Qualifying for Medicaid

A common question of residents of Fort Wayne, Indiana, indeed of residents of most states, is what assets are included in the resource threshold to determine a single individual’s qualification for Medicaid to cover nursing home expenses. Under the qualification rules, an individual must spend virtually all of his or her resources before government financial assistance is awarded. Generally, no more than about $2,000 of total assets are allowed under current Medicaid qualification standards.

Certain expenditures are allowed in order to reduce assets to a level that will qualify the individual for financial aid. For example, the individual may prepay funeral expenses and pay off debt. Other methods of reducing assets are not allowed and trigger a penalty or disqualification. For example, gifts of cash and property will disqualify the individual if the transfer is too close to the time of the Medicaid application.

An applicant’s financial transactions from the proceeding five years may be examined by Medicaid officials. This five-year period is known as a look-back period. The purpose of the look-back period is to penalize applicants who are deliberately trying to reduce their assets for the Medicaid qualification determination. If disqualifying asset transfers occur, the individual will not qualify and the individual will bear the financial liability for the nursing home care.

The 2006 federal law that extended the look-back period from three years to five years is intended to deter aggressive estate planning. The purpose of the law is to discourage individuals from intentionally impoverishing themselves in order to become eligible for Medicaid benefits. Medicaid is a welfare program designed to assist the poor; it is not an entitlement program like Medicare. Working individuals earn Medicare benefits from wage withholding during their working lifetime.

It is advisable that an individual maintain financial records of all expenses and cash outlays in order to document that no disqualifying transfers have occurred during the five-year look-back period. It is best to plan for the possibility of eventual nursing home care by saving and/or purchasing nursing home insurance. Transfers to irrevocable trusts are a planning tool that may be considered with the advice of legal counsel. A knowledgeable estate planning attorney can assist you in planning for the possibility of required future nursing home care.