are at stake. It's penny-wise and dollar-foolish not to consult with a certified elder law attorney who guides clients through this overwhelming process on a daily basis. The fees are a minimal percentage of the amount that can be legally sheltered. Attorneys specializing in other areas or tax and financial advisers shouldn't "dabble" in elder law since it is a legal minefield that could leave the client ineligible for public benefits for five years at an annual cost of $132,000 = $660,000.

9. Not including tax and estate planning with health care planning
All three planning concepts should be coordinated to avoid problems. As an example, an annual gift of $14,000 to four children ($56,000) is permitted under the IRS gift tax rules; such a strategy is widely used in estate planning. However, that same transfer renders the gift giver ineligible for Medicaid for five months ($62,000). McHugh & Macri have the answers to balance these contradictory impacts.

Don McHugh and Vince Macri are two of only 450 attorneys nationwide who are certified in elder law (CELA) by the National Elder Law Foundation.

Free Lawyer Consultation

For a free initial consultation with one of our CELA partners at our East Hanover, New Jersey, firm to discuss how to legally preserve your assets, call 973-577-6010 or fill out the fee-free contact form on this website.