Medicaid: Understanding the difference between Long-term Care Medicaid and Medicaid Expansion: Part 2: Long-term Care (LTC) Medicaid

How the government will steal your entire life savings, should you ever live in a nursing home

If you are ever lucky enough to live the American Dream and beat every POS thrown at you during your career, and become “successful” by saving a million dollars, or operating your own family business such as a farm, you will most likely lose them should you ever have to reside in a nursing home.  This is due to the fact that Long-term care is so expensive in the United States, averaging 100,000.00 annually for a single room.  However, in Alaska, the average annual cost is 800 dollars daily, or 300,000.00 annually.  Now if you have a million dollars in the bank, and don’t mind paying these astronomical fees out of your life savings, or liquidating your life’s work to pay for your LTC, that is your choice.  God forbid you and your spouse be admitted to LTC simultaneously, you will lose your nest egg twice as fast. However, if you would like to preserve these accomplishments to pass along to your family, you have the option of LTC Medicaid, if you prepare now. Remember, only Medicaid will pay for Long-term Care, Medicare DOES NOT pay for any Long-term Care costs!

There are many obstacles to hurdle in order to qualify for LTC Medicaid, and we will discuss the major ones, starting with the “asset check.”  As we discussed earlier, an important distinction between Medicaid expansion and LTC Medicaid is the expansion program removed the asset check, but the asset check still remains for LTC Medicaid qualification.  In order to qualify for LTC Medicaid, you cannot have more than $2,000.00 in countable assets such as savings, investment and checking accounts.  In fact, according to medicaidplanningassistance.org,  “Countable assets are assets that can easily be converted to cash to help cover the cost of long-term care and include the following: Cash, stocks, bonds, investments, credit union, savings, and checking accounts, and real estate in which one does not reside. However, for Medicaid eligibility purposes, there are many assets that are considered exempt, or said another way, are not counted towards the eligibility limit. Exemptions include personal belongings, such as clothing and jewelry, household goods / furnishings, an automobile, a burial plot, and one’s primary home, given the Medicaid applicant or his / her spouse lives in it and the equity value is under $595,000 (in 2020).” https://www.medicaidplanningassistance.org/medicaid-eligibility-alaska/   So as you can see, should you have spent your life working and building any significant savings, you will be forced to either “spend down” your assets by contributing them to your cost of care, or you will be excluded from the program.   “Spending down” is exactly what it sounds like.  Let’s say you have $100,000.00 in “countable assets.”  The way qualification for LTC Medicaid works is you will basically be forced to contribute that $100,000.00 towards your “cost of care” until you have reached the $2,000.00 limit, meaning 98% of your entire life savings will be spent on your medical bills. “Cost of care” is just what it sounds like as well, it is any medical bills you pay towards your hospital or nursing home care. Since the average annual cost for LTC in the United States is right at $100,000.00, you will effectively lose your entire life savings in your first year in the nursing home, making exclusion from LTC Medicaid another major POS for contributing to society. In a state such as Alaska where exclusion from Medicaid means a $300,000.00 annual bill for LTC Medicaid, this POS has an even more profound effect on your life.  Next let’s discuss the second major problem with LTC Medicaid qualification, the 5-year lookback period.

Years ago, Medicaid had what was referred to as a 3-year lookback period, which has now been extended to 5 years.  Basically, the lookback period is the 5-year period of time immediately preceding your application for LTC Medicaid.  When you apply for LTC Medicaid, Medicaid will “lookback” at all of your financial statements from all of your banking, brokerage, and other financial statements in the last 5 years, to determine where your money went.  If they discover that you went to Las Vegas and blew all of your entire life savings in a weekend, that is totally okay, but God forbid you transferred some of your assets to family or friends, you will be penalized, and possibly excluded from the program.  According to familyassets.com, “If a gift of any amount is given in Alaska during a period of 5 years before applying to Medicaid, a penalty period will be initiated. This penalty period in Alaska is called a look-back period and it can make an individual not eligible for Medicaid. Medicaid will not pay for care until the penalty period is over. The penalty is calculated by taking the total amount of any gifts given, and dividing it by $ 5,800, which creates a number of months before Medicaid kicks in. The average (monthly) cost of Nursing home care in Alaska is $24,820, so penalties can become very costly for a family that has not planned appropriately for Medicaid.  Although these numbers are specific to Alaska, the same principle applies to all states and their LTC Medicaid programs.  It is important to keep in mind that the 5-year lookback period only applies to the last 5 years before requiring LTC, making it extremely important to start planning now, not when you are admitted to the hospital and placed in LTC.

So how do you beat the system and qualify for LTC Medicaid for yourself, while protecting your assets, the answer is simple: gift your assets now!  If you don’t believe me and think I am doing this only for my own personal gain, listen to the “experts” from Forbes Magazine in the following article https://www.forbes.com/sites/markeghrari/2014/08/01/the-medicaid-look-back-period-explained/#4a0cb5313645  Currently, you can gift anyone up to $15,000.00 annually of those “countable assets” without incurring any tax liability for you, or the person who receives the gift.  This gift doesn’t have to be strictly cash and can be land, property, vehicles, stocks, bonds, gold and silver, or most any other type of asset that will be counted as far as LTC Medicaid is concerned.  The key to qualify for LTC Medicaid, while protecting your assets for future generations of your family, is to give away as many of your assets as possible now to those you plan to give your assets to upon your death.  This idea of writing a will now, and hiding it from your children until your death is nonsense, and is an outdated method.  If you don’t trust those you plan to give your assets to, then you probably shouldn’t be leaving them your life savings anyhow.  The best way to make sure you complete an asset transfer appropriately is to speak with an attorney familiar with LTC Medicaid, usually referred to as an Elder Care attorney in the state you reside.  Although they can cost hundreds of dollars an hour, their expertise will be instrumental in protecting your assets and well worth the investment.  The best attorney and program I have discovered to protect your assets and qualify for Medicaid is called the Living Trust Plus, developed by Elder Care Attorney Evan Farr. His program works for most everyone trying to protect their assets from Medicaid, regardless of income or the size of your estate. For more information, follow the link below and watch his videos on YouTube.I strongly advise you to watch his videos and look into his program as the videos and information you will learn there are absolutely free, and you can sign up for emails and webinars that will further educate you on how to best go about this process.  As a disclaimer, I had my parents look into this program and pursue this program via a different attorney, trained in the Living Trust Plus.  The Living trust Plus is available in almost every state, even where I live in Alaska.   https://www.livingtrustplus.com/    However, if you cannot afford an attorney the following are in MY OPINION, the best steps to take to protect your assets for future generations, while allowing you to qualify for LTC Medicaid.

1. Start NOW! Don’t wait. Remember, the quicker you finish an asset transfer, the quicker the 5 year lookback period expires.
2. Transfer the maximal annual nontaxable “gift” to your heirs now!  Since the $15,000.00 cap is per person, you can transfer a significant amount of “countable assets” out of your name and into your heirs names, and quickly. Waiting to transfer assets upon your death will guarantee your heirs receive less of your assets than you expected, if they receive anything at all.  Remember these assets can include land, stocks, bonds, and other financial assets. For instance, my parents have 2 children and soon will have 5 grandchildren.  If they transferred the maximal tax-free amounts for the year 2020, they could transfer $105,000.00 of countable asset wealth out of their name and into their heirs names now.  Since we’re halfway through 2020, come January 1, 2021, they could do the same transfer to the same heirs again, effectively transferring nearly a quarter million dollars of wealth or “countable assets” to the people they were most likely going to transfer their assets to upon their death anyhow in a 6-month period of time.
3. Do not simply just give this money to your heirs to spend, as thanks to the five-year lookback period, you could possibly need it back to qualify for Medicaid.  Instead, transfer it to an account with your heir as the account holder, but make sure they understand they cannot spend the $15,000.00 until the 5-year lookback period for that particular $15,000.00 has passed.  For instance, if my parents were to transfer the maximal $15,000.00 each year to me, I would need to hold that money in the account for 5 years before I could spend a single penny.  So, if my parents gifted me $15,000.00 annually for ten years then were subjected to the 5-year lookback period, the first $75,000.00 would be free and clear, where the second $75,000.00 would be subject to the lookback period and would be required to cover the “cost of care” before LTC Medicaid would kick in and pay the bill. Along this line, once the money has been sheltered in the account for 5 years, it can be withdrawn and spent or invested, or whatever you want to do with the funds.  So if my parents gave me the 15k each year for 5 years this would amount to 75k.  Beginning on year 6, when my parents hypothetically deposited another 15k into the account, I could withdraw and spend the initial 15k, as this money will have passed the 5-year look back period and no longer be subject to the Medicaid lookback period.  This method isn’t perfect, as it may very well result in some assets being taken back by LTC Medicaid, but it sure beats giving all of your assets away to cover your “cost of care” since you can only have $2,000.00 in countable assets when you begin with your LTC Medicaid.  This method will work best for those who have either a significant number of heirs, and/or those who have less than 1 million dollars in countable assets to disperse. 
4. Another possibility is to go ahead and gift everything now, but due to the $15,000.00 cap, there will be significant taxes incurred by going this route.  However, the transfer will be totally complete, and your 5 year countdown will begin.  The other issue with this method is should something happen in that five years, you will most likely have to return at least a portion of the gift to cover the cost of care.  In my opinion, this method should only be considered for those who have countable assets worth over a million dollars, and be completed with the assistance of an Elder Care attorney.
5. Another possibility to protect countable assets, and qualify for LTC Medicaid is to transfer countable assets towards your primary residence by paying off the mortgage, and/or improving the property.  Medicaid cannot take the primary residence to pay for LTC Medicaid as long as the spouse still resides in the residence, however, in order to qualify for LTC Medicaid the value of the home cannot exceed just under $600,000.00.  Although Medicaid can in theory take your primary residence after the death of both parties who own the home, but in my decade of experience I have never seen them do this.  I am sure it is due to the political fallout that would come from seizing property of someone deceased to pay for care they received while alive, and the fallout of possibly taking a family home that’s been in the family for generations.  In my opinion, it is much safer to transfer countable assets to the primary residence, than it is to wait around and guarantee Medicaid takes the funds to pay for your cost of care.  
6. The last strategy that requires some attention is the transfer of “countable assets” into gold, silver, or other jewelry.  As noted on page 1, assets exempt from the “asset check” include jewelry.  Since many gold, silver and jewelry companies such as Provident Metals accept cash, Bitcoin, and money orders, and since gold is currently trading at around $1,800.00 an ounce, in theory, it would be possible to transfer all of your countable assets to exempt assets by converting them to just a few pounds of “jewelry.”  Provident Metals and other gold and silver companies ship their metals in a very discrete manner, so that somebody doesn’t see the return address and capture your shipment before arrival at your home.  Hypothetically, you could turn a million dollars of “countable assets” into just under 35 pounds of “jewelry” with little way to track it since countable assets were not directly transferred to an heir. 😊 Once transferred into gold/silver, tracing physical gold and sliver will be very difficult for any person or agency.  
7. The last thing you can do to help lower your countable assets, although not very substantial, is to prepay all burial and funeral expenses.  With the average funeral expenses running about $10,000.00, you can lower your countable assets, while sparing your heirs the task of arranging this after your passing. 

The only other possible way to avoid losing everything to the government for LTC Medicaid is private LTC insurance, but I don’t recommend this route for multiple reasons.  First, it isn’t free.  The average monthly LTC insurance payment is around $300.00 but LTC Medicaid is totally free.  Second, they usually have an exclusion period, such as 1 year before you can benefit from the policy, and in the case of my parents, have a 3-month elimination period before they kick in, meaning you still have to foot the bill for the first 3 months of LTC, or roughly 30K, BEFORE the policy will begin to pay.  Third, they have maximum benefit limitations, with the average being 3 years.  In my fathers’ case, his policy is for 5 years, my mothers is for 3 years.  Fourth, if you miss a payment, they have the right to cancel the policy.  This is a sneaky, and unethical, play that these insurance companies use.  Basically, what happens is you or your loved one has a stroke or other major medical issue requiring prolonged hospitalization and while you are busy focusing on their recovery, the monthly premium is missed.  Then, a month or two later when it is time to enter LTC, your policy is no longer valid because of the missed payment.  It’s a disgusting tactic these companies use, but it is legal and they do it.  Fifth, since they only pay a set amount, sometimes the policy may not be enough to cover the full cost of care, leaving someone in your family a substantial bill.   To me, all of the possible issues with private LTC insurance policies dissuade me from even considering one for myself.

In conclusion, time is your most valuable asset, especially when it comes to transferring countable assets to your heirs.  The sooner you start, the more of your assets you can get out of your name and protect for your heirs.  Should you live long enough, you will need LTC Medicaid to cover your stay in a nursing home, or be forced to spend your entire life savings in your last few years to cover your stay in the nursing home.  Nobody ever expects to have to live in a nursing home, but the fact is millions of Americans do, none of which thought it would happen to them.  The 5-year lookback period and the asset check limiting you to $2,000.00 in savings are the two biggest hurdles to qualifying for LTC Medicaid, but can be circumnavigated by planning now.  Do not wait to start transferring your assets, begin now.  It’s never too soon to transfer your countable assets to your heirs.  Additionally, your heirs will be able to better benefit from your transfer of wealth now, as they are most likely starting families of their own, with the largest debt loads they will ever face in their lifetime.